ANNUAL REPORT 2011

N O VA RT I S  G R O U P A N N UA L  R E PO R T  2 0 11
UR MISSION
We want to discover, develop and successfully market 
innovative products to prevent and cure diseases, to ease 
suffering and to enhance the quality of life.
We also want to provide a shareholder return that reﬂ ects 
outstanding performance and to adequately reward those 
who invest ideas and work in our company.

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CONTENTS
EALTHCARE PERSPECTIVES
y photojournalist Eugene Richards
LIFE IN A CIRCLE 
12
NO GUARANTEES 
32
NEAR-PERFECT VISION 
38
JUST THE BEGINNING 
44
THE TROUBLESHOOTER 
50
AN ONSET OF MALARIA 
56
SOMETHING BEYOND THEMSELVES 
68
THE VILLAGES MILES AWAY 
74
THE LIVES OF OTHER PEOPLE 
82
I AM WHO I AM 
110
A GIFT FOR LIVING  
134
Acknowledgements and 
282
Annual Report Photography
 
 
GROUP REVIEW 
Financial Highlights 
2
News in 2011
3
 
Letter from Daniel Vasella 
4
Interview with Joseph Jimenez
8
EALTHCARE PORTFOLIO 
Contents 
16
 
Pharmaceuticals 
18
 
Novartis Institutes for BioMedical Research 
29
Alcon 
34
 
Sandoz 
40
 
Vaccines and Diagnostics 
46
 
Consumer Health 
52
 CORPORATE CITIZENSHIP 
Contents 
60
 
Citizenship at Novartis 
62
Commitment to Patients 
70
 
Commitment to People and Communities 
72
 
Commitment to the Environment 
76
 
Commitment to Ethical Business Conduct 
78 
 
Independent Assurance Report 
81
CORPORATE GOVERNANCE
Contents 
86
 
Our Board of Directors 
92
 
Our Management 
102
COMPENSATION REPORT 
Contents 
114
 
Compensation Report 
115
OVARTIS GROUP
INANCIAL REPORT 
Contents 
138
Operating and Financial Review 
141
 
Equity Strategy 
187
 
Novartis Group Consolidated Financial Statements 
190
 
Financial Statements of Novartis AG 
262
 
 
Key Dates 2012, Contact Information 
284
 
and Forward-Looking Statements

KEY FIGURES
(in USD millions, unless indicated otherwise)
SHARE INFORMATION
2011
2010
Net sales
58 566
50 624
Operating income
10 998
11 526
Return on net sales (%)
18.8
22.8
Net income
9 245
9 969
Basic earnings per share 1 (USD)
3.83
4.28
Core 2
Operating income
15 909
14 006
Core return on net sales (%)
27.2
27.7
Net income
13 490
12 029
Basic earnings per share 1 (USD)
5.57
5.15
Research & Development
9 239
8 080
As a % of net sales
15.8
16.0
Number of associates (FTE) 3
123 686
119 418
Return on average equity (%)
13.6
15.7
Group free cash flow
12 503
12 346
2011
2010
Share price at year-end (CHF)
53.70
54.95
ADS price at year-end (USD)
57.17
58.95
Dividend 5 (CHF)
2.25
2.20
Payout ratio 6
63
55
2011 NET SALES BY REGION
(% and in USD millions)
12011 average number of shares outstanding: 2 382.5 million (2010: 2 285.7 million)
2Core results for operating income, net income, earnings per share (EPS) and R&D eliminate the
impact of acquisition-related factors and other significant exceptional items. These adjustments
are explained in detail starting on page 179.
3Full-time equivalent positions at year end
4To ease comparability, all figures for 2006 and 2007 exclude the Consumer Health Nutrition
operations divested in 2007
5Dividend payment for 2011: proposal to 2012 Annual General Meeting
6Payout ratio is calculated based on net income attributable to shareholders of Novartis AG. 2011
based on estimated number of shares outstanding on dividend payment date.
NET SALES, OPERATING INCOME, NET INCOME, CORE OPERATING
INCOME AND CORE NET INCOME 4
(Index: 2006 = 100%)
Net sales
Core operating income
Operating income
Core net income
Net income
United States
33
19 225
Europe
37
21 507
Asia/Africa/Australasia
21
12 354
Canada and Latin America
9
5 480
Total
58 566
180
160
140
120
100
80
2006
2007
2008
2009
2010
2011
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N O VA RT I S  G R O U P A N N UA L  R E PO R T  2 0 11
GROUP REVIEW
Novartis provides healthcare solutions that address the evolving needs of patients and societies worldwide. Our portfolio focuses 
on broad areas of healthcare: pharmaceuticals, eye care, generics, vaccines, consumer-based OTC and animal health.
FINANCIAL HIGHLIGHTS

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Financial Highlights
News in 2011
NEWS IN 2011
ERFORMANCE 
Net sales rise 16% (+12% in constant currencies) to USD 58.6 billion. Operating income 
down 5% (+1% cc) to USD 11.0 billion, following a net exceptional charge of USD 1.9 billion. 
Core operating income increases 14% (+16% cc) to USD 15.9 billion. Net income of 
USD 9.2 billion declines 7% (-2% cc) in line with operating income. Core net income up 
12% (+15% cc) to USD 13.5 billion.
 
Recently launched products fuel growth across the broad healthcare portfolio, with 
products launched since 20071 accounting for 25% of Group sales, up from 19% in 2010.
RODUCTS 
Products launched since 20071 grow 38% to USD 14.4 billion. Continuing to rejuvenate 
the portfolio, Pharmaceuticals sees 15 major regulatory approvals in 2011 in the US, EU 
and Japan. Approvals include new indications for everolimus (Aﬁ nitor/Votubia) in the EU 
and US, our breakthrough multiple sclerosis therapy Gilenya in Europe and Japan, two 
new indications for Lucentis in the EU, and Arcapta Neohaler, for treatment of chronic 
obstructive pulmonary disease, in the US. In the Alcon Division, Dailies Total 1, a daily 
disposable contact lens that uses silicone hydrogel technology, receives approval in the 
EU, and WaveLight EX500 Excimer Laser is approved in the US.
N  
One of the industry’s leading pharmaceuticals pipelines with more than 130 projects 
in development. Milestones in development include late-stage studies showing Aﬁ nitor, 
in combination with exemestane, signiﬁ cantly lengthens amount of time women with 
advanced breast cancer live without disease progression. In Vaccines, two pivotal studies 
of candidate Bexsero show promise for protecting infants against meningococcal sero-
group B. Sandoz starts recruitment for a Phase II trial in rheumatoid arthritis patients 
for biosimilar rituximab (generic Rituxan®/MabThera®).
ESEARCH 
Significant investment, focusing on areas of greatest patient need and scientific 
promise at Novartis Institutes for BioMedical Research, aims to discover novel therapies. 
Biologics account for an increasing proportion of the exploratory pipeline.
ORTFOLIO 
The Group establishes Alcon, the world leader in eye care, as the newest and second-
largest division in our diversiﬁ ed healthcare portfolio after securing 100% ownership of 
Alcon, Inc., on April 8, 2011. Pharmaceuticals acquires oncology laboratory Genoptix, 
bolstering its Molecular Diagnostics unit, and Vaccines and Diagnostics completes its 
acquisition of an 85% stake in Zhejiang Tianyuan, one of China’s largest privately held 
vaccine companies.
 
CORPORATE CITIZENSHIP 
Engaging with society to improve healthcare is integral to how Novartis operates. Access-
to-medicine programs for those in need reach more than 89 million patients in 2011 
and, together with our R&D institutes for diseases in developing countries, are valued at 
USD 1.7 billion, or 3% of net sales.
N  
15th consecutive dividend increase with 2% raise is proposed for 2011 to CHF 2.25 per 
share (2010: CHF 2.20 per share), a dividend yield of 4.2%. 
1 Excluding A (H1N1) vaccines; including Alcon on a pro forma basis for 2010

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N O VA RT I S  G R O U P A N N UA L  R E PO R T  2 0 11
Daniel Vasella, M.D.
EAR SHAREHOLDER
hat started with a banking crisis in 2008 
rew into a debt crisis for a number of 
ndustrialized nations last year. So far there 
as been a distinct lack of credible propos-
ls for a short-term solution to tackling the 
udget deficits and reducing the debt, let
lone any long-term solution. It now appears
nlikely that all the institutions of social wel-
are that have been built up over the past 
ecades can be maintained in the long term. 
xpansion of the money supply may paper
ver problems in the short term, but there 
an be no doubt that the consequences of 
ebt and money supply policies will catch 
p with us one day.
espite the uncertainties that are shaping 
he current mood, Novartis again succeeded
n posting record sales of USD 58.6 billion 
nd a net income of USD 9.2 billion in
2011, as well as gained market share in 
ost divisions. 
The strategy of focusing on the healthcare 
sector, which we have pursued over the
last 15 years, has proven successful. ur 
ctivities include preventive healthcare,
iagnostics and above all drug therapy. This
pens up multiple opportunities for expan-
ion both geographically and also in terms
f new products, and it allows knowledge 
nd experience to be successfully leveraged 
ver several business areas. Our focused 
iversification strategy also reduces risks
otably by diversifying the payor base.
nnovation, quality and productivity are a
rerequisite for all divisions to remain com-
etitive. Innovative strength is especially 
rucial for Pharmaceuticals. We therefore 
nvested over 20% of Pharmaceuticals sales 
n R&D last year, consistent with previous 
ears. Our robust pipeline includes products 
or the treatment of certain cancers, res-
iratory diseases, metabolic disorders, 
nfections, as well as autoimmune and oph-
halmic diseases. 
ovartis has successfully established itself 
n new therapeutic areas and expanded its
roduct portfolio of highly specialized medi-
ines. New discovery approaches could also 
nable us to tackle previously untreatable 
iseases of genetic origin. 
he launch of Gilenya, the ﬁ rst oral therapy 
or multiple sclerosis is a success. Aﬁ nitor/r/r
Votubia has proven to be a new and valuable
ancer therapy. In addition to previously 
pproved indications, the results of clinical
tudies confirm that it also has consider-
ble potential in the treatment of estrogen 
eceptor-positive, metastatic breast cancer 
n combination with the aromatase inhibitor 
xemestane. Tasigna is an even more effec-
ive treatment for chronic myeloid leukemia
han Glivec, which already set a very high 
tandard in this treatment. Just before the
nd of the year, we received marketing 
uthorization for Lucentis in China. In the 
ey countries, Lucentis is approved not only
or wet macular degeneration, but also for 
he treatment of diabetic macular edema
nd retinal vein occlusion.
he year 2011 was also the beginning of pat-
nt expiries for Diovan – our most successful

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Letter from Daniel Vasella
While there were many successes, there were 
also setbacks. A long-term study with the
ntihypertensive aliskiren showed negative 
esults in high-risk patients with pre-existing 
enal or cardiovascular disease. For all the 
dvances made in research and development,
here were also delays in the regulatory 
pproval of some products.
articular attention and further efforts are 
eeded regarding quality management in 
roduction. As with many competitors, 
andoz received a warning letter from the
S Food and Drug Administration, which
as tightened up its requirements. For
uality assurance reasons we also tempo-
arily stopped production in our Lincoln, 
ebraska, US, factory for over-the-counter 
nd animal health products. Remediation 
ctions are now underway including lead-
rship changes and rigorous training. 
Across our businesses, we decided to pro-
eed with quality-oriented investments at 
ur manufacturing sites. 
As a result of government-imposed price 
uts and patent expiries, productivity ini-
iatives continue to gain importance. These 
actors led to some site closures and related 
roduct transfers. Research and develop-
ent also reviewed their operations, which 
ed to the outsourcing of some cyclical 
ctivities in development, as well as the 
eorganization of research activities in 
euroscience ultimately resulting in the 
losure of the department in Basel. Due to 
he Diovan patent expiry, restructuring of 
ur US operations remains an imperative. 
At the same time, we are increasing our 
nvestments in growth regions, such as 
Asia and South America. 
ntihypertensive – in larger European markets. 
atent expiry in the US will follow in 2012. 
ithin two years we expect a corresponding
ecline in sales, which could amount to a 
rop of USD 4 billion dollars. We expect this 
ill probably be offset by the dynamic growth 
f new products.
hanks to a diligent and highly professional 
pproach, the integration of Alcon – the world’s 
eading producer of eye-care products – went
moothly. The synergy targets that were set
ere exceeded while sales increased by 7%
n constant currencies. This new division is 
hus contributing signiﬁ cantly to the growth 
f the Group.
he decision to systematically build up our
enerics business was initially questioned, 
ut is now imitated by other companies.
andoz, our generics division, shows dynamic
rowth worldwide and, over the past 12 
onths, the anticoagulant enoxaparin has 
ecome our ﬁ rst generic to generate sales 
f more than USD 1 billion.
he Vaccines and Diagnostics Division 
ained market share with Menveo, a vaccine 
or meningitis types A, C, W-135 and Y.
 Bexsero – for meningitis type B, an often 
atal infection among newborns – is under 
egulatory review in Europe. Thanks to
ts investment in the vaccines producer 
hejiang Tianyuan  Bio-Pharmaceutical Co. 
n China, the division has access to this 
romising market.
Both the self-medication and animal health
usinesses showed growth in the single-
igit range thanks to their good product 
ortfolios.
estructuring is very stressful for associ-
tes, especially in an environment of rising 
nemployment, and it is one of the most 
npleasant responsibilities for manage-
ent. However, a company that fails to make 
he necessary adjustments to market con-
itions because of the hardship associated 
ith such decisions will sooner or later pay
n even higher price for inaction.
In 2011, Novartis continued its support for 
patients who are unable to afford treatment. 
his is especially the case for people in 
eveloping countries. For several years
ow, all the leprosy medicines needed world-
ide have been provided free of charge by
ovartis in collaboration with the World 
ealth Organization. The 480 million doses 
f our antimalarial drug Coartem that have 
een sold without profit since 2001 have 
elped save an estimated 1 million lives – 
ost of them children. This is the largest
nd most important program of its kind.
ur researchers also recently succeeded in
iscovering a new and promising class of 
ompounds for the treatment of malaria, 
nown as imidazolopiperazines. Addition-
lly, we are continuing our discovery efforts 
or new medicines and vaccines to treat 
eglected diseases mainly occurring in
eveloping countries. 
Alcon also conducts pro bono programs in 
he ﬁ eld of ophthalmology. In India some 
ears ago, Novartis began an innovative ini-
iative with doctors to improve healthcare 
n rural regions. There is signiﬁ cant demand
or this program, which already encom-
asses 33 000 villages.

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N O VA RT I S  G R O U P A N N UA L  R E PO R T  2 0 11
n the new year, we will continue to pursue 
ur primary objectives in the field of pre-
entive care and treatment by working to 
iscover innovative medicines and vac-
ines, as well as by offering low-cost, high-
uality generics.
In spite of the uncertain economy – partic-
ularly government debt and weak growth – 
we will pursue our strategy. Continued inno-
ation and expansion in growth markets 
ill remain key to gaining market share in 
he medium term. At the same time, pricing
ressure must be offset by productivit
ains, including restructuring activities in 
ertain markets, which we will implement 
ith social responsibility. We must con-
inue to ensure the highest quality stan-
ards across the Group. We are building 
ur research and development center in 
China and also production sites in Brazil 
nd Russia.
e will continue to invest in the training 
nd education of our associates because
heir competence, motivation and integ-
ity are key to our success. The Executive
Committee is committed to enforcing our 
Code of Conduct worldwide. It is essential 
hat the trust of our stakeholders and the
ompany’s good reputation be preserved 
lso in the future.
e are confident that thanks to our pipe-
ine, one of the richest and most promising
n the industry, we will be able to continu-
usly contribute to the effective treatment 
f patients worldwide and thereby grow
nd generate profits.
 am grateful to all our associates and 
eaders worldwide for their excellent work 
uring the past year and their continued 
ngagement in the pursuit of our mission.
e also extend our thanks to you, our share-
olders, for your loyalty, and are pleased
o propose an increase in the dividend to
CHF 2.25 for 2011.
incerely, 
aniel Vasella, M.D.
Chairman of the Board

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Letter from Daniel Vasella
BUILDING SUSTAINABLE LEADERSHIP IN HEALTHCARE
Novartis strategy is based on focused diversiﬁ cation. Our broad portfolio focuses on science-based healthcare sectors that are 
growing, reward innovation and enhance the lives of patients.
STRATEGIC PRIORITIES
Extend lead in innovation Our research is driven by a distinctive scientiﬁ c and clinical strategy, focusing on knowledge of disease and 
unmet medical need. This approach has resulted in an established track record of pacing our markets through innovation. Since 2007, 
Novartis has received approvals for more innovative medicines in Europe and the United States than any other company.
Accelerate growth We are tailoring our commercial model to the rapidly changing healthcare environment. Our aim is to better address 
unmet medical need of patients and achieve positive treatment outcomes for patients. We are also leveraging our broad portfolio to 
expand aggressively in emerging and established markets.
Drive productivity We strive to continuously simplify and streamline processes, and reduce costs, allowing us to reinvest in innovation.
CONSUMER HEALTH
A world leader in 
over-the-counter 
medicines (OTC) and 
animal health treat-
ments, Novartis offers 
a robust portfolio of 
self-care products – 
including cough, cold, 
respiratory disease, 
digestive health and 
pain management 
medication – as well 
as veterinary products 
that prevent and 
treat diseases in pets, 
farm animals and 
cultivated ﬁ sh.
PHARMACEUTICALS
Novartis discovers and 
develops innovative 
patent-protected 
medicines that enhance 
outcomes for patients 
and healthcare providers. 
The division is a leader 
in oncology, primary 
care and specialty 
medicines, with an 
industry-leading pipe-
line. Innovation has 
rejuvenated our product 
portfolio to drive 
growth, with recently 
launched medicines 
representing 28% of 
division sales in 2011.
ALCON
Alcon is the global 
leader in eye care, 
offering innovative 
surgical, ophthalmic 
pharmaceuticals and 
vision care products to 
address the world’s 
most pressing eye care 
needs. As the second-
largest division, Alcon 
adds a dynamic new 
growth platform to the 
diversiﬁ ed healthcare 
portfolio of Novartis.
SANDOZ
Sandoz is the number 
two generics company 
worldwide, providing 
affordable, high-quality 
medicines. Sandoz 
focuses on differentiated 
generics that are more 
difﬁ cult to develop, 
manufacture and 
market, but that offer 
higher growth and 
proﬁ tability. Sandoz 
is also the worldwide 
leader in biosimilars.
PATIENT-CENTRIC PORTFOLIO
VACCINES AND 
DIAGNOSTICS
Reﬂ ecting a commitment 
to help prevent disease, 
Novartis is a leader in 
inﬂ uenza vaccines. 
The division has a 
broad development 
pipeline, including an 
emerging platform 
of meningococcal 
vaccines. Our diagnostic 
tools help safeguard 
blood supplies and 
ensure patient safety.

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N O VA RT I S  G R O U P A N N UA L  R E PO R T  2 0 11
Joseph Jimenez
NTERVIEW WITH JOSEPH JIMENEZ
WHAT WERE THE HIGHLIGHTS OF 2011 FOR 
NOVARTIS?
ovartis had another successful year in
2011. We are still well-positioned to take 
dvantage of the positive industry trends 
ut also to offset some of the headwinds. 
nce again the strength of our diversiﬁ ed 
ortfolio helped us deliver strong growth.
Group net sales climbed 12% in constant 
urrencies and core operating income rose 
t a rate of 16%, reﬂ ecting productivity
ains. All divisions helped to achieve this
 performance, and recently launched prod-
cts continue to rejuvenate our portfolio
nd drive growth. Sales of these products 
ose 38% in 2011 versus the previous year 1
nd now account for about 25% of total 
Group net sales. Free cash ﬂ ow was also very
trong. 
ooking beyond ﬁ nancial metrics to strategic 
riorities, I am proud of the innovation that 
e delivered in 2011. Fundamentally health-
are is a growth industry, and a key success 
actor is our ability not only to innovate but
lso to transform the potential of our pipe-
ine into new products that drive sales. We
ained key approvals and advanced devel-
pment of important medicines and vaccines
uring 2011. 
mportantly, we also completed the acquisi-
ion and integration of Alcon, adding the world
eader in eye care as a new growth platform.
Group sales in emerging markets climbed 
17% and now represent 10% of our total net 
1 xcluding A (H1N1) vaccines; ncluding Alcon on a pro forma 
asis for 2010
ales. Productivity gains, particularly in 
rocurement, generated cost savings of 
ore than USD 2 billion, beating the ﬁ gure 
or 2010. 
hile results were strong, Novartis is facing
n increasingly difﬁ cult external environment 
hat is likely to get even tougher over the next 
ew years. The global debt crisis is forcing 
overnments to cut spending, and health-
are is a prime target. On top of pricing
ressure, upcoming patent expirations will 
low growth of our Pharmaceuticals Division 
uring 2012 and 2013. We took action in 
2011 to prepare the company for this exter-
al environment. 
WHAT IS THE OUTLOOK FOR PERFORMANCE
OF THE COMPANY? 
e live in extraordinarily volatile times. This 
akes it even more difficult to give a reli-
ble outlook. But based on what we know, 
 believe Novartis is the best positioned 
ompany in healthcare. We focus on science-
ased innovation that is spread across 
ultiple high-growth segments of health-
are. It’s critical to have the best scientists 
nd to maintain a high level of investment 
n research and development because 
reakthroughs in medicine will drive our 
rowth in the future.
e have entered an important period in the 
ompany’s history during which we will 
ose patent protection on Diovan and other
ey products. In major European markets, 
Diovan patents began to expire in November
2011, and we will lose exclusivity in the
nited States in September 2012. Femara
atents also began to expire in 2011, with 
enerics entering the US market in April. 
his will clearly have an impact on growth,
ut based on current projections we expect

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Interview with Joseph Jimenez
o be one of the few companies to actually 
ffset losses during a period like this.
SALES GROWTH ACCELERATED IN THE TOP SIX 
EMERGING MARKETS LAST YEAR. WHAT WERE 
THE KEY DRIVERS?
et sales in our top six emerging markets 
ose 17% in constant currencies during 
2011, representing 10% of Group net sales. 
China was a major success story, with net 
ales climbing 38% in constant currencies. 
A new local management team leading the
harmaceuticals Division concentrated on 
arketing and sales skills, and the new
ecentralized organization introduced last 
ear covering inland provinces in China is 
tarting to pay off.
xpanding our presence in China – as well 
s in other fast-growing countries such as 
Brazil, Russia and India – is critical to our 
ong-term growth strategy, and we achieved
everal milestones during 2011. Novartis 
ompleted the purchase of an 85% holding 
n Zhejiang Tianyuan Bio-Pharmaceutical Co., 
ne of China’s largest privately held vaccine
ompanies. The agreement is expected to
nable Novartis to deliver a broad range of
accines in China. 
Also this year, the Vaccines and Diagnostics
ivision began design of its first plant in
Brazil. The plant will be located in the 
ortheast coastal state of Pernambuco 
nd is expected to produce vaccines 
gainst meningococcal disease when it 
omes onstream in 2014. 
ovartis also began construction of a pharma-
eutical manufacturing plant in St. Petersburg, 
ussia, our most signiﬁ cant investment in 
ussia to date. The new facility is expected to 
anufacture innovative pharmaceuticals 
s well as high-quality generics for patients 
n Russia. It is part of a broader package of 
nvestment by Novartis in Russia that also 
ncludes research and development and 
ublic health initiatives in tuberculosis, and
 program in Yaroslavl that aims to reduce 
he high prevalence of hypertension. 
HOW HAS THE INTEGRATION OF THE NEW  
ALCON DIVISION PROGRESSED SINCE 
CONSOLIDATION IN APRIL?
Alcon was one of our fastest-growing divi-
ions during 2011 with pro forma net sales
rowth of 7% in constant currencies. That
ells me that Alcon management has not let
he integration work get in the way of great
xecution.
he surgical and ophthalmic pharmaceuticals
usinesses drove Alcon’s performance.
Another highlight was 22% growth (con-
tant currencies) in pro forma sales in the 
op six emerging markets, led by China, South 
orea and India.
ye care exempliﬁ es the changing demo-
raphics and aging of populations that will 
ncrease demand for healthcare in the 
uture. Alcon has built leadership positions 
cross all of its businesses, and the new
ivision provides a stronger vehicle for the 
ontact lens business, which is now expected
o have a great platform for growth. The 
lobal rollout of Dailies Total 1, a new gen-
ration of daily disposable contact lenses,
egan in selected European markets dur-
ng the fourth quarter and is planned to 
xpand during 2012.
he new division was accretive to Group 
ore income margins, and there is expected 
o be a further boost to margins from cost 
ynergies of USD 350 million by 2013. The
omplementary nature of the businesses 
eans we expect to grow faster together 
han either Novartis or Alcon would have 
anaged on its own.
NOVARTIS ANNOUNCED STRUCTURAL 
CHANGES TO REDUCE COSTS. WHY WAS 
THIS NECESSARY?
e are implementing a program to reduce 
ur cost base – including consolidation
nd transfer of some manufacturing and
esearch and development activities. These
nitiatives will take place over the next three 
o ﬁ ve years, but we wanted to be trans-
arent about our plans as early as possible 
o associates affected can prepare for the
uture. 
 get a lot of questions about why we would 
nnounce plans for cost reductions at a time 
hen the company is doing so well. We must 
ddress the increasingly challenging exter-
al environment from a position of strength. 
o continue to be successful we need to reduce 
ur cost base. In this sense, cost savings 
re strategic. They allow us to maintain 
trong levels of research and development
pending, which leads to innovation and, in 
urn, sales growth.
At Novartis innovation is at the center of
verything we do, and we plan to keep our 
pending on research and development at
he high end of the healthcare industry.
Because of the success of our research 
round the world, we have a growing num-
er of compounds entering development.
implifying our organization is a way to free 
p resources to invest in new research 
latforms and projects, and ensure we keep
ur track record of innovation going.

10
N O VA RT I S  G R O U P A N N UA L  R E PO R T  2 0 11
RECENTLY LAUNCHED MEDICINES HAVE 
FUELED GROWTH AT THE PHARMACEUTICALS 
DIVISION IN RECENT YEARS. DID THAT 
PORTFOLIO TRANSFORMATION CONTINUE? 
he Pharmaceuticals Division continues to 
eliver robust sales growth, through out-
tanding launches of new medicines such
s Gilenya as well as important new indica-
ions for approved medicines, including our
nticancer treatment Aﬁ nitor/Votubia. The 
ivision has also managed its cost base 
xtremely well.
A year ago, Gilenya was still in registration,
nd the launch to date has outpaced bench-
arks for existing multiple sclerosis 
 therapies. More than 25 000 patients are
eing treated with commercial drug. We 
ompleted reimbursement negotiations in 
 several countries in Europe as well as in Asia. 
n another important milestone, Gilenya was 
pproved in Japan during September. 
ales of Lucentis rose 26% in constant cur-
encies during the year, mainly in treatment
f the “wet” form of age-related macular
egeneration (AMD). Lucentis has been 
pproved for two new indications – diabetic
acular edema and retinal vein occlusion. 
ach of these indications represents a new 
arket comparable in size to wet AMD.
Tasigna – the second-generation treatment 
or chronic myeloid leukemia – grew strongly 
nd now represents more than 19% of sales 
n our CML franchise. One newly diagnosed 
CML patient in three begins treatment with 
Tasigna, an important gauge of how the 
arket is likely to evolve in coming years.
n the landmark BOLERO-2 clinical trial,
Aﬁ nitor n combination with the aromatase 
nhibitor exemestane more than doubled 
rogression-free survival of women with
etastatic estrogen-receptor-positive breast 
ancer. We have submitted regulatory
 lings in that additional indication and, if 
pproved, Aﬁ nitor could help potentially tens 
r
f thousands of women with advanced 
reast cancer who lack effective treatment 
ptions today.
HOW DID OTHER DIVISIONS PERFORM IN 2011? 
At the Vaccines and Diagnostics Division,
he meningococcal franchise is growing 
trongly, driven by market share gains for 
Menveo in the United States. Bexsero, our
eningococcal serogroup B vaccine, is un-
er review in Europe, and has the potential 
o protect against the most common cause f
acterial menin gitis in European countries. 
he Sandoz Division delivered robust growth
n 2011 – with great sales execution in many
egions of the world. Sandoz enoxaparin
ecame our first generic “blockbuster,”
chieving sales of more than USD 1 billion 
n its ﬁ rst 12 months on the US market. The 
utlook for the generics industry is very 
ositive going forward: Generics help lower 
ealthcare costs for payors around the world, 
nd demand for high-quality generics is 
xpected to remain strong in coming years. 
e also expect dynamic growth in the rapidly 
merging segment of biosimilars, where 
andoz is the global leader, with three mar-
eted products and a strong pipeline.
owever Sandoz tends to have greater 
ear-to-year volatility than other Novartis
ivisions due to limited periods of exclu-
ivity, which are a fundamental part of the
enerics business. It can be difﬁ cult to 
eliver strong growth coming off a high 
ase like 2011 – especially if Sandoz no lon-
er markets the only generic version of 
noxaparin available in the United States in 
2012.

11
2  |  G R O U P  R E V I E W  
16 | HE A LT H C A R E P O R T FO L I O 
6 0 | C O R P O R AT E C I T IZE NSHIP 
8 6 | C O R P O R AT E G OV E R N A N C E 
114 | C O MPE NS AT I O N R E P O R T 
13 8 | F IN A N C I A L R E P O R T
Interview with Joseph Jimenez
ur consumer-based OTC and Animal
ealth businesses help to balance periodic 
olatility at Sandoz and Pharmaceuticals. 
Both OTC and Animal Health have histori-
ally outgrown their markets, reflecting 
lobal positions as number one or two in 
iche categories in their respective indus-
ries. As predominantly self-pay busi-
esses less dependent on reimbursement, 
TC and Animal Health also provide a 
egree of insulation from the current fi-
ancial pressure on governments and other 
ajor payors.
YOU HAVE BEEN A DRIVING FORCE BEHIND THE 
LAUNCH OF THE INTERNAL INITIATIVE BE 
HEALTHY. WHAT INSPIRED YOUR INITIATION 
OF THE PROGRAM DURING 2011?
 believe Novartis has a responsibility to 
ffer all Group company associates the tools 
hey need to live healthier lives. We are a 
ealthcare company, and healthcare starts 
ith our own employees. Be Healthy is a 
oluntary global initiative with four com-
onents: encouraging physical exercise, 
hoosing a healthy diet, fostering greater
wareness of key health indicators, and
ffering support for associates who become 
ll to manage their illness and ultimately 
eturn to work.
e rolled out the program to 76 Novartis 
Group company sites during 2011, and the
emaining sites around the world will be 
dded during 2012. We held a celebration 
eek in September to build awareness but 
his isn’t a once-a-year initiative. We all 
eed to keep our health top-of-mind and 
hink about small changes to keep us in
etter shape – from daily exercise to low-
ost healthy meals that we have introduced 
n Novartis cafeterias.
WHAT ADVANCES HAS NOVARTIS MADE IN 
ENHANCING ACCESS TO MEDICINE AND 
IN CORPORATE RESPONSIBILITY OVERALL?
At Novartis our mission is to care and to
ure. This means a strong commitment to 
nderserved populations to ensure access 
o medicines. Novartis reached 89 million 
atients in need through access-to-medicine
rograms during 2011, and we continued
o make progress on some of our important
rograms against so-called neglected 
iseases. 
he Novartis Malaria Initiative entered a 
ew phase following expiration of our 
10-year partnership with the World Health 
rganization to provide Coartem at no proﬁ t
or use by public health systems in devel-
ping countries. Underscoring our commit-
ent to the battle against malaria, Novartis 
lans to continue to provide Coartem to 
eveloping countries on the same terms.
e received several awards for SMS for Life, 
 collaboration developed by Novartis to 
elp prevent rural clinics in Africa from
unning out of critical malaria treatments. 
sing mobile phone text messages, rural 
linics report levels of medicines they
ave in stock once a week, and distribution 
ites use the information to schedule more 
e liveries. SMS for Life was first intro-
uced in Tanzania and is being expanded 
o other countries. 
ovartis also continues to lead the global 
ffort to eradicate leprosy. For more than 20 
ears, we have provided the only multidrug
herapy for leprosy free to patients. In Brazil, 
ovartis has sponsored a mobile clinic that
ravels to remote areas of the country to pro-
ide diagnosis and treatment for patients 
ho otherwise would not receive therapy.
 am pleased that Alcon, our newest division, 
lso has a strong track record in corporate 
esponsibility. Alcon’s corporate giving,
ocused on broadening access to eye care in 
eveloping markets and local communities, 
omplements our commitment to reaching 
ore patients and addressing signiﬁ cant 
nmet medical need.
ur company’s shared commitment to 
orporate responsibility rests with every 
ovartis associate. We made progress on 
overnance of corporate responsibility 
uring 2011, anchoring it more strongly 
ithin the Executive Committee. George 
Gunn, Division Head, Animal Health, assumed 
n additional position as Head of Corporate
ocial Responsibility.
e can all be proud of what Novartis has
ccomplished in enhancing access to medi-
ine worldwide.

Life in a circle 
JUAN MEJÍA MIRANDA: “As a parent, I have an obligation to take life 
as it comes. When your children are sick, you can’t just stand there 
hoping, with your fingers crossed. My daughter is the patient and 
tomorrow I am giving her my kidney, and I’m overjoyed.
“My daughter’s name is Dayrin Elizabeth Mejía Garcia. She was born 
on October 12, 1995. My person is, I’m 38 years old and from a 
little village in Petén, which is 500 kilometers from this hospital, from 
Guatemala City. I had studied accounting, but because of the lack of 
employment, nowadays I work in construction and earn 1 975 quetzales 
a month ($258), the minimum wage. There are five children – four 
boys and Dayrin is the only girl – so we don’t have the money to go to 
private clinics. We use the national hospital to get the services. And 
I’m thankful. Dayrin has been having problems with her health since 
she’s been born. She was born at home and the midwife was the first 
one to see the little ball at the bottom of her column, of her spine. 
Clinically that name is myelomeningocele. And the fear was terrible, 
because people in the village told my wife, Miria, that our daughter 
would never be able to walk, or talk. But before she was one year old, 
my daughter was walking, though most kids who suffer this disease 
cannot. Then she again broke the barrier, and said ‘Mami’ and ‘Papi.’
“From that time we began traveling back and forth from our village to 
get help. The doctors said she would need a surgery. When she was 
three years old, they did the first one. But after that operation, Dayrin 
still had little repeats of problems, again and again. I remember that even 
before she began school, we explained to the teachers what she had, 
HE A LT H C A R E PE R SPEC T I V E S: L IF E IN A C IR C L E
13

14
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14
N O V
N O V
N O V
N O V
N O V
N O V
N O VA RT I S  G R
T I S  G R
T I S  G R
T I S  G R
T I S  G R
T I S  G R
T I S  G R O U P
U P
U P
U P
U P
U P
U P A N N
N N
N N
N N
N N
N N
N N UA L  R E
A L  R E
A L  R E
A L  R E
A L  R E
A L  R E
A L  R E PO R T  2 0 11
O R T  2 0 11
O R T  2 0 11
O R T  2 0 11
O R T  2 0 11
O R T  2 0 11
O R T  2 0 11
and they gave my wife permission to go into the school and change her 
diapers. After that, sometimes, the children would tease my daughter 
about her size – she is very, very small for her age – and the diapers. 
But even now she cannot control her pee; it’s from the myelomeningocele. 
Six years after that first surgery, the doctors told me Dayrin had a 
neuro genic bladder. The way I understand it, her bladder is too small, 
and because the walls of the bladder are not able to contain the pee, it 
goes back to the kidneys and that’s why the kidneys get sick.
“Now this is my first time as a patient, but I’m really feeling very calm 
because I know that I’m going to do what no one else is going to do 
for my child. Finally, she will be transplanted. For the past six months, 
three times a week, three hours a day, Dayrin has been on dialysis, which

15
15
15
HE A LT H C A R E PE R SPEC T I V E S: L IF E IN A C IR C L E
battling for her. She was in danger. It was real complicated, her surgery, 
and Dayrin had a lot of water remaining in her body. They had to dialyze 
her. Then when I could finally speak to Dayrin I tried to motivate her, 
tell her that though the difficult days are not all over and ahead of us 
is a long healing process, this is a chance for her to continue her life. 
 
“Today, they woke me up at 6 a.m. to take a bath. They want me to be 
active. So yeah, I walked. And I have a scar that’s really special. And 
my daughter also has a special scar. The doctors are telling me because 
of this surgery and the medicines, my daughter’s body is already 
working different than it used to. She’ll be able to live 20 years more. And 
if science today starts creating more medicines, she might live 30 or 40 
years more. Now I don’t have the specific words to thank everyone. 
Since Roosevelt Hospital is the national hospital, I don’t have to worry 
about paying. And I’m so grateful for the Fundanier Foundation, which 
helps children with renal problems, and for its founder Dr. Randall Lou 
Meda; for the hospital director; for the surgeons, pediatricians and 
nurses in this place that’s a long way from where I live. And I’m grateful 
for my wife, who has suffered a lot raising our daughter; for my father, 
who was an exemplary father; for my wife’s mother and my mother who 
sometimes helped my family when I went to work.
“You can say now that this time with my daughter has been like life in a 
circle – from birth to rebirth. I do believe God has a plan for each human 
being and a path that is written, and that each of us has to accomplish 
that journey. Because when the time comes, he’s going to ask for an 
accounting. And what are we going to say to him?”

16
N O VA RT I S  G R O U P A N N UA L  R E PO R T  2 0 11
EALTHCARE PORTFOLIO
In 2011, our products reached more than 1.1 billion patients 
around the world, according to internal estimates.
While healthcare remains a growth industry, both positive 
and negative trends are affecting the way we operate. 
Rapid aging of the population, greater access to healthcare 
in emerging markets and advances in science create 
opportunities to enhance the lives of patients.
At the same time, an uncertain economy, pricing pressures, 
regulatory issues and patent expirations exert downward 
pressure. Tensions will grow as healthcare spending outpaces 
economic growth.
Novartis is a leader in navigating these pressures and 
meeting changing customer needs. Our strategy of focused 
diversiﬁ cation helps us to fully leverage the changes in 
our industry while balancing risk.
CONTENTS
EALTHCARE PORTFOLIO 
Healthcare Portfolio Overview 
17
 
Pharmaceuticals 
18
 
Novartis Institutes for BioMedical Research 
29
Alcon 
34
 
Sandoz 
40
Vaccines and Diagnostics 
46
 
Consumer Health 
52

2011 NET SALES BY SEGMENT
(% and in USD millions)
2011 NET SALES BY REGION AND SEGMENT
(% and in USD millions)
Pharmaceuticals
Alcon
Sandoz
Vaccines and Diagnostics Consumer Health
2011 CORE OPERATING INCOME 3 BY SEGMENT
(% and in USD millions)
1Data since 2009 has been restated to reflect new segment allocation introduced in 2011 as explained in detail on page 159.
22006-2011 for Consumer Health only includes OTC and Animal Health
3Core operating income eliminates the impact of acquisition-related factors and other significant exceptional items. These adjustments are explained in detail starting on page 179.
NET SALES BY SEGMENT 2
(Index: 2006 = 100%; Alcon only consolidated from August 25, 2010. 
However, Alcon 2011 growth rate is based on pro forma full year data for 2010)
CORE OPERATING INCOME 3 BY SEGMENT 2
(Index: 2006 = 100%; Alcon only consolidated from August 25, 2010. 
However, Alcon 2011 growth rate is based on pro forma full year data for 2010)
Pharmaceuticals
Alcon
Sandoz
Vaccines and Diagnostics
Consumer Health
300
250
200
150
100
50
2006
2007
2008
2009
2010
2011
300
250
200
150
100
50
2006
2007
2008
2009
2010
2011
Pharmaceuticals
56
32 508
Alcon
17
9 958
Sandoz
16
9 473
Vaccines and Diagnostics
3
1 996
Consumer Health
8
4 631
Total
58 566
Pharmaceuticals
61
10 040
Alcon
21
3 492
Sandoz
12
1 921
Vaccines and Diagnostics
1
135
Consumer Health
5
873
Corporate Expenses, net
– 552
Total
15 909
United States
31
9 973
38
3 810
35
3 300
37
737
30
1 405
Europe
36
11 595
29
2 835
47
4 445
33
668
43
1 964
Asia/Africa/Australasia
24
7 928
22
2 207
11
1 064
19
373
17
782
Canada and Latin America
9
3 012
11
1 106
7
664
11
218
10
480
Total
32 508
9 958
9 473
1 996
4 631
17
2 | G R O UP R E V IE W 
16  |  H E A LT H C A R E  P O R T F O L I O 
6 0 | C O R P O R AT E C I T IZE NSHIP 
8 6 | C O R P O R AT E G OV E R N A N C E 
114 | C O MPE NS AT I O N R E P O R T 
13 8 | F IN A N C I A L R E P O R T
 
Heathcare Portfolio Overview
HEALTHCARE PORTFOLIO OVERVIEW1

18
N O VA RT I S  G R O U P A N N UA L  R E PO R T  2 0 11
NEWS IN 2011
Recently launched products drive portfolio rejuvenation across therapeutic franchises.
Net sales rise 7% (+4% in constant currencies, or cc) to USD 32.5 billion. Europe (USD 11.6 billion, +2% cc), our largest region, maintains 
strong volume growth, more than offsetting the negative impacts of healthcare cost-containment measures and generic erosion. Our 
top six emerging markets (USD 3.2 billion, +7% cc) are led by double-digit growth in China and India. Growth is solid in Japan, Latin 
America and Canada; the US is ﬂ at, contributing 31% of net sales for the division.
Products launched since 2007 (USD 9.2 billion) comprise 28% of division net sales, up from 22% in 2010. Key growth drivers include 
Lucentis, Tasigna, Aﬁ nitor, Gilenya, Exforge, Galvus, Exelon Patch, Exjade, Reclast/Aclasta and Onbrez Breezhaler.
Operating income declines 2% (+4% cc) to USD 8.3 billion, following net exceptional charges including amortization of USD 1.7 billion 
(including USD 903 million for Tekturna/Rasilez in the fourth quarter). Core operating income advances 5% (+8% cc) to USD 10.0 billion.
Constant currency core operating income margin expands by 1.4 percentage points due to continuing productivity efforts. However, 
this improvement was offset by a negative currency impact of 2.1 percentage points, resulting in a net decrease in core operating 
income margin of 0.7 percentage points to 30.9 % of net sales.
Promising development pipeline, with more than 130 projects, achieves 15 major regulatory approvals in 2011. Gilenya, our multiple 
sclerosis treatment, gains approval in EU, Switzerland, Japan and many other countries. Aﬁ nitor/Votubia is approved in US and Europe 
for subependymal giant cell astrocytomas associated with tuberous sclerosis and advanced pancreatic neuroendocrine tumors. Lucentis 
gains two new EU approvals to treat diabetic macular edema and retinal vein occlusion. In late December, following the seventh interim 
review of data from the ALTITUDE study with Tekturna/Rasilez, Novartis announced that the trial was halted on the recommendation of 
the independent Data Monitoring Committee overseeing the study.
KEY FIGURES
(in USD millions, unless indicated otherwise)
2011
20101
Net sales
32 508
30 306
Operating income
8 296
8 471
Return on net sales (%)
25.5
28.0
Core operating income 2
10 040
9 586
Core return on net sales (%)
30.9
31.6
Core Research & Development 2
6 860
6 344
As % of net sales
21.1
20.9
Free cash flow
10 789
10 355
Net operating assets
13 696
15 212
Additions to property, plant & equipment 3
1 041
777
Number of associates (FTE) 4
60 527
59 409
1Restated to reflect new segment allocation introduced during 2011 as explained in detail on
page 159.
2Core operating income eliminates the impact of acquisition-related factors and other significant
exceptional items. These adjustments are explained in detail starting on page 179.
3Excluding impact of business combinations
4Full-time equivalent positions at year end
PHARMACEUTICALS OVERVIEW
PORTFOLIO REJUVENATION
(Share of sales from recently launched products1 in %)
2008 
2009 
2010 
2011
26 331
28 287
30 306
32 508
10
17
22
28
+5
+6
+7
Recently launched products
Established products
1Major products launched since 2007 including Lucentis, Tasigna, Exjade, Sebivo/Tyzeka, Exforge,
Galvus, Aclasta/Reclast, Cubicin, Exelon Patch, Aﬁ nitor/r/r Votubia, Tekturna/Rasilez, Extavia, Onbrez,
Gilenya, Fanapt and
t
Ilaris

19
n June 29, 2011, an Independent Data 
Monitoring Committee met in Newark, New 
Jersey, for a scheduled interim review of 
BOLERO-2, a clinical study of the Novartis 
edicine Aﬁ nitor in treatment of advanced
r
reast cancer.
Because important studies like BOLERO-2
an take years to complete, interim analyses
re designed to assess safety data and crit-
cal efﬁ cacy endpoints without comprising 
cientiﬁ c integrity. The stakes are high. Inde-
endent Data Monitoring Committees can 
ecommend continuation, modiﬁ cation or 
ven termination when there is compelling 
vidence that one treatment is superior to
he comparator.
or BOLERO-2, the Committee’s verdict
as unequivocally positive. The interim 
eview showed that the study’s primary
ndpoint had been met: Everolimus, the 
ommon name for Aﬁ nitor, in combination
r,r
ith the aromatase inhibitor exemestane,
igniﬁ cantly extended time without tumor 
rowth in postmenopausal women with 
strogen-receptor-positive but human 
pidermal growth factor receptor 2 (HER2)-
egative metastatic breast cancer, who had 
ailed initial endocrine therapy. The trial was
topped early and data from BOLERO-2 
ormed the basis for worldwide regulatory 
ubmissions that are currently pending.
verolimus had previously been approved 
n Europe and the United States for multiple
ndications, from prevention of rejection in
rgan transplants to treatment of advanced 
enal cell carcinoma in patients whose disease 
as progressed after treatment with vascular 
PHARMACEUTICALS
Novartis Oncology has built one of the industry’s broadest pipelines of anticancer medicines, with 
more than 20 pivotal clinical trials ongoing. Oncology is a forerunner of the strategy at the Novartis 
Pharmaceuticals Division, using companion diagnostic tests to match the right drug with the right 
patient and explore the full potential of innovative medicines. 
ndothelial growth factor-targeted therapy
uch as sunitinib or sorafenib. Those approv-
ls were just the beginning of a bold program
f parallel clinical trials. 
n October 2010 the US Food and Drug 
Administration (FDA) approved everolimus
s the ﬁ rst medication for children and adults
ith subependymal giant cell astrocytoma 
(SEGA), a benign brain tumor associated
ith the genetic disorder tuberous sclerosis. 
uropean regulators followed suit in 
eptember 2011. Moreover, during 2011 both 
he FDA and European regulators approved
Aﬁ nitor as the ﬁ rst new treatment in nearly
r
hree decades for patients with advanced 
ancreatic neuroendocrine tumors, a rare but
ggressive cancer for which there have been
imited treatment options.
arallel with the BOLERO-2 study,
verolimus is being investigated in pivotal 
tudies for treatment of patients with HER2-
ositive advanced breast cancer. Clinical trials 
re also ongoing in liver cancer, as well as a
orm of benign kidney tumors associated 
ith tuberous sclerosis complex. 
he success of everolimus underscores 
he rejuvenation of the product portfolio and 
ommercial model at the Pharmaceuticals 
ivision’s Oncology Business Unit. Oncology 
ales rose 3% in constant currencies dur-
ng 2011, buoyed by dynamic growth of
verolimus and Tasigna, a second-generation 
reatment for chronic myeloid leukemia.
The products that grew fastest are the ones 
hat are most important for our long-term 
uccess,” said Herve Hoppenot, President, 
ovartis Oncology. 
2 | G R O UP R E V IE W 
16  |  H E A LT H C A R E  P O R T F O L I O 
6 0 | C O R P O R AT E C I T IZE NSHIP 
8 6 | C O R P O R AT E G OV E R N A N C E 
114 | C O MPE NS AT I O N R E P O R T 
13 8 | F IN A N C I A L R E P O R T
 
Pharmaceuticals

20
N O VA RT I S  G R O U P A N N UA L  R E PO R T  2 0 11
Growth of new products more than offset
oss of patent protection on Femara, a block-
uster treatment for breast cancer. Novartis 
ncology also is set to lose exclusivity on
Zometa, another blockbuster medicine, by
2013. “It is the nature of our business: We 
eceive patents in recognition of innovation, 
e develop medicines and grow sales during
he years we have exclusivity, but ultimately 
e lose them,” Mr. Hoppenot said. “Obviously, 
e have been preparing for this for several 
ears.”
Along with its new medicines, Novartis
ncology has a packed pipeline of targeted 
nticancer treatments undergoing clinical
rials. “The ﬁ eld of oncology is in the middle 
f a complete revolution – it is a turning point 
n treating cancer,” Mr. Hoppenot said. “We
re learning to treat these patients intelli-
ently. And if we are successful in following 
he direction in which science is leading us,
here is enormous potential to transform
reatment of cancer in the same way anti-
iotics changed the world in the 20th century
r the ﬁ rst effective medicines changed HIV /
AIDS from a deadly disease to one with 
hich patients could live relatively normal
ives for a long time.”
Just as everolimus has already won
pproval for multiple disease indications, 
Mr. Hoppenot believes cancer treatments 
n the future will build sales through layers 
f indications for use in specific patient 
opulations. “Breakthroughs in the future 
ill be drugs where we understand the bio-
ogical target very well, understand the 
echanism of action very well and have
eveloped diagnostic tools to identify the 
ight patients to be treated with these novel 
roducts,” he added.
Meanwhile, signiﬁ cant investment in 
ecent years has strengthened development 
eams in countries such as Japan and China, 
hich traditionally lagged Europe and North 
America in testing and approval of new
ancer medicines. That global infrastruc-
ure is essential to parallel development of 
ultiple indications as seen in the Afinitor
rogram. Recruitment of patients can be 
hallenging, especially for studies of tar-
eted medicines in relatively uncommon 
ypes of cancer. “We need to involve a large
umber of cancer centers around the world 
o identify sufﬁ cient numbers of patients 
ho have exactly the type of mutation or 
athway abnormality we are looking for,” Mr.
oppenot said.
he Aﬁ nitor prototype of early studies of
r
 drug in multiple parallel indications will be 
 common model for Novartis Oncology in 
he future. “We would rather start earlier in 
ultiple directions than follow a traditional,
equential approach to development,” Mr. 
oppenot added. “Speed is crucial – there 
ill be competition for each indication.” 
And Novartis Oncology is a forerunner
f the strategy at the Pharmaceuticals 
ivision. “The whole idea of matching the
ight drug with the right patient at the right 
ose and the right time was really born out 
f Oncology,” said David Epstein, Division
ead, Novartis Pharmaceuticals, and mem-
er of the Executive Committee of Novartis.
There are multiple lessons from Oncology 
hat we are applying to our expanding port-
olio of specialty medicines. One is the impor-
ance of understanding genetics, and how 
ach patient is different and responds indi-
idually to a medicine. That puts a premium 
n use of a companion diagnostic test to 
nsure the drug prescribed hits the path-
ay that is actually responsible for the 
atient’s disease. We also are developing 
echnological interventions such as remote 
onitoring to optimize the outcome of 
reatment for patients. And just as with 
Afinitor, Pharmaceuticals plans to conduct 
r,r
road development programs, including 
arallel clinical trials in multiple indica-
ions, for most of our drugs.”

21
TRANSLATIONAL MEDICINE 
he emerging wave of targeted therapies 
eﬂ ects a modern view of cancer as a 
isease caused by genetic defects in key 
olecular pathways. These pathways play
n important role in cell growth and develop-
ent in normal cells. Sometimes, however,
hese pathways can be abnormally activated
r deregulated by genetic changes, leading
o the uncontrolled cell proliferation charac-
eristic of cancer. Breakthroughs such as
Gleevec/Glivec – the pioneering medicine
rom Novartis for treatment of chronic 
yeloid leukemia, gastrointestinal stromal
umors and other types of rare tumors – 
emonstrated how targeting an underlying
enetic defect could halt or delay progres-
ion of cancer and keep a large proportion
f patients in remission for years.
ovartis Oncology has built one of the 
ndustry’s broadest pipelines of targeted 
nticancer medicines. Innovative therapies
ith almost a dozen different mechanisms 
f action are currently being tested in 
ore than 20 pivotal clinical trials. Devel-
pment programs for these targeted thera-
ies are as groundbreaking as the drugs 
hemselves.
ncology Translational Medicine is re-
ponsible for testing new drugs in carefully
elected subgroups of patients based on the 
olecular target of the compound. “Novartis 
as an unwavering commitment to patient 
election,” said Barbara Weber, M.D., Global
ead, Oncology Translational Medicine, at 
ovartis. “All our new compounds are being 
eveloped with a strategy for enriching the
tudy with patients most likely to beneﬁ t 
rom the new drug.”
ne example is the portfolio of PI3
inase inhibitors, a promising class of anti-
ancer drugs, where Novartis Oncology is 
eveloping three compounds in parallel.
Scientiﬁ c data indicate strongly that PI3 
inase inhibitors give the greatest beneﬁ t for 
atients who have genetic alterations in the 
I3 kinase pathway,” Dr. Weber explained.
With our newest PI3 kinase inhibitor, we
pened the Phase I study only to patients
ith PI3 kinase pathway mutations, an 
pproach that to our knowledge has not 
een taken before. Despite concern that 
atient selection would slow down our 
tudies, accrual has gone exceptionally well. 
xternal investigators think it is the right 
hing to do for patients and for drug devel-
pment, and have been fully behind us.” 
ne challenge for both standard chemo-
herapies and targeted anticancer agents
s that some patients fail to respond or even-
ually develop resistance to treatment. The 
BOLERO-2 study demonstrated the value 
f combination therapy in overcoming 
esistance. “Signaling pathways talk to 
ach other, and sometimes inhibiting one 
athway will trigger activation of a backup
athway,” Dr. Weber added. “We know that 
ith few exceptions, optimal treatment is 
oing to require combinations, so we are 
oving forward quickly with combinations 
f our new drugs, particularly with our PI3 
inase inhibitors.” 
MASTER SWITCH
verolimus inhibits mammalian target of 
apamycin, or mTOR. A biological master 
witch located at the intersection of several 
ajor signaling pathways, mTOR controls 
ey cellular functions ranging from metab-
lism and growth of cells and tumor cell
ivision, to angiogenesis, or growth of new 
lood vessels.
verolimus was synthesized in 1992, and 
evelopment of the new medicine pro-
ressed simultaneously with elucidation of
he mTOR pathway. Initial preclinical testing 
howed that inhibition of mTOR suppressed
he immune system, and development
onﬁ rmed that potential. Under the brand
ames Certican and Zortress, everolimus has 
een approved in more than 70 countries 
or use in kidney and heart transplantations.
By the late 1990s, however, Novartis
esearchers began to explore the potential
f everolimus in treatment of cancer. 
ormally, cells keep the machinery respon-
ible for growth and proliferation under tight 
ontrol, but the PI3 kinase/mTOR pathway
s activated by genetic mutations affecting
any different nodes. Everolimus works 
gainst different types of cancer in which 
ctivation of the mTOR pathway is a common 
eature. “mTOR is located strategically at the 
ottom of multiple signaling pathways in the 
ell,” Dr. Weber said. “Regardless of the 
xact genetic alteration upstream, all roads 
ead into mTOR.” 
uberous sclerosis complex, the inher-
ted brain disorder, offers a model of aber-
ant activation of mTOR and the therapeutic 
eneﬁ t of mTOR inhibition. TSC1 and TSC2 
re nodes in the PI3 kinase/mTOR signaling 
ascade located upstream of mTOR, and 
heir normal function is to keep the mTOR
witch in the inactive position. Mutations in 
SC1 or TSC2 activate the mTOR pathway,
eading to abnormal growth of tumors in the
rain, kidneys, skin and other vital organs.
egulatory applications for everolimus in
reatment of SEGA associated with tuberous
clerosis were based on a study conducted
y Cincinnati Children’s Hospital Medical 
Center in which nearly a third of patients
xperienced a reduction of 50% or greater 
n the size of their largest SEGA tumor
fter six months of treatment. None of the
atients developed a new SEGA tumor while 
eceiving everolimus. 
DRIVING TUMOR GROWTH
ome breast tumors need hormones to grow 
nd for more than a century, the hormone
strogen has been linked with progression 
f breast cancer, driving tumor growth and
ell proliferation in an estimated 70% of all 
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N O VA RT I S  G R O U P A N N UA L  R E PO R T  2 0 11
reast cancer cases. When diagnostic assays
how that a breast tumor has estrogen
eceptors, hormone therapy is most often 
ecommended as a treatment option.
Biology always told us that activation 
f mTOR is linked with development of resis-
ance to hormonal therapy, and evidence 
rom preclinical studies conﬁ rmed that
ypothesis. Based on this evidence we took 
he risk of running a large Phase III trial,” 
xplained Alessandro Riva, M.D., Head of
Global Development and Medical Affairs, 
ovartis Oncology. “The success of BOLERO-2 
ould change the treatment paradigm for 
strogen-receptor-positive metastatic breast 
ancer; in the future, we expect Aﬁ nitor to 
r
ecome a key component in combination
herapy to avoid the onset of resistance,” he 
dded.
Aﬁ nitor is also being tested in a different
r
ombination for treatment of another form 
f breast cancer caused by a protein called 
ER2, which promotes the growth of tumor
ells. HER2-positive tumors tend to be
ore aggressive than other types of breast
ancer, and they are less responsive to
ormone treatment.
A therapy called trastuzumab (marketed 
y Roche Holding AG under the brand name
erceptin ) has transformed treatment of 
ER2-positive cancer, but a recent editorial 
n the Journal of Clinical Oncology bserved 
hat many patients with HER2-positive 
reast cancer will either not respond to
 Herceptin  or develop resistance to the drug. 
Understanding and overcoming resistance 
s a critical step toward the improvement of
utcomes for this subtype of breast cancer,”
he authors wrote.
ovartis is conducting two trials of the 
ombination Aﬁ nitor/Herceptin
r/r
 in treatment
f HER2-positive breast cancer. “Just as with 
strogen-receptor-positive breast cancer, 
iology clearly tells us that patients who 
arry ampliﬁ cation of HER2 also have a link 
ith activation of the PI3 kinase pathway
nd downstream activation of mTOR,” Dr. Riva 
aid. “Preclinical data indicate that if we
nhibit the mTOR pathway, we may achieve 
 synergistic effect with Herceptin .” The 
BOLERO-1 and BOLERO-3 studies are
ecruiting well, Dr. Riva added, and Novartis 
xpects to disclose results of the studies by 
ate 2012 or early 2013.
PRE-EMPTING RESISTANCE 
tudies testing everolimus in combination
herapy reﬂ ect a broader challenge: Inhibi-
ion of mTOR appears to activate other
athways that can lead to emergence of 
esistance. One way to pre-empt resistance
ould be to target two nodes in the PI3 
inase/mTOR pathway or even two separate 
athways simultaneously.
The idea underlying combination 
herapy is that, if we could hit the cancer cell
 little bit harder in a smart way, its defenses 
hould fall apart,” said David Lebwohl, M.D., 
Global Program Head Afinitor. “We are
rying to learn where we see activity and 
hat combinations make sense.” 
ne combination to be tested will be 
verolimus and a PI3 kinase inhibitor. PI3 
inase is a critical regulator of cell growth 
nd survival. “mTOR is the lowest of the
otential targets in the pathway, so going 
pstream is a natural progression,” said 
amit Hirawat, M.D., who leads the PI3 kinase
nhibitor development program. 
But there are also potential pitfalls. “As 
ou go higher and higher above mTOR in 
he pathway, you have to start screening
atients for the speciﬁ c genetic defect 
argeted by your drug,” Dr. Hirawat observed. 
n patients with either overexpression of
ER2 or mutations in the Epidermal Growth
actor Receptor, “therapy is only effective
hen the receptor is overexpressed or when 
here is presence of an activating mutation 
n the tumor,” he added.
or patients entered into studies with 
I3 kinase inhibitors, tissue is collected and

23
rospectively analyzed for several bio-
arkers. “Patients are stratiﬁ ed according 
o whether they carry mutated versions of 
he gene encoding PI3 kinase, or inactive 
ersions of PTEN, a tumor suppressor gene
ften dysfunctional in cancer patients,” Dr. 
irawat explained. Other biomarkers also 
re included in study protocols but haven’t
een publicly disclosed.
mulating the Aﬁ nitor model, the clinical 
r r
rogram for PI3 kinase inhibitors is planned 
o include parallel trials in multiple indica-
ions, ranging from endometrial and lung 
ancers to breast cancer and glioblastoma,
he most common form of brain tumors. The 
hree PI3 kinase inhibitors have distinctive 
echanisms of action. BKM120 is a PI3
inase inhibitor that targets all four types of 
I3 kinase found in human cells. BEZ235 is a
I3 kinase inhibitor that also inhibits the pro-
eins that make up mTOR complexes, known 
s mTORC1 and mTORC2. Everolimus blocks 
nly the mTORC1 complex, for example, and 
reclinical data indicate that cancer cells are 
ess able to evade a drug that hits both 
TORC1 and mTORC2.
BKM120 and BEZ235 are currently in 
hase II trials. “This is the start of a great new 
ra,” said Mark C. Fishman, M.D., President 
f the Novartis Institutes for BioMedical 
esearch and member of the Executive 
Committee of Novartis. “The PI3 kinase/
TOR pathway is activated abnormally in 
ne-third of all solid tumors. Drugs that hit 
his pathway have the potential to become 
he staple of cancer therapy.”
PIPELINE PROGRESS 
or all the promise of PI3 kinase inhibitors, 
ovartis Oncology passed major milestones 
cross its broad pipeline during 2011. Results
rom two pivotal Phase III studies demon-
trated the positive effects of ruxolitinib, a 
rug also known by the research number 
NC424, in treating patients with myeloﬁ brosis, 
 blood cancer with limited therapeutic
ptions. Novartis licensed INC424 from 
ncyte Corp. for development and potential 
ommercialization outside the United States. 
he European Commission has granted 
NC424 orphan drug status for treatment of 
yeloﬁ brosis. Under Europe’s orphan drug
ules, INC424 would be entitled to an expe-
ited regulatory review and, if approved, a
eriod of market exclusivity. 
NC424 inhibits the Janus kinase (JAK1
nd JAK2) pathway, which regulates produc-
ion of blood cells. Abnormal signaling leads 
o an enlarged spleen and other severe compli-
ations. INC424 is also being investigated in 
linical trials for treatment of polycythemia 
era, a rare blood disorder in which the bone 
arrow makes too many red blood cells.
DE225 is a compound that inhibits 
moothened (Smo), a node in the hedgehog 
athway. Smo is normally active during fetal 
evelopment and inactive in adult cells. 
Abnormal activation of the pathway by 
utations in Smo or other key genes is a 
ause of several kinds of cancer. Mutations
n Smo are common in medulloblastoma,
he most common malignant brain tumor of 
hildren. LDE225 is being tested in treat-
ent of medulloblastoma in both children 
nd adults, with promising early results.
Another targeted anticancer compound 
iscovered in Novartis labs is PKC412, cur-
ently at a late stage of Phase III trials for 
reatment of acute myeloid leukemia in 
atients who carry a mutated version of the
ene encoding FLT3. FLT3 is mutated in 
pproximately one-third of acute myeloid
eukemia patients, and PKC412 inhibits 
nother molecular target believed to play
mportant roles in the pathogenesis of the
isease. The Phase III study enlisted the 
fforts of three cooperative trial groups in 
ifferent parts of the world to bolster the 
ecruitment of patients with this genetic 
lteration, which is relatively uncommon.
AUY922 is a compound that inhibits heat 
hock protein 90 (HSP90), a chaperone pro-
ein needed to fold proteins into their active
hapes. Proteins encoded by mutant cancer 
enes may be particularly dependent on 
SP90 – thus cancer cells driven by those
utations may be susceptible to killing by 
AUY922. Several genes commonly mutated
n lung cancer are among those that may be 
ensitive to HSP90 inhibitors, and Novartis 
ncology has promising early data in this 
ommon cancer.
he success of targeted anticancer ther-
pies has reinforced conﬁ dence in the new 
evelopment paradigm, particularly patient 
reselection and the use of combination 
herapies even before resistance to treat-
ent has actually been observed. “Patient 
reselection has become commonplace in 
he ﬁ eld and thus is more readily accepted 
y oncologists than specialists in other dis-
ase areas,” Dr. Weber said. “The state of the
cience is so far along that we are in a position 
o be able to really take advantage of that 
nowledge in a way that isn’t possible quite 
et in other therapeutic areas.”
he added: “Of course the clinical value 
f that knowledge often is enhanced by having 
 good drug to test. Oncologists have seen
any examples in which preselection has
eant the difference between a drug working 
r not working in trials. What’s changing 
hings for cancer patients is getting good 
rugs – and the right combinations – into 
he right people at the right time.”
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N O VA RT I S  G R O U P A N N UA L  R E PO R T  2 0 11
PIPELINE
Novartis is consistently rated as having one of the 
industry’s most respected development pipelines, with 
134 projects in clinical development. Several of these 
pharmaceutical projects, which include potential uses 
of new molecular entities as well as additional indica-
tions or new formulations for marketed products, are 
for potentially best-in-class and ﬁ rst-in-class medicines 
that would signiﬁ cantly advance treatment standards.
This table provides an overview of selected pharma-
ceutical projects in conﬁ rmatory development.
For a glossary of terms, see page 28.
1 
efers to ﬁ rst planned ﬁ ling date in a major market (US or EU) for lead indication 
2 
efers to current phase of lead indication only
3
eurite outgrowth inhibitor
4 
eat hock protein
5 Mammalian arget of rapamycin
Project /product
Common name
Mechanism of action
ACZ885
anakinumab
Anti-interleukin-1ß monoclonal antibody
AEB071
otrastaurin
rotein kinase C inhibitor
AFQ056
avoglurant
Metabotropic glutamate receptor 5 
ntagonist
AIN457
ecukinumab
Anti-interleukin-17 monoclonal antibody
ATI355
Anti NOGO3-A mAb
AUY922
ATP-competitive non geldanamycin 
nhibitor of HSP 490
BCT197
Anti-inﬂ ammatory agent
BEZ235
I3K/mTOR 5 inhibitor
BGS649
Aromatase inhibitor
BKM120
I3K inhibitor
CAD106
Beta-amyloid-protein therapy
EB025
lisporivir
Cyclophilin inhibitor
Exjade
eferasirox
ron chelator
Gilenya
 ngolimod
phingosine-1-phosphate (S1P)
eceptor modulator
CD122
Anti-CD40 monoclonal antibody
NC424
uxolitinib
Janus kinase (JAK) inhibitor
BH589
anobinostat
istone deacetylase inhibitor
CI699
Aldosterone synthase inhibitor
CQ908
iacylglycerol acyl transferase-1 inhibitor
CZ696
Angiotensin receptor-neprilysin 
nhibitor (ARNI)
DE225
moothened receptor /
edgehog signaling inhibitor
FF571
Bacterial elongation factor 
u (EFTu) inhibitor
GT209
ipid modulator

25
Potential indication/indications
Therapeutic area 
Route of administration
Planned submission dates 1
Current phase 2
Gouty arthritis (lead indication), systemic onset 
uvenile idiopathic arthritis, diabetes mellitus, 
econdary prevention of cardiovascular events
ntegrated Hospital Care, Critical Care
ubcutaneous
ubmitted US, EU
ubmission
revention of organ rejection after trans-
lantation (kidney, liver), psoriasis
ntegrated Hospital Care
ral
≥2016
ragile X syndrome (lead indication), L-dopa 
nduced dyskinesia in Parkinson’s disease
euroscience
ral
2013
I
soriasis (lead indication), arthritidies – rheumatoid 
rthritis, ankylosing spondylitis, psoriatic arthritis, 
ultiple sclerosis
ntegrated Hospital Care, Neuroscience 
ubcutaneous, intravenous 
2013
II
pinal cord injury
euroscience
ntrathecal spinal infusion
≥2016
olid tumors
ncology
ntravenous
≥2016
Chronic obstructive pulmonary disease
rimary Care
ral
≥2016
olid tumors
ncology
ral
2014
bese hypogonadotropic hypogonadism
Critical Care
ral
≥2016
I
ndometrial cancer
ncology
ral
2014
Alzheimer’s disease
euroscience
ubcutaneous, 
ntramuscular
≥2016
I
Chronic hepatitis C
ntegrated Hospital Care
ral
2013
on-transfusion dependent thalassemia
ncology
ral
ubmitted US, EU
ubmission
Chronic inﬂ ammatory demyelinating neuropathy
euroscience
ral
2014
I
ematological tumors
ncology
ntravenous
≥2016
Myeloﬁ brosis (lead indication), polycythemia vera
ncology
ral
ubmitted US, EU
ubmission
elapsed or relapsed-and-refractory multiple
yeloma (lead indication), hematological cancers
ncology
ral
2013
olid tumors
ncology
ral
≥2016
Metabolic diseases
Critical Care
ral 
2014
eart failure (lead indication), hypertension
Critical Care, Primary Care
ral 
2014
II
Basal cell carcinoma
ncology
ral
2014
II
Clostridium difﬁ cile infection
ntegrated Hospital Care
ral
≥2016
ypercholesterolemia
Critical Care
ubcutaneous
≥2016
I
ontinued on next page
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PIPELINE (CONTINUED)
Lucentis
anibizumab
Anti-VEGF 6 monoclonal antibody
MEK162
MEK 8 inhibitor
IC002
icotine Qbeta therapeutic vaccine
VA237
lycopyrronium bromide
ong-acting muscarinic antagonist
KC412
idostaurin
ignal transduction inhibitor
AW039
Anti-inﬂ ammatory agent
MF149
ndacaterol, 
ometasone furoate
ong-acting beta-2 agonist 
nd inhaled corticosteroid
TI571
matinib mesylate
rotein tyrosine kinase inhibitor
VA149
ndacaterol, 
lycopyrronium bromide
ong-acting beta-2 agonist and 
ong-acting muscarinic antagonist
AD001 (Aﬁ nitor)
verolimus
TOR 5 inhibitor
LX030
ascular modulator
OM230
asireotide
omatostatin analogue
Tasigna
ilotinib
ignal transduction inhibitor
KI258
ovitinib lactate
EGFR 1-3 11, FGFR 1-3 12, PDGFR 13 and
ngiogenesis RTK 14 inhibitor 
Xolair
malizumab
Anti-IgE monoclonal antibody
Zortress/Certican
verolimus
TOR inhibitor
6
ascular
ndothelial growth factor
7
Choroidal
eovascularization (CNV) and macular edema (ME) secondary to conditions other than age-
elated macular degeneration, diabetic macular edema, 
tinal vein occlusion and pathologic myopia
8 Combination f
togen activated protien kinase (MAP) and extracellular signal-regulated kinase (ERK)
9
Angiomyolipomas
10
ransmembrane eceptor tyrosine kinase
11
ascular
ndothelial growth factor receptor
12 
ibroblast rowth factor receptor
13 
latelet-derived rowth factor receptor
14
eceptor yrosine kinase
Project /product
Common name
Mechanism of action
This table provides an overview of selected pharma-
ceutical projects in conﬁ rmatory development.
For a glossary of terms, see page 28.

27
athological myopia, choroidal neovascularization 
nd macular edema 7
phthalmology
ntravitreal
2012
II
olid tumors
ncology
ral
≥2016
I
moking cessation
rimary Care
ubcutaneous
≥2016
I
Chronic obstructive pulmonary disease
rimary Care
nhalation
ubmitted EU, US (TBD)
ubmission
Aggressive systemic mastocytosis 
(lead indication), acute myeloid leukemia
ncology
ral
2013
Asthma
rimary Care
ral
≥2016
Asthma, chronic obstructive pulmonary disease
rimary Care
nhalation
2015
ulmonary arterial hypertension
Critical Care
ral
2012
II
Chronic obstructive pulmonary disease
rimary Care
nhalation
2012
uberous sclerosis complex – AML9 (lead indica-
ion), advanced ER+HER2-breast cancer, breast 
ancer HER2-over-expressing ﬁ rst line, breast 
ER2-over-expressing second/third line, hepato-
ellular carcinoma, lymphoma
ncology
ral
ubmitted US, EU (2012)
ubmission
Acute heart failure
Critical Care
ntravenous
2013
Cushing’s disease (lead indication), acromegaly, 
arcinoid syndrome
ncology
ubcutaneous, 
ntramuscular
ubmitted EU, US (2012)
ubmission
Metastatic melanoma with c-KIT 10 mutation
ncology
ral
2014
I
enal cell cancer, solid tumors
ncology
ral
2013
Chronic idiopathic urticaria
Critical Care
ubcutaneous 
2013
II
revention of organ rejection – liver
ntegrated Hospital Care
ral
ubmitted US, EU
ubmission
Potential indication/indications
Therapeutic area 
Route of administration
Planned submission dates 1
Current phase 2
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PIPELINE GLOSSARY
Conﬁ rmatory development
Projects for which a positive proof of concept has been established 
and are currently in either post proof-of-concept clinical trials 
(Phase I /II / III) or under review by the regulatory agencies for 
the purpose of granting marketing authorization (submission).
Project /product
Project refers to the Novartis development project reference code 
(combination of three letters and three numbers), used for 
projects in development. Product refers to the brand name for 
a marketed product.
Common name
Ofﬁ cial international non-proprietary name or generic name for 
an individual molecular entity as designated by the World Health 
Organization.
Mechanism of action
Speciﬁ c biochemical interaction with a molecular target such as 
a receptor or enzyme, through which a drug substance produces 
its pharmacological effect.
Potential indication /indications 
Disease or condition for which a compound or marketed product 
is in development and is being studied as a potential therapy.
Route of administration 
Path by which a medicinal preparation is administered into the 
body, such as oral, subcutaneous or intravenous.
Phase I 
First clinical trials of a new compound, generally performed in a 
small number of healthy human volunteers, to assess the clinical 
safety, tolerability, as well as metabolic and pharmacologic prop-
erties of the compound.
Phase II 
Clinical studies that are performed on patients with the targeted 
disease, with the aim of continuing Phase I safety assessment in a 
larger group, assessing the efﬁ cacy of the drug in the patient popu-
lation and determining the appropriate doses for further testing.
Phase III 
Large-scale clinical studies with several hundred to several 
thousand patients, to establish the safety and effectiveness of 
the drug for regulatory approval for indicated uses. Phase III 
trials also may be used to compare a new drug against a current 
standard of care in order to evaluate the overall beneﬁ t-risk 
relationship of the new drug.
Submission 
An application for marketing approval has already been filed 
with one or both of the following regulatory agencies: FDA 
(United States), EMA (European Union). Novartis has not yet 
received marketing authorization from both regulatory agencies.1 
The application contains comprehensive data and information 
gathered during the animal studies and human clinical trials con-
ducted through the various phases of development of the drug.
1 ilings that ave received approval in one of the markets (either US or EU) but are 
waiting approval in the other market are included in the preceding table.

29
ince 2009 the Novartis Institutes for 
BioMedical Research (NIBR) have stepped
p research programs focusing on regen-
rative medicine.
egenerative medicine is a rapidly 
volving, interdisciplinary ﬁ eld aiming to 
evelop therapies that repair or replace
rgans and tissues damaged by disease or
ging. In recent years, the ﬁ eld has been 
evolutionized by breakthroughs in under-
tanding the biology and ex vivo cultivation
f stem cells, a remarkable category of cells
ith singular properties. A stem cell is self-
enewing – able to divide and generate an 
xact copy of itself numerous times. Each 
f these cells retains the potential to differ-
ntiate into one of several different cell types 
nder appropriate conditions.
t was originally thought that stem cells 
ccurred only in a few specialized locations 
n the body such as bone marrow, but in 
ecent years, scientists have identiﬁ ed stem 
ells in many mature tissues. At least in 
heory, these “local” stem cells represent a 
eadily available source of replacement cells 
nd tissues. Increasingly sophisticated 
eprogramming and differentiation tech-
iques are emerging to generate desired but 
ften difﬁ cult-to-obtain cell populations. 
During development, stem cells provide 
he precursors for many cells of an organ. 
hese cells are guided to adopt their proper
ate and position within organs by signaling 
athways. Our goal is to ﬁ nd medicines that
apture these pathways and use intrinsic 
esidual stem cells in the adult to repair 
NOVARTIS INSTITUTES FOR BIOMEDICAL RESEARCH
Regenerative medicine is an emerging ﬁ eld focusing on therapies that repair damage caused by disease 
or aging. In line with a distinctive pathways strategy, the Novartis Institutes for BioMedical Research are 
racing to discover new medicines or proteins that can make stem cells or other types of progenitor cells 
perform their proper role and enhance regeneration. 
issues damaged by injury or aging,” said 
Mark C. Fishman, M.D., President of NIBR 
nd member of the Executive Committee of
ovartis. 
his regenerative medicine initiative 
uilds on NIBR’s distinctive pathways 
trategy. Single proteins are the building
locks of life, assembled in a limited number 
f core signaling pathways that regulate
ritical cellular functions. These pathways 
re conserved through evolution in highly 
eproducible ways. NIBR scientists are
acing to decipher these pathways – and 
heir nodes – in great enough detail to pro-
ide new and proprietary targets for drugs. 
As well as having direct therapeutic 
otential, stem cells also provide powerful 
ew tools for drug discovery. “We can do 
xperiments today that were not possible as 
ecently as two or three years ago,” said 
Jeffrey Porter, Ph.D., Global Head of the 
evelopmental and Molecular Pathways
latform. One example is the recent break-
hrough that allows scientists to culture in 
he laboratory a complete stem cell niche – 
he specialized, carefully controlled micro-
nvironment in which cells live. “Under the 
ight conditions it is possible to generate 
hat we call organoids – in essence, mini-
rgans that elaborate the exact structures
hat you see in human tissue,” Mr. Porter said.
To a scientist, all the action is there –
he system is alive, well and ﬁ ring. We use
rganoids to ask big questions: What could 
timulate pathways and turn up production
f stem cells or progenitor cells and make it
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N O VA RT I S  G R O U P A N N UA L  R E PO R T  2 0 11
ossible to rebuild tissue? What would make 
ore differentiated cells and what would 
top the system? It allows us to look at regen-
ration in a very controlled fashion.”
Although stem cell technology and path-
ay analysis have elevated regenerative 
edicine to a new level, Novartis has been 
ctive in regenerative medicine for years – 
or example, through discovery and devel-
pment of medicines to treat osteoporosis,
 progressive bone-thinning disease. Bone
etabolism is a dynamic process in which 
steoclasts, a class of specialized cells, 
emove old bone while osteoblasts rebuild
ew bone. “Peak bone density is usually 
ttained around 30 years of age, after which 
he balance gradually changes and we start 
o break down more than we build up,” said 
Michaela Kneissel, Ph.D., Head of NIBR’s
Bone Research Group. An effective medicine
ike Reclast/Aclasta lows the activity of 
steoclasts to improve the balance between
reakdown and growth of bone.
Current research efforts by NIBR to 
timulate true regeneration of bone focus 
n the Wnt pathway – in particular a protein 
alled sclerostin that impedes signaling 
hrough the Wnt pathway and inhibits
rowth of new bone. Genetic analysis has 
hown that people with mutated versions 
f the gene encoding sclerostin have par-
icularly heavy and strong skeletons. A 
ompound discovered by NIBR blocks ac-
ivity of sclerostin to correct the imbalance 
n bone metabolism and spur regeneration 
f bone. This sclerostin inhibitor is currently 
eing tested in proof-of-concept studies.
A profound unmet medical need exists 
or innovative medicines that enhance 
egeneration in tissues other than bone.
Cachexia, the muscle wasting associated 
ith several severe diseases, afﬂ icts millions 
f people around the world but remains 
argely untreated. Frailty associated with 
ging is an increasingly prevalent medical 
ondition driven by loss of muscle, a process 
ermed sarcopenia.
ith an aging world population, unmet
eed can only increase. “After the age of 50, 
eople get weaker due to the loss of certain 
ypes of muscle cells – including stem cells
– and a variety of muscle proteins seem to 
iminish over the course of a lifetime,” Dr. 
ishman observed. “We do not fully under-
tand why muscle loss occurs in aging but 
e believe blocking the pathway that nor-
ally limits muscle growth, in a manner 
nalogous to blocking sclerostin in bone, will 
e beneﬁ cial. We are currently in the clinic 
ith early-stage therapies to block activity 
f that pathway and hopefully restore 
uscle lost to aging.”
MUSCLE WASTING
oss of muscle is a serious consequence of 
any chronic diseases – and aging itself –
eading to weakness, loss of independence
nd increased risk of death. Millions of 
eople around the world are affected by 
achexias associated with chronic obstruc-
ive pulmonary disease (COPD), cancer, 
eart failure and HIV/AIDS. Cachexia leads
o involuntary loss of more than 5% of body 
eight and muscle over a period of only a
ew months. Emerging most often in incur-
ble patients toward the end of life, cancer
achexia limits the intensity of chemo-
herapy and is one of the most common ulti-
ate causes of mortality in cancer patients.
reatment for cachexia traditionally has 
een limited to improvement of diet and
xercise. Patients with COPD and other
ypes of organ failure often are intolerant to 
xercise, and inactivity exacerbates muscle 
asting. 
arcopenia, the age-related loss of 
keletal muscle mass and function, occurs
rogressively in almost everyone over age 
50. By contrast to cachexia, sarcopenia is 
ot currently recognized as a disease. Yet 
he estimated prevalence of sarcopenia-
elated disability is between 5% and 10%
mong people over age 60, and manage-
ent of the condition costs healthcare
ystems billions of dollars annually. Falls 
eading to significant or severe injury 
equiring hospitalization could be reduced 
y improving muscle mass and function in
rail patients. When frailty eventually 
ecomes so signiﬁ cant that it interferes with
he ability to live independently, institu-
ionalization in assisted living incurs addi-
ional costs and leads to decrease in quality 
f life.
ver the last decade, research has dem-
nstrated a coordinated set of signaling 
athways that can modulate muscle mass.
n an article published in the Annals of the 
New York Academy of Sciences, David Glass,
M.D., head of NIBR’s muscle disease group,
nd Ronenn Roubenoff, M.D., MHS, head 
f Musculoskeletal Translational Medicine at
IBR, described how cachexias eventually 
ignal into “conserved pathways that mod-
late the breakdown of the sarcomere, 
erturb protein synthesis and block the 
ifferentiation of the satellite [stem] cell into 
 multinucleated [muscle] ﬁ ber.”
tudies in several animal species have 
ighlighted the role of a signaling pathway 
nduced by a protein called myostatin, which 
ctivates a molecular brake on muscle 
rowth. “A breed of cattle known as Belgian
Blue are double-muscled, the result of a 
utated version of the gene encoding 
yostatin, suggesting that inhibition of the 
yostatin pathway could release the brake 
nd stimulate muscle growth,” observed 
Brian Richardson, Ph.D., Global Head of 
Musculoskeletal Diseases Research.
IBR researchers have identiﬁ ed anti-
odies that interfere with this pathway,

31
nd are investigating them in early clinical 
tudies of patients who have muscle weak-
ess of different etiologies.
ACCELERATING RECOVERY
ach year in the United States, more than
80 000 patients receiving chemotherapy 
r radiation therapy for cancer develop
ucositis, a painful inflammation and 
lceration of the mucous membranes lining
he digestive tract. Mucositis can become
o severe that patients are forced to reduce 
osage of chemotherapy – or even halt
reatment.
IBR’s mucositis program attempts to
odulate stem cells to regenerate cells of
he mucosa. Chemotherapy works by killing 
apidly dividing cells, which includes tumor
ells but also the intestine, one of the most 
egenerative tissues in the body that renews 
tself roughly every ﬁ ve days.
ealing in mucosa is mediated by 
pithelial cells that are attracted to the site 
f the ulcer and begin to cover the wound.
Growth factors that attract epithelial cells
r enhance differentiation of amplifying 
rogenitor cells could accelerate recovery 
r even be used preventively to strengthen 
ucosal tissue prior to chemotherapy.
iscovering the growth factors and 
ther signaling proteins that stimulate 
elf-renewal and differentiation of local 
tem cells is a prime objective of NIBR’s
egenerative medicine initiative. The muco-
itis program is a prototype because the 
tem cell system of the small intestine is 
mong the best-deﬁ ned of any body tissue.
IBR scientists employ organoids as 
utting-edge screening systems to test a 
ibrary comprising thousands of growth 
actors and secreted proteins. Promising 
ead compounds have emerged from the 
creening programs and are in early stages 
f preclinical testing.
Mucositis is the clinical indication, but 
e know nature is conservative, so the path-
ays involved in organogenesis or homeo-
tasis in the intestine are likely to be central 
o stem cell function in many tissues,” said 
ewis Bouwmeester, Ph.D., who heads the 
evelopmental and Molecular Pathways 
Group in Basel, Switzerland. “For this reason, 
e believe that what we discover in mucositis 
as the potential to also be applied to regen-
ration of other organs.”
GENETIC SWITCH
IBR continues to closely monitor progress
n more futuristic applications such as cell 
herapy and gene therapy through alliances 
ith academic groups and biotechnology 
irms. With GenVec Inc., a biotech firm 
ased in Gaithersburg, Maryland, NIBR is 
esting the frontier of gene delivery to 
estore hearing. 
earing loss is increasingly afﬂ icting
ounger individuals as well as the elderly. 
ne in six adults in Europe and the United
tates suffers from hearing loss great enough 
o adversely affect daily life, and almost half 
f adults over age 75 have hearing impair-
ent. The most common cause of hearing 
oss is degeneration of sensory hair cells in 
he inner ear, resulting from infections, auto-
mmune disorders or aging.
air cells are responsible for converting 
ound into electrical signals sent to the brain 
ia the auditory nerve for processing. Loss 
f hair cells is irreversible but preclinical 
xperiments indicate that a gene known as
Atoh1 that triggers differentiation of 
recursors into hair cells during embryonic 
evelopment can have the same effect on 
o-called “supporting” cells in adults – and 
estore auditory function. “Atoh1 is a key
ranscriptional regulator that activates the 
athways that drive differentiation,” said 
loyd Klickstein, M.D., Head Translational 
Medicine for NIBR’s New Indication Discovery
nit. “Supporting cells in the inner ear are 
recursors one step removed from hair
ells. You just need to turn on a switch and 
n this case the switch is the Atoh1 gene.”
n 2010 Novartis acquired rights to 
GenVec’s hearing loss treatment based on
Atoh1. It was a bold step: A number of 
ajor pharmaceutical companies, including 
ovartis, had invested heavily in gene 
herapy programs that failed during the 
1990s. “One problem was that earlier gene 
herapy projects were trying to run before
hey could walk,” Dr. Klickstein acknowl-
dged. “They wanted sustained, high level
xpression of the new gene, and exposed the 
ntire body of patients to the risk of toxicity 
rom vectors used for gene delivery.”
he Atoh1 therapy attempts to avoid 
any of those pitfalls. The replacement 
ene is delivered directly into the inner
ar, which is sealed off from the blood
irculation. Moreover the Atoh1 gene will 
e delivered through a single injection 
ather than repeated administrations. Still,
elivery of therapeutic genes remains 
hallenging, and drug delivery to the inner
ar is unprecedented.
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N O VA RT I S  G R O U P A N N UA L  R E PO R T  2 0 11
 No guarantees 
DR. THIERRY DIAGANA: “Why science? In the late 1960s, there was this 
huge summit in Rome that produced reports on the challenges the world 
was facing: increasing populations, unchecked disease, the need for 
producing more food. When I read them, I was in junior high school. My 
teacher basically said that science was a place to solve some of these 
problems, so after that, I thought of science as maybe my calling. In high 
school, I took more classes in physics and chemistry and biology, then 
went on to major in biochemistry as an undergrad, before taking on a 
Ph.D. in molecular genetics. At the end of my postdoc, I was preparing 
to have my own small lab, get a grant, become an associate professor. 
So yes, academic research was something I could have done, but I 
wanted to do something that was concretely applicable to people.
“I was born in France, but my relatives are from West Africa and they 
live with malaria all the time, see it all the time, talk about it all the time. 
It’s just part of their lives, essentially a disease of poverty. The critical 
period for malaria is from zero to five years old, when your immune 
system is not robust enough to protect you against the parasite. And if 
you develop the severe form of the disease, you have 24 hours to get 
treated. Then the mortality rate shoots up, kids go into a coma. And it’s 
mostly kids, because the older people have seen it six, seven, 20 times, 
and have developed some sort of tolerance. There’s always a debate, 
but the official statistic is that 800 000 people die from malaria each 
year. Ninety percent of these people live in sub-Saharan Africa and most 
are young kids, so my interest in the disease is not an abstract thing.
“Now, many years later, what I’m doing at Novartis Institute for Tropical 
Diseases is struggling to translate our hypotheses into medicines, in the 
ﬁ ght against what we call neglected diseases. Here we have programs for 
tuberculosis and dengue, although malaria is a big chunk of what we’re 
trying to do. Drug discovery is really a place where you are absolutely 
100% dependent on multidisciplinary approaches. Biology, chemistry, 
pharmacology alone cannot solve the problems. As the head of the 
drug discovery unit, my role is to help scientists on the team from all 
different disciplines to design experiments, gather data, interpret the 
results and help guide decisions on what to do next. There is a sense of 
urgency here, so those moments when you have to redo the experiments 
can be disappointing. But I try to detach myself emotionally from these 
things, because I can only control what I can control. What we’re up 
against is the hard reality of science and biology. Sometimes we think 
we’re right, but the parasite proves us wrong. 
“Now the public only hears about medicines that work. They are prob-
ably thinking: What’s so hard about this? You get some money, do the 
research, and there it is, something that saves lives. Why can’t you do 
that again and again? I mean, we probably make tens of thousands of 
molecules to get one that works. Drug discovery is not like producing 
the next model of a smartphone, where you put a lot of intelligent 
people in a room, put a timeline on it, and in two years have the product. 
Launching a medicine has nothing in common with this. It’s a trial-and-
error process. You have tremendous minds at work and tremendous 
technological resources, but there are no guarantees.”

33
HE A LT H C A R E PE R SPEC T I V E S: N O GUA R A N T E E S

6
5
8
17
10
7
34
N O VA RT I S  G R O U P A N N UA L  R E PO R T  2 0 11
KEY FIGURES
(in USD millions, unless indicated otherwise)
2011
20101
Net sales
9 958
9 031
Operating income
1 472
1 181
Return on net sales (%)
14.8
13.1
Core operating income 2
3 492
3 095
Core return on net sales (%)
35.1
34.3
Core Research & Development 2
869
826
As a % of net sales
8.7
9.1
Free cash flow 3
3 498
1 191
Net operating assets 3
43 792
46 253
Additions to property, plant & equipment 3; 4
354
193
Number of associates (FTE) 3; 5
22 987
22 108
12010 on a full year pro forma basis as explained in detail on page 184, except where otherwise
indicated.
2Core operating income eliminates the impact of acquisition-related factors and other significant
exceptional items. These adjustments are explained in detail starting on page 179.
32010 on a restated basis as explained in detail on page 159.
4Excluding impact of business combinations
5Full-time equivalent positions at year end
ALCON OVERVIEW
NEWS IN 2011
Integration of Alcon, CIBA Vision and certain ophthalmics products from Novartis Pharmaceuticals creates one global leader in eye care. 
Now the second-largest business in the Novartis portfolio, Alcon offers an extensive breadth of products serving the full life cycle of 
patient needs across eye diseases, vision conditions and refractive errors.
Net sales of USD 10.0 billion rise 10% (+7% in constant currencies, or cc) on a pro forma basis, underpinned by strong growthin our 
ophthalmic pharmaceuticals franchise (+10% cc) and surgical franchise (+8% cc). Sales in our top six emerging markets increase 
26% (+22% cc), led by China and India. The division also delivers strong operating leverage through realization of post-integration 
 synergies (USD 75 million).
Operating income of USD 1.5 billion rises 24% (+14% cc) on a pro forma basis, while core operating income of USD 3.5 billion increases 
by 13% (+9% cc) on a pro forma basis. Core operating income margin improves from 34.3% to 35.1% of net sales. 
The surgical portfolio is supported by uptake of advanced technology intraocular lenses, growth in emerging markets particularly with 
increased adoption of the phacoemulsiﬁ cation procedure for cataract surgery, as well as the global launch of the femtosecond cataract 
refractive laser. The surgical business strongly beneﬁ ts from growth in the vitreoretinal and refractive categories, based on introduction 
of new industry-leading technology.
The ophthalmic pharmaceuticals product category shows consistent growth despite generic entrants in the prostaglandin segment 
in glaucoma in selected markets, including the US. Key drivers of strong performance include combination glaucoma products DuoTrav 
and Azarga, and launch of new formulations of Travatan and DuoTrav solutions. In addition, allergy, anti-infective, anti-inﬂ ammatory 
and dry eye products perform well.
Through integration of CIBA Vision, the Alcon vision care business now has the broadest portfolio across contact lenses and lens care 
products. The Air Optix family of monthly contact lenses is a strong growth driver for the year. EU approval of Dailies Total 1, the ﬁ rst 
water gradient silicone hydrogel daily disposable contact lens, adds breakthrough innovation based on improved comfort.
1 2011 % net sales growth in constant currencies based on full-year 2010 pro forma ﬁ gures
NET SALES GROWTH BY REGION1
(in %)
S
urope, Middle East and Africa
Japan
Asia
atin America and Canada
otal

35
ALCON
In 2011 Novartis completed the acquisition of Alcon, Inc. Alcon now offers the widest spectrum of eye 
care products in surgical, ophthalmic pharmaceuticals and vision care on the market, presenting opportunities 
to accelerate growth and address urgent, unmet patient needs even more effectively than in the past. 
hen the top 150 executives of the Alcon 
ivision assembled in Frisco, Texas, for their 
 rst global leadership conference, the theme 
 “Going Beyond Number One” – crystallized
heir aspiration for the new division.
n April 8, 2011, Novartis completed the 
cquisition of Alcon, Inc. – the global leader 
n eye care. The new Alcon Division includes
ssets transferred from Novartis to reinforce 
ts leadership in the eye care industry. 
A portfolio of ophthalmic medicines from 
ovartis augmented Alcon’s existing 
harmaceutical product range. In addition, 
he contact lens and lens care operations of
CIBA Vision were combined with Alcon’s 
ortfolio of contact lens solutions to create 
 stronger Vision Care business. With the 
erger, Alcon now offers the widest spectrum 
f eye care products in surgical, ophthalmic
harmaceuticals and vision care on the 
arket, and addresses the broadest range 
f customer and patient needs.
n his keynote speech at the leadership 
onference, Alcon Division Head Kevin 
Buehler emphasized opportunities to 
ccelerate growth and address urgent, 
nmet patient needs even more effectively 
han in the past. “Several hundred million
eople around the world live with blindness 
r serious vision impairment,” Mr. Buehler 
bserved, “but 80% of all visual impairment 
an be prevented, treated or cured.“
Globally, uncorrected refractive errors are
he main cause of visual impairment and 
ataracts remain the leading cause of
lindness. About 90% of the world’s visually 
mpaired live in developing countries,
ccording to the World Health Organization. 
he burden of eye disorders is expected to
row as people live longer. By 2020, the
nstitute of Eye Research estimates 2.5 billion
eople worldwide will be affected by myopia 
(nearsightedness) and 60 million people are
xpected to have open-angle glaucoma, the
econd-leading cause of blindness after 
ataracts. 
These numbers are staggering, and as
n industry we have just started to address 
hese clinical needs. As the leader in eye 
are, Alcon must strive for breakthrough 
nnovations that bring relief to millions of 
atients,” Mr. Buehler added. “There is 
otential to accelerate growth and access to
reatment in each of our businesses and in 
very region of the world. We have a unique
pportunity to build a division where 1 plus 1
ranslates into a number much bigger than 2.”
Alcon began to deliver on that promise 
uring 2011. Pro forma net sales climbed 
7%, measured in constant currencies, and 
ore operating income, 9%. Net sales in the 
ivision’s six major emerging markets 
urged 26% (22% in constant currencies) 
nd now represent 10% of overall net sales.
Alcon’s advanced technology intraocular 
enses to treat cataracts posted double-digit 
rowth. Glaucoma medicines also posted
igniﬁ cant growth and the Air Optix range of 
ontact lenses became Alcon’s fastest-
rowing brand worldwide.
he Alcon Division realized post-
ntegration synergies of USD 75 million in
2011, in line with the target of annual cost 
avings of USD 350 million by 2013. In 
ddition to merger-related savings, Mr. 
Buehler held out prospects for further cost 
eductions in areas such as procurement. 
Productivity has not been a core strength 
t Alcon,” he acknowledged. “It is something
hat we hope to learn from Novartis. We
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N O VA RT I S  G R O U P A N N UA L  R E PO R T  2 0 11
bviously can beneﬁ t from procurement 
fﬁ ciency and also leveraging our manufac-
uring footprint.” 
Joseph Jimenez, Chief Executive Ofﬁ cer 
nd member of the Executive Committee
f Novartis, reiterated that the Alcon 
cquisition is primarily about long-term 
rowth, not cost synergies. “In eye care, just 
s with other Novartis segments, innovation 
s the key driver of success. The aging 
opulation and areas of signiﬁ cant unmet 
edical need make it likely that eye care will 
emain an industry with strong growth well
nto the future,” Mr. Jimenez said. “The 
Alcon Division adds another growth plat-
orm to Novartis, and we expect that,
ecause of the complementary nature of
Alcon and Novartis, the companies will grow 
aster together than they would have 
therwise.”
“WE FOCUS ON THE EYE...”
phthalmology is a USD 30 billion-a-year
ndustry growing about 5% per year. Alcon 
omprises three businesses – Surgical,
phthalmic Pharmaceuticals and Vision 
Care – covering the full life cycle of patient
eeds across eye diseases, vision conditions 
nd refractive errors, with the exception of 
yeglasses. Alcon ranks number one or 
umber two globally in sales across all three 
f its businesses. Strategic focus has been
ritical for the company’s success. “It is 
mportant to understand that we do one
hing: We do the eye, and we do it well, 
nhancing quality of life by improving 
ision,” Mr. Buehler said. 
Alcon has the largest sales force in the
ye care industry, with more than 5 000 sales
epresentatives worldwide. “We are going to 
ead – and lead with a commanding share of
oice – in any channel that uses eye care 
roducts,” Mr. Buehler said.
As part of Novartis, Alcon’s research 
apability will be further enhanced. With
early 2 000 associates working to address
he world’s most pressing eye care needs,
he Alcon Division plans to invest more than
SD 5 billion in research and development 
(R&D) over the next ﬁ ve years – the largest
nnounced corporate commitment in the 
ye care industry.
Alcon has R&D capabilities in both 
edical devices and pharmaceuticals. The 
ew Alcon Division will have the beneﬁ t of 
orking closely with the Novartis Institutes 
or BioMedical Research (NIBR). As scien-
ists from NIBR and Alcon R&D joined forces 
uring the integration process, they discov-
red how complementary their capabilities
ere. More than 20 joint teams have been 
ormed, including projects in which com-
ounds from NIBR are being evaluated in 
reclinical models developed by Alcon. 
Alcon scientists have gained access to a 
ange of technologies, from biologics to 
tructural biology and high throughput
creening, that previously were only available 
hrough external partners. Glaucoma and 
acular degeneration will be priority areas 
or drug discovery efforts. 
Mr. Buehler also expects Novartis to help
mprove market access and reimbursement 
or Alcon products, especially in Europe, 
Japan and emerging markets. One example 
s advanced technology intraocular lenses 
hat are implanted during surgery to correct 
ataracts, or clouding of the eye’s lens as
 result of aging or injury. In addition to cor-
ecting cataracts, Alcon’s range of AcrySof
ntraocular lenses correct other vision dis-
rders such as presbyopia and astigmatism 
t the same time, enabling a patient to see 
ithout glasses. 
or elderly patients in the United States, 
he government pays the cost of the basic 
ataract procedure but patients can choose 
n advanced lens to address those additional 
ision needs and pay the difference out-of-
ocket. As a result, penetration of advanced 
echnology intraocular lenses has reached
ow-to-mid teens in the United States but

37
emains signiﬁ cantly lower in Europe and 
Japan. “We believe we can leverage the 
apability of Novartis to talk with regulators 
nd governments in Europe and Japan to gain 
roader market access for these advanced 
echnology lenses,” Mr. Buehler said.
PREVENTING BLINDNESS
Alcon offers equipment, instruments, 
isposable products and intraocular lenses
or surgical procedures that address cata-
acts, vitreoretinal conditions, glaucoma 
nd refractive errors. Cataract surgery is the 
ornerstone of Alcon’s Surgical business. 
he only known treatment for cataracts is 
urgical removal of the natural lens which, 
f combined with implantation of a replace-
ent intraocular lens, can restore vision. 
As people age, cataracts become 
ncreasingly common. We have the ability to 
ddress this form of preventable blindness, 
hanks to highly effective surgical proce-
ures,” Mr. Buehler said. “Still, an estimated 
18 million people around the world go blind 
s a result of untreated cataracts. There is
 big opportunity to build sustainable infra-
tructure, particularly in emerging markets, 
uch as India, China and Russia.”
Alcon has been the driving force in the
orldwide adoption of phacoemulsiﬁ cation 
ystems, a technology that uses ultrasound
nergy to break up and remove the defective
ens. Together with the development of fold-
ble intraocular lenses, phacoemulsiﬁ cation 
as transformed cataract surgery through 
maller surgical incisions, faster recovery 
imes and improved patient outcomes.
hacoemulsiﬁ cation surgical systems 
re spearheading Alcon’s rapid growth in 
merging markets. To achieve sustainable 
ye care through the broad adoption of 
tate-of-the-art cataract procedures, Alcon 
ffers extensive training programs with local
ospitals and professional associations 
hat provide hands-on training in surgical 
echniques and equipment.
uring 2011 Alcon introduced the
LenSx
aser that delivers the accuracy of a
emtosecond laser to refractive cataract 
urgery. The LenSx 
aser is designed to 
redictably perform many of the most 
hallenging aspects of traditional cataract 
urgery with highly reproducible computer 
recision.
Alcon’s portfolio of pharmaceuticals is
sed to treat chronic and acute diseases of
he eye, from glaucoma and allergies to anti-
nfective, anti-inﬂ ammatory disorders and 
ry eye. The Ophthalmic Pharmaceuticals 
usiness also oversees the line of profes-
ionally driven over-the-counter brands in 
rtiﬁ cial tears and ocular vitamins. 
Glaucoma is a disorder that results in 
ptic nerve damage due to elevated 
ntraocular pressure. “While glaucoma is the 
econd-leading cause of blindness today, 
e have simply started to scratch the sur-
ace in addressing this disease,” said Sabri 
Markabi, M.D., Senior Vice President for 
esearch and Development for the Alcon 
ivision.
Alcon’s portfolio of glaucoma treatments, 
ncluding Travatan Z solution, helps lower
levated intraocular pressure associated
ith open-angle glaucoma or ocular hyper-
ension. The DuoTrav BAK-free solution, 
Alcon’s latest innovation, was developed in
esponse to customer preference for the 
onvenient combination of medicines. 
hese eye drops have the additional beneﬁ t
f being free from the preservative BAK that 
an cause some irritation of the surface of 
he eye following chronic use.
NEW ERA IN CONTACT LENSES
he Air Optix range of monthly silicone 
ydrogel lenses continued its dynamic
rowth of recent years, posting a double-
igit increase in net sales during 2011. The
uccess of the Air Optix contact lens portfolio 
x
nderscores the high value consumers
lace on the high comfort of silicone hydro-
el, a material developed by CIBA Vision that 
llows more oxygen to pass through the lens
or better eye health.
n late 2011, the Vision Care business 
aunched a new generation of daily dispos-
ble silicone hydrogel lenses in several 
uropean markets. Alcon’s Dailies Total 1 ens 
epresents a new era in contact lenses – the 
 rst water gradient silicone hydrogel daily
isposable lens. This innovative contact 
ens has the highest surface lubricity and
he highest oxygen transmissibility of any 
eading daily disposable contact lens, deliv-
ring exceptional comfort. 
he development of Dailies Total 1 enses
s based on breakthrough innovation in 
erms of production technology as well as
ens design. “We believe that the Vision Care 
eam has managed to create a truly new
ype of silicone hydrogel lens where the
omposition is so close to the physiology of 
he eye’s tear ﬁ lm that it should provide 
nprecedented comfort,” Dr. Markabi said. 
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Near-perfect vision
I was operated on ﬁ rst for the right eye. After the bandage was taken 
off, I looked out the window and saw such a nice green tree. Then I 
noticed that the doctor was so young. As for my husband, the two of
us have been together from 1964, so the way he looks doesn’t any
longer make any difference to me. – Aliadna Lyashko, age 76
DR. ALEXANDER IGOREVICH SAMOYLENKO: “My parents, grandparents, 
great-grandparents – all doctors. Brothers, sisters, my wife; it’s a family of 
doctors. There’s no escaping. Originally inspired by the work of Svyatoslav 
Fyodorov, our outstanding and famous eye surgeon, I’ve worked at the 
Moscow Ophthalmic Clinical Hospital since 1996. The hospital is 180 
years old, one of the very first eye centers in the world.
“Surgery for cararacts was almost certainly begun in ancient Egypt. Today, 
it’s the eye operation most in demand. For the 25 surgeons who work here, 
60 to 70% of the procedures are for cataracts, 30 to 40% for other 
problems, like glaucoma or detached retinas. Whereas once people had 
surgery just to regain their eyesight, they are now operated on to allow them 
not to wear glasses. They are operated on for myopia, presbyopia, hyperopia. 
“Twenty years ago the patients with cataracts who came here were 
older than 65 and nearly completely blind. They were afraid of having 
surgery, or delayed coming in for financial reasons. This is a public 
hospital, so even now the people who come here are seldom rich. 
Though it should be noted that those coming in now are doing so earlier, 
even at age 40 or 45. Perhaps the stresses of modern life are a contributing 
factor or perhaps better diagnostic practices are revealing the problem 
earlier. No one is exactly sure why, but cataracts are getting younger. 
“The basic cataract operation involves the surgical removal of the 
natural lens of the eye, after the lens has become opaque or cloudy. 
When we begin, the patient is covered by a sterile cover; only one eye 
shows. There is an anesthesiologist, just in case any additional help is 
needed, though normally the surgeon does local anesthesia. Then once 
the eye is anesthetized, I make micro-cuts, since a smaller cut reduces 
the later consequences, like infection or astigmatism. After separating 
the lens with the knife, the phacoemulsification process is next. Ultra-
sound destroys the unwanted lens, chopping it into fragments, so they 
become fluid and can be vacuumed out or aspirated. The new lens is 
then implanted.
“The total operation usually takes 10, 15 minutes at most. There is, 
of course, the potential for problems, but they’re rare. The outcome 
is highly predictable, most always perfect if you follow the prescribed 
techniques closely. Now I have to admit that after all the years I’ve 
been doing this work, the procedure has become sort of routine for me. 
While the patient feels this is a miracle – being blind one day, having 
nearly perfect vision the next – this is something I do again and again 
throughout a day. During those very first cataract operations many years 
ago, I would have been emotionally involved. But, the mind is selective. 
What I tend to remember are problem patients. It’s easy to forget what’s 
most important.
“Now what do people who once couldn’t see, see after the surgery? 
It depends often upon their gender and on their age. Men are happy 
because they can drive again, or hunt. Women can be unhappy when 
they see themselves clearly in the mirror.”

39
HE A LT H C A R E PE R SPEC T I V E S: NE A R- PE R F EC T V IS I O N

40
N O VA RT I S  G R O U P A N N UA L  R E PO R T  2 0 11
KEY FIGURES
(in USD millions, unless indicated otherwise)
2011
20101
Net sales
9 473
8 592
Operating income
1 422
1 321
Return on net sales (%)
15.0
15.4
Core operating income 2
1 921
1 742
Core return on net sales (%)
20.3
20.3
Core Research & Development 2
724
618
As a % of net sales
7.6
7.2
Free cash flow
1 587
2 141
Net operating assets
15 223
15 576
Additions to property, plant & equipment 3
335
307
Number of associates (FTE) 4
24 377
23 536
1Restated to reflect new segment allocation introduced during 2011 as explained in detail on
page 159.
2Core operating income eliminates the impact of acquisition-related factors and other significant
exceptional items. These adjustments are explained in detail starting on page 179.
3Excluding impact of business combinations
4Full-time equivalent positions at year end
Differentiated Products3
Commoditized Products
–22
+222
47%
53%
2011 NET SALES 1 – DIFFERENTIATED VS. COMMODITIZED GENERICS
(in %)
1Net sales percentage based on retail generics and biosimilar sales
22011 Sandoz third party net sales growth in constant currencies versus 2010
3Differentiated products refer to products requiring specialized knowledge and expertise in
development, production and/or commercialization, characterized by the active ingredient,
formulation/delivery mechanism and/or underlying technology. Examples include complex
oral solids, transdermal patches, implants, ophthalmics, inhalables, injectables and
biosimilars
SANDOZ OVERVIEW
NEWS IN 2011
Growth continues over previous year as our portfolio of differentiated medicines expands, despite pricing pressures in several key markets.
Net sales are up 10% (+7% in constant currencies, or cc) to USD 9.5 billion, driven by signiﬁ cant growth in US retail generics and 
biosimilars (+22% cc), with more than USD 1 billion in enoxaparin sales, making it our ﬁ rst generic “blockbuster.” Strong performances 
in Western Europe, Central and Eastern Europe, Canada, Latin America and Asia also contribute to growth, as do differentiated 
products, which now account for 47% of Sandoz global sales.
Operating income grows 8% (+10% cc) over the prior year to USD 1.4 billion. Core operating income rises 10% (+11% cc) to USD 1.9 billion, 
with declining prices more than offset by additional sales volume, new product launches and productivity improvements in all areas.
Constant currency core operating income margin increases by 0.8 percentage points to 21.2%. Currency has a negative impact, 
resulting in a 20.3% core operating income margin.
Sandoz captures the number one position globally in generic injectable medicines in mid-2011 based on IMS ﬁ gures, with growth 
driven by both enoxaparin and oncology injectables. Sandoz conﬁ rms its position as leader in biosimilars, with sales reaching 
USD 261 million in 2011 (+37% cc). Strong progress on biosimilar pipeline, including the start of a Phase II trial in rheumatoid arthritis 
patients for Sandoz biosimilar monoclonal antibody rituximab (generic Rituxan®/MabThera®) and a complementary Phase III trial 
for rituximab in patients suffering from follicular lymphoma, a blood cancer that affects the lymphatic system.

41
SANDOZ
Enoxaparin is part of a broad portfolio of rapidly growing differentiated medicines at the Sandoz Division. 
The differentiated portfolio includes pioneering biosimiliars, follow-on versions of biologic medicines that 
have lost patent protection. Sandoz continues to break new ground in making biosimilars available for 
patients in markets around the world. 
n 2011 Sandoz enoxaparin became one of 
he generic industry’s ﬁ rst “blockbusters” – 
xceeding sales of USD 1 billion during its 
 rst 12 months on the market.
hat achievement highlights the vast 
ommercial potential of differentiated 
enerics. These products, with challenging 
ctive ingredients or specialized formula-
ions, are more difﬁ cult to develop, manu-
acture and market than commoditized 
enerics but offer greater growth potential 
nd proﬁ tability. Enoxaparin may be 
he biggest success story to date but it is
art of a broad portfolio of differentiated 
edicines at the Sandoz Division.
Burgeoning demand for that differenti-
ted portfolio has fueled robust growth at
andoz during the past two years and 
ccounted for 47% of the division’s sales in 
2011, up from 30% of sales in 2008.
he focus on differentiated products is
pitomized by biosimilars, follow-on versions 
f existing biotechnology medicines that
ave lost patent protection. Sandoz pioneered 
he ﬁ eld, winning regulatory approval for the
 rst biosimilar medicines in Europe, the 
nited States, Japan, Canada, Australia and 
aiwan between 2006 and 2009. Sandoz
emained the world leader during 2011,
ccounting for roughly half of worldwide 
iosimilar sales in regulated markets and 
xceeding the combined market segment 
hare of its two closest rivals.
egulatory prowess is an important 
ompetitive edge for Sandoz because dif-
erentiated products often must surmount 
ormidable hurdles. Sandoz enoxaparin
as approved by the US Food and Drug 
Administration (FDA) in July 2010 following 
 marathon ﬁ ve-year regulatory review. The
pproval set important precedents for 
eneric versions of large complex molecules 
hat reside on the border of traditional drugs 
nd biologics.
andoz, and its collaborator Momenta 
harmaceuticals Inc., invested heavily in 
evelopment of state-of-the art analytical
ethods and complex mathematical mod-
ling to show convincingly the “sameness,” 
r equivalence, of the Sandoz enoxaparin 
nd the originator product Lovenox , a low
olecular weight heparin developed and 
arketed by Sanoﬁ  SA. Interestingly, the
DA’s review of Sandoz enoxaparin revealed 
n approach that appears to hold preceden-
ial value for the development of biosimilars 
s well.
riting in the New England Journal of 
Medicine (NEJM) in August 2011, four FDA 
fﬁ cials, including Janet Woodcock, M.D., 
irector of the agency’s Center for Drug 
valuation and Research, cited the approval 
f enoxaparin as an example of “ﬁ ngerprint”-
ike characterization that “will be essential 
n designing a US biosimilars policy.” The 
nited States has lagged Europe and other
egions in establishing a regulatory pathway
or biosimilars, but a legislative break-
hrough came in 2010 when the landmark 
Biologics Price and Competition Act autho-
ized the FDA to oversee an abbreviated 
athway for approval of biologics that are
biosimilar” to already-approved products.
n their NEJM article, the FDA ofﬁ cials 
eclared an abbreviated pathway “will 
liminate unnecessary (and therefore 
nethical) testing of biosimilars in animals 
nd humans.” The authors also acknowledged 
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N O VA RT I S  G R O U P A N N UA L  R E PO R T  2 0 11
he FDA “is carefully scrutinizing lessons 
rom the European Medicines Agency,”
hich published general guidelines on 
iosimilars in 2005 and approved its ﬁ rst 
iosimilar in 2006. 
ronically, the United States has the
orld’s most dynamic market for conven-
ional generic medicines. The use of generic 
rescription drugs in place of patented 
ounterparts has saved the US healthcare 
ystem more than USD 1 trillion from 2000 
hrough 2010. At a time when biologics 
epresent a steadily increasing share of 
lobal drug sales, the US Federal Trade 
Commission predicts that availability of bio-
imilars will signiﬁ cantly reduce biologics’ 
ost and increase their accessibility.
Gains in access are already apparent in 
urope. One example is granulocyte colony-
timulating factor, or G-CSF, a protein that 
timulates bone marrow to increase pro-
uction of white blood cells. Filgrastim, the 
ecombinant form of G-CSF, is used as sup-
ortive therapy to offset the effects of
ggressive chemotherapy, which can  deplete 
hite blood cells and leave patients vulner-
ble to infections.
reatment guidelines suggest ﬁ lgrastim 
e used preventively at the same time that 
atients start chemotherapy to avoid infec-
ions, but in the United Kingdom use of the 
edicine was often relegated to second-line 
herapy – because of cost – to patients who 
ad already developed infections. The 
umber of patients receiving ﬁ lgrastim was 
eclining until Sandoz and other manufac-
urers introduced biosimilar ﬁ lgrastim at a 
rice roughly 50% below the originator 
roduct – Amgen Inc.’s Neupogen . Access to 
n affordable biosimilar allowed physicians
o treat patients preventively as recom-
ended, moving the product back to ﬁ rst-
ine therapy and rejuvenating the market.
Although more patients are receiving treat-
ent today, expenditure on ﬁ lgrastim has 
eclined.
Lower prices give physicians more 
reedom to treat patients in the way they 
onsider appropriate,” said Jeff George, 
ivision Head, Sandoz, and member of the
xecutive Committee of Novartis. “We’re 
eeing this happen in Europe now, but I
xpect to see the same effect from the intro-
uction of biosimilars in the United States 
nd the rest of the world in years to come.” 
COMPLEX COMMERCIAL MODEL 
ince the 2006 launch of Omnitrope, a bio-
imilar human growth hormone, Sandoz has 
xpanded biosimilar operations to more 
han 40 countries. “We have reﬁ ned our
ommercial model for biosimilars – it is not 
ust about price,” said Ameet Mallik, Global 
ead of the Sandoz Biopharmaceuticals and 
ncology Injectables business. Omnitrope
as gained more than 10% of the US market 
egment for human growth hormone despite 
ntrenched competition from six rival 
ompanies.
hen physicians in the United States 
rite a prescription for human growth 
ormone, they expect the manufacturer to
rovide a comprehensive package of patient-
upport services ranging from help in pro-
essing reimbursement applications to
ducation that includes training patients 
n use of the injection device. “It is only 
hen all these elements are in place – 
ncluding a very good device – that payors
an really improve patient access and still 
apture savings in the healthcare systems,”
Mr. Mallik added.
n Europe Zarzio, the bio similar ﬁ lgrastim 
rom Sandoz, and Binocrit, a biosimilar 
poetin alfa used to regulate formation of 
ed blood cells, are used more by hospitals 
nd dialysis clinics, which adopt biosimilars 
ore readily than primary care physicians. 
You need a good key account manager to 
all on hospitals, as well as a ﬁ eld force to 
ducate physicians about the products,” 
Mr. Mallik said.

43
he next generation of biosimilars cur-
ently in development is expected to include
onoclonal antibodies, the largest and fast-
st growing segment of biologics. Products 
ith projected annual sales of USD 63 billion
ill lose patent protection by 2016. But that 
ff-patent slice of biologics will surge to an 
stimated USD 100 billion by 2020 as patents
n monoclonal antibody-based therapies 
egin to expire. “By 2016 biologic products 
re expected to represent seven of the 10 
op-selling drugs worldwide – each with
nnual sales exceeding USD 5 billion,” Mr. 
Mallik said. “Their patents will expire within 
he next decade and you can imagine that
ur biosimilar pipeline includes many of 
hese originator products.” 
ABBREVIATED CLINICAL TRIALS 
he Sandoz biosimilar pipeline currently 
omprises up to 10 projects including the
ivision’s ﬁ rst monoclonal antibody, a bio-
imilar version of Rituxan /Mabthera , a 
lockbuster medicine known by the common
ame rituximab, developed and marketed 
y Roche Holding AG. The Sandoz biosim-
lar rituximab is in pivotal Phase III clinical
rials for treatment of follicular lymphoma,
 slow-growing cancer of the immune system. 
n a parallel clinical program, the Sandoz 
ituximab is in Phase II trials for treatment 
f rheumatoid arthritis. 
egulatory review of a biosimilar in 
urope proceeds through two distinct 
hases. The ﬁ rst involves a detailed analyt-
cal characterization of the biosimilar in rela-
ion to the originator reference product.
Based on the results of that initial analytical 
haracterization, regulators then ﬁ x the pro-
ram of clinical trials required for approval. 
The closer your product is to the originator 
n the analytical characterization, the more 
bbreviated the subsequent clinical trial 
rogram can be,” explained Mark McCamish, 
M.D., Ph.D., Global Head of Development for
andoz Biopharmaceuticals. 
he biosimilar rituximab program draws 
n valuable experience Sandoz has gained 
hrough approval of three biosimilar medi-
ines. Unique to all biologics, including
iosimilars, is batch-to-batch variability that 
s inherent in the manufacturing process. 
andoz has taken advantage of this variability 
y establishing “goalposts,” or boundaries 
f acceptable variability for the originator 
iologic, and applying these goalposts to the 
evelopment of biosimilar products. 
Because scant data are available about 
he precise degree of variability regulators 
olerate, Sandoz researchers analyzed mul-
iple batches of three major recombinant 
herapeutic proteins that were commercially 
vailable from 2007 to 2010. These origina-
or medicines were Aranesp , Enbrel  and
ituxan , and the analysis pinpointed exam-
les of variability even though the products 
emained on the market with unchanged 
roduct labels.
ublishing the data in the scientiﬁ c 
ournal Nature Biotechnology, the Sandoz 
esearchers observed: “Current analytical 
ethods allow the detection of even small 
hanges in quality attributes and can
herefore enable sensitive monitoring of
ariability of the manufacturing process.” 
he studies, they added, “reveal substantial 
lterations of the glycosylation proﬁ le for all
ested products...most probably caused by
hanges in the manufacturing processes.”
Biosimilars are not called bioidentical 
r biogeneric due to this inherent variability 
ompared with the originator,” Dr. McCamish
aid. “But that is nothing new; even origi-
ators can’t make exact copies of their prod-
cts. Regulatory agencies accept a degree 
f variability between batches. Advanced 
nalytical tools enabled Sandoz to document 
his variability over the production life of the
riginator biologic and demonstrate that our 
iosimilar has product attributes that are 
ithin the variability of the originator. Due 
o the variability we ﬁ nd in the originator, in 
ffect, originator companies are making bio-
imilar versions of their original products.” 
he analysis of rituximab was particu-
arly valuable to clarify the variability 
esulting from changes in manufacture of 
he originator product over the years – and
o ensure that variability of the Sandoz bio-
imilar rituximab remains within the bound-
ries accepted by regulatory agencies. “The 
tudy exempliﬁ es the sensitivity of our ana-
ytical technology,” Dr. McCamish said. 
EXTRAPOLATION OF DATA 
he European Medical Agency’s review of
Zarzio underscores how analytical charac-
erization can accelerate registration of a 
iosimilar product. Based on the initial 
nalytical characterization, the agency 
ndorsed an abbreviated clinical trial pro-
ram and subsequently approved four 
eparate indications for Zarzio based on
xtrapolation of data generated in a single 
pen-label study. “Although rituximab is 
ore complex than Zarzio, by showing com-
arability with the originator, we believe 
ur biosimilar rituximab can follow an 
ppropriately abbreviated clinical develop-
ent path,” Dr. McCamish added. 
Meanwhile, Sandoz is joining forces with
ther Novartis units to ﬁ ne-tune design and
ecruitment for clinical studies of rituximab
nd other biosimilar projects. For example,
andoz and Novartis Oncology have estab-
ished a joint project team to manage devel-
pment of monoclonal antibodies for
ncology indications, including rituximab in 
ollicular lymphoma.
Novartis Oncology excels in clinical 
evelopment including recruitment of 
atients, while Sandoz is particularly strong 
n technical development, intellectual prop-
rty issues and the regulatory side,” Mr.
Mallik said. “We’re combining the best 
ssets of both to do something that will be 
ood for patients and payors.”
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N O VA RT I S  G R O U P A N N UA L  R E PO R T  2 0 11
Just the beginning
DR. OMAR BHOLAT: “You’ve got three minutes…GO! Usually you take 
some time; still, this needs to be done right the first time. Needs to 
be done fast, or they die. And this is just opening them up, is just the 
beginning, doing your initial assessment. I still have to open the peri-
cardium, lift the heart, cross-clamp the aorta, do open-heart massage, 
and fix whatever needs to be fixed. 
“Now what kind of a person does this? My first surgery…it was during 
my third-year surgical rotation and one of the vascular surgeons decided 
he wanted to see if I had what it took to be a surgeon. I’m out at the 
scrub sink, ask him if I can come in, and he says, ‘Come here,’ and has 
me amputating a toe and pulling on it. Next thing, I have a toe in my 
hand. And he looked at me to see what I was going to do next, whether 
or not I was going to fall to the ground, unconscious. And I said, ‘OK, 
what’s next?’ 
“Following a surgical residency, my first job was in a Philadelphia 
emergency room as a trauma surgeon. They’d just gone bankrupt and 
there were two people in the department, my boss and me. Our case-
load was a lot busier than here. An average weekend I’d open at least 
one chest. This was 1999. Lots of drug dealing. People were getting 
shot all over North Philadelphia. One day, on the way to work, I found a 
guy hanging from a tree and called the police. ‘No,’ I said to them. ‘He’s 
not alive…. No, I had nothing to do with it.’ 
“To crack a chest for the first time is very frightening. The first time I 
did it was on a kid who’d been stabbed in the posterior chest, from 
behind. He had arrested a few minutes out from the hospital. So I get 
down there and slice him open as rapidly as I can. Today I can do it a 
lot faster, because back then I was worried about cutting things I wasn’t 
supposed to. We’re used to the pericardium, the sac the heart’s sitting 
in, being paper-thin; you can see right through it. On a 16-year-old, it’s 
a quarter-inch thick, so when you start cutting, you’re thinking, ‘My 
God, am I cutting into the heart?’ Eventually you open it up widely, pick 
up the heart, there’s a clot everywhere. Lift up the heart, see a hole, you 
toss a Foley in there, blow up the balloon like they taught you back in 
the old days. Then all of a sudden, he wakes up and looks at you while 
his chest is open, which is slightly disconcerting, because he has no 
blood pressure. Ultimately this kid went on to die, because there was 
such ischemic insult to the heart. He passed, but I learned a lot from 
it. I learned you can’t save everyone. Did I feel defeated? I feel defeated 
every time I lose one. If you don’t, you shouldn’t be doing this anymore. 
“I’ve been a trauma surgeon for 12 years, a good long time. Now some 
people still like to think it’s the moon being full that brings people in 
here, but I’ve seen lots of business on moonless nights. It’s the heat 
that brings them in, the long days, everything that gets people out of 
their apartments and interacting, drinking, behaving badly, getting into 
trouble. Next thing you know, this one’s fighting with that one. That 
one’s stabbing that one, or grabbing a baseball bat. The other stuff 
happens all the time. Someone’s crossing the street, certain of their 
right-of-way to cross. Then there’s someone driving with the green light, 
making the turn, and they meet. Hit by cars is 50% of my business. If 
I stop these people from crossing the street and getting hit by cars, I’m 
out of business. But that’s OK, that’s OK.”

45
 HE A LT H C A R E PE R SPEC T I V E S: J US T T HE B EG INNIN G

46
N O VA RT I S  G R O U P A N N UA L  R E PO R T  2 0 11
KEY FIGURES
(in USD millions, unless indicated otherwise)
2011
2010
Net sales
1 996
2 918
Operating loss / income
– 249
612
Return on net sales (%)
– 12.5
21.0
Core operating income 1
135
1 066
Core return on net sales (%)
6.8
36.5
Core Research & Development 1
494
506
As a % of net sales
24.7
17.3
Free cash flow
– 292
1 336
Net operating assets
5 067
4 804
Additions to property, plant & equipment 2
192
159
Number of associates (FTE) 3
6 122
5 394
1Core operating income eliminates the impact of acquisition-related factors and other significant
exceptional items. These adjustments are explained in detail starting on page 179.
2Excluding impact of business combinations
3Full-time equivalent positions at year end
VACCINES LATE-STAGE DEVELOPMENT PIPELINE
Phase I
Phase II
Phase III
Registration
Menveo 2-10 1
Menveo infant 1
Bexsero 2
Fluad pediatric
Optaflu 3
Agriflu pediatric
MenABCWY 4
Pseudomonas aeruginosa 5
GBS 6
FCC 3 H5N1
1Neisseria meningitidis bacteria serogroups A, C, W-135 and Y
2Neisseria meningitidis bacteria serogroup B
3Influenza cell culture
4Neisseria meningitidis bacteria serogroups A, B, C, W-135 and Y
5Collaboration with Intercell
6Group B Streptococcus
VACCINES AND DIAGNOSTICS OVERVIEW
NEWS IN 2011
Strong underlying sales growth is driven by the meningococcal disease franchise and emerging markets.
Net sales are USD 2.0 billion, down 32% (-34% in constant currencies, or cc) compared with USD 2.9 billion in 2010. The primary 
driver of net sales variance is USD 1.3 billion of A (H1N1) pandemic ﬂ u vaccine sales in 2010 not repeated in 2011. Excluding A (H1N1), 
we achieve growth of 22% cc driven by all strategic franchises, with a particularly strong contribution from our meningococcal 
 disease franchise – including Menveo – which reaches over USD 140 million in 2011 sales.
Reported operating loss is USD 249 million for 2011 compared to an operating income of USD 612 million in 2010, due in large 
part to the nonrecurrence of A (H1N1) pandemic ﬂ u vaccine sales from the prior year. Core operating income is USD 135 million, 
down from USD 1.1 billion in 2010. Excluding the impact of A (H1N1), core operating income improves over 2010.
Our strong pipeline progresses with more than 15 vaccines in clinical trials to prevent several serious infectious diseases. Menveo is 
now approved in more than 50 countries – including US and EU – for prevention of meningococcal serogroups A, C, W-135 and Y in 
adolescents; applications to expand approval for use in younger patients ﬁ led in countries around the world, including US. EU regulatory 
ﬁ ling review for Bexsero for prevention of meningococcal serogroup B is in progress. 
Majority acquisition of Chinese vaccines supplier Zhejiang Tianyuan is completed in 2011, providing an opportunity for signiﬁ cant 
expansion in the fast-growing Chinese vaccines market.

47
he Vaccines and Diagnostics Division 
ontinued to deliver on the promise of its
ipeline during 2011 by expanding the age 
ndication for the quadrivalent meningo-
occal conjugate vaccine Menveo n the 
nited States. A Marketing Authorization 
Application for Bexsero, potentially the ﬁ rst 
road-coverage vaccine for use against dis-
ase caused by meningococcal serogroup 
B bacteria (MenB), is currently under review 
t the European Medicines Agency (EMA).
he division markets a broad portfolio 
f vaccines with leading positions in inﬂ u-
nza vaccines, cell-culture-derived inﬂ u-
nza vaccine technology and adjuvants –
nhancers of vaccine efﬁ cacy. The emerging 
eningococcal vaccine franchise anchors a
ipeline with more than 15 vaccine candi-
ates in development.
Meningococcal disease is a rare but 
otentially life-threatening infection that can 
anifest as bacterial meningitis, an infection 
f the membrane around the brain and spinal
ord, and septicemia, a blood infection.
Most cases occur in previously healthy peo-
le without any warning, and even with early 
nd appropriate treatment, patients can die, 
ften within 24 to 48 hours of the onset of 
ymptoms. Of those who survive, one in ﬁ ve 
ill suffer lifelong complications such as brain 
amage, hearing loss and amputations.
ive serogroups, or subtypes, of Neisseria 
meningitidis – A, B, C, W-135 and Y – cause the
ajority of an estimated 500 000 cases of
eningococcal disease that lead to more than
50 000 deaths worldwide each year. Distri-
ution of serogroups varies widely between 
eographic regions and changes over time.
Menveo s a vaccine that helps to protect
gainst four of the five major serogroups: 
A, C, W-135 and Y. In early 2010, regulators 
n Europe and the United States approved
Menveo or active immunization of people
rom age 11 to 55, and the vaccine is cur-
ently approved in more than 50 countries. 
he clinical development program for 
Menveo 
as comprehensive; more than 
30 clinical trials involving more than 35 000 
articipants have been completed or are 
n progress.
n January 2011, the US Food and Drug
Administration (FDA) and regulators in
Canada expanded the Menveo ndication to
nclude individuals 2 to 10 years of age, an 
xtension currently under review at the 
MA. Later in the year, the FDA accepted for 
eview a supplemental application to extend 
he indication to infants and toddlers from
2 months of age. Infants are the age group 
ost vulnerable to meningococcal disease, 
nd represent the greatest unmet need.
BROAD COVERAGE
MenB is responsible for up to 90% of menin-
ococcal disease cases in Europe and
ore than 80% of meningococcal cases
mong infants in Canada. Novartis Vaccines 
nd Diagnostics submitted a Marketing 
Authorization Application for the inves-
igational vaccine Bexsero to the EMA in 
ate 2010.
he submission was based on com-
leted clinical trials that involved more than 
8 000 participants; data supports use of the 
accine in infants from 2 months of age and
lder, adolescents and adults. Additional
VACCINES AND DIAGNOSTICS
The emerging meningococcal vaccine franchise anchors the vaccines development pipeline and epitomizes 
the division’s “reverse vaccinology” research approach. In 2011, the US Food and Drug Administration 
broadened approval of Menveo, part of this growing franchise, to include patients from 2 to 10 years of age. 
Bexsero, a second vaccine against meningococcal disease, is under review by regulators in Europe.
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pplications were submitted during 2011 
o regulatory agencies in Brazil and Australia 
– as well as in Canada.
MenB disease is a major public health
oncern that can have a devastating impact 
n vulnerable populations,” said Andrin
swald, M.D., Division Head, Vaccines and
iagnostics, and member of the Executive 
Committee of Novartis. “The Bexsero sub-
issions are important milestones toward 
chieving the world’s ﬁ rst broad-coverage 
MenB vaccine through our unique multi-
omponent approach.” 
MenB is an exceptionally difﬁ cult vaccine 
arget. Meningococci can mutate key genes 
r exchange genes with bacterial cousins 
rom other serogroups. Expression of key
roteins varies at different stages of the bac-
erium’s life cycle. MenB can even manipu-
ate pathways in the host to deﬂ ect attacks 
y the host’s immune system.
All of us who work on this bacterium 
hould remain humble – it is not an easy
oad,” said Peter Dull, M.D., Head of Clinical 
evelopment for Meningococcal Vaccines. 
echnologies used for conjugate vac-
ines like Menveo hat target the capsule
f the bacterium won’t work against MenB. 
he capsular polysaccharide found on the
urface of MenB is identical to a molecule 
resent in the human body and cannot be
sed safely as an antigen, the active ingre-
ient in a vaccine. To surmount that hurdle, 
ubcapsular proteins found in the outer 
embrane surrounding the MenB bacte-
ium have been used as antigens, and vac-
ines based on outer membrane proteins 
ave been deployed against epidemics in 
orway and New Zealand. Those vaccines
re only effective against the local strain, 
owever, and fail to provide protection 
gainst the thousands of different MenB
trains in circulation around the world.
The ideal antigens for a MenB vaccine 
ould be proteins found on the surface of 
he bacterium that are conserved across 
ost circulating strains and induce bac-
ericidal antibodies,” Dr. Dull explained.
Unfortunately, ﬁ nding those proteins was a
eal struggle.”
“REVERSE VACCINOLOGY”
Bexsero is a prototype for a genome-based 
pproach – known as “reverse vaccinology”
 which has revolutionized vaccine discovery 
nd development. In the mid-1990s Rino 
appuoli, Ph.D., Global Head of Research for 
ovartis Vaccines and Diagnostics, con-
inced maverick gene hunter Craig Venter 
o sequence the genome of N. meningitidis. 
ovartis scientists mined that sequence 
ata to discover dozens of novel proteins 
hat were assessed as potential antigens. 
o single antigen is sufﬁ cient to provide 
road protection to cover the diversity of 
MenB strains. But the multiple antigens ulti-
ately selected for Bexsero are essential for 
he bacterium’s survival, function or ability 
o cause infection, and can be found in the
ajority of MenB strains circulating globally. 
ne antigen – neisserial adhesion A
(NadA) – is a protein that promotes invasion 
f the bacterium and adhesion to human 
pithelial cells, an important property for an
nvasive pathogen. Factor H binding protein 
(fHbp) is another selected antigen. It binds
ith Factor H, a common protein found in the
lood, enabling the bacterium to evade attack 
y the host immune system. “The organism
imply surrounds itself with Factor H to 
ide,” Dr. Dull said. A third antigen, Neisseria 
eparin binding antigen, also helps MenB 
urvive in human blood and is present in 
early all strains of meningococci. Finally, 
ovartis scientists added Por A, a protein 
hat is important in certain highly virulent 
trains of MenB. 
Clinical trials were conducted through-
ut the world, and during 2011 data from 
ivotal studies were published showing that 
Bexsero induces a robust immune response 
n infants when given alone or with other

49
outine vaccines in different vaccination 
chedules. Bexsero was studied in various
accination schedules in the ﬁ rst year of life, 
hen the likelihood of contracting meningo-
occal diseases is greatest.
PREDICTING COVERAGE
or the evaluation of a multicomponent 
accine, Novartis had to demonstrate that 
ach of the antigens included in the vaccine 
enerates bactericidal antibodies that con-
ribute to killing the target organism. “That is 
elatively straightforward with traditional vac-
ines that rely on single antigens,” Dr. Dull 
aid. To fulﬁ ll that requirement for Bexsero,
owever, the Vaccines and Diagnostics 
ivision had to identify and engineer strains 
f MenB that would express each vaccine 
ntigen individually to isolate the response 
o each vaccine antigen.
Another challenge is to demonstrate the 
otential efﬁ cacy of Bexsero against the 
MenB strains circulating in a country. The 
olution was the Meningococcal Antigen 
yping System, or MATS, an innovative method 
o type large numbers of MenB isolates 
ithin a geographic area.
he MATS system measures character-
stics of circulating invasive MenB disease 
trains – in particular, levels of expression
s well as the relative “match” to the vaccine
ntigens included in Bexsero. By surveying 
irculating MenB populations in a country 
r region, the proportion of strains likely to 
e covered by Bexsero and the potential 
ublic health impact of a vaccination pro-
ram can be estimated.
ovartis Vaccines and Diagnostics con-
inues to work closely with reference labo-
atories in major countries to roll out the 
MATS system and generate additional data
n estimated coverage of Bexsero. Results
f an initial study published in Proceedings 
of the National Academy of Sciences showed 
hat antibodies induced by Bexsero killed the
ajority of MenB strains in a geographically 
iverse collection of strains obtained from
eference laboratories in several European 
ountries. In this proof-of-concept study, the 
elected strains were not intended to repre-
ent any speciﬁ c regional sample but 
ncluded a broad range of sequence variants 
mong the antigens of interest – NHBA, 
adA and fHbp.
At the 2011 meeting of the European 
Monitoring Group on Meningococci, held in 
jubljana, Slovenia, John J. Donnelly, Ph.D.,
esearch Serology Project Leader for the 
Bexsero program, presented preliminary 
esults of an international study estimating
he potential strain coverage of Bexero
urope. The study used the MATS system to
valuate invasive MenB strains isolated 
etween July 2007 and July 2008 by national 
eference laboratories of England and Wales, 
rance, Germany, Norway and Italy.
MATS results were obtained for 1 011 
trains, and estimated that 78% of the strains 
ould be covered by Bexsero. Coverage esti-
ates varied across European countries, 
anging from 73% to 87%.
STRUCTURAL VACCINOLOGY
ecently Novartis reported in the journal 
Science Translational Medicine the production 
f a synthetic version of fHbp that is poten-
ially more potent than the natural version 
sed in Bexsero.
Mr. Rappuoli and associates began by 
equencing the fHbp gene in almost 2 000 
ifferent strains of MenB. That analysis iden-
iﬁ ed more than 300 variants of the gene, 
hich could be grouped into three classes. 
rotective antibodies generated by the fHbp 
rotein could kill MenB strains in the same 
lass but there was no cross-protection with 
ther classes, limiting utility as a vaccine 
ntigen.
ext the team pinpointed the section of
he fHbp protein critical for generation of 
rotective antibodies and transplanted 
equences from variants in the other two 
lasses in place of the corresponding 
equence on the parent protein. In all, 54 
ifferent synthetic versions of fHbp were
enerated and tested for their ability to 
nduce immunogenecity in mice. One of the
ynthetic versions, known as G1, generated
rotective immunity against all MenB vari-
nts tested from all three classes. This 
mportant innovation paves the way for 
otential future generations of MenB vac-
ines with even broader coverage of the 
iversity of globally circulating strains.
n the journal article, Mr. Rappuoli and 
o-authors observed that success in re-
ngineering natural variants of fHbp into a 
3-into-1 antigen and markedly expanding 
MenB strain coverage “could in principle be 
sed in other cases where sequence vari-
bility is the main obstacle to vaccine devel-
pment.” An accompanying editorial called 
he study “one of the ﬁ rst successful uses
f atomic-level structure in vaccine design,” 
nd one that provides a glimpse of the power 
f structure-based vaccine design against 
enetically diverse pathogens. 
hat underscored a bold prediction Mr.
appuoli had made in a separate article in 
he Journal of Clinical Investigation two years
arlier. Reﬂ ecting on applications of reverse
accinology to pathogens ranging from 
roup B Streptococcus to antibiotic-resistant 
Staphylococcus aureus, he observed that 
accines in use today represent only the tip 
f the iceberg of diseases that remain to be
argeted. “The genome era catalyzed a long-
verdue revolution in vaccine development,”
e added.
ogether with the emergence of structural 
accinology as another potent tool for rational 
esign, “progress has ﬁ nally put the realiza-
ion of vaccines for many pathogens within 
each. Indeed, in the coming years, vaccines
re set to have an even greater im pact on 
orld health than they currently do.”
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 The troubleshooter
DR. MARK PROCTOR: “I grew up in Lincolnshire, the son of a poultry 
farmer. My mother was a nurse and my grandfather was in the Royal 
Army Medical Corps, so a bit of medical history goes back in the family. 
People always said to me, ‘Oh, are you going to be a doctor?’ and I was 
kind of like, ‘No I’ll do something slightly different.’ There was a bit of 
rebellion there. And I knew I wouldn’t be a farmer. To be honest, toward 
the end of his working life, my father was struggling to keep the place 
going. So I moved on, choosing veterinary medicine.
“Back then, there were six veterinary schools in the UK, producing 
about 300 graduates a year, whereas now, the school sizes and classes 
are much larger. And in those days it was probably 80% guys, 20% 
ladies. It’s probably the flip side of that now. Well, after graduating, I 
was a little bit of a wreck, looking at the jobs. I came to this practice in 
1980, and was out and about in the countryside all day long. It was lots 
of clinical work, a lot of manual work. It was tough. My first Caesarian 
took me about five hours; I could probably do one in about an-hour-
and-a-quarter now.
“Cows became lame; you had to tend to their feet. Cows needed their 
horns chopped off. It’s a very physical job; they’ll knock you around. 
Back about 20 years, this cow had calved and the farmer had asked 
me to look at it because it was a bit sluggish. So we went down to the 
field, but it was getting so dark I couldn’t really see what I was doing. I 
stepped away from the calf and the cow comes straight for me, knocked 
me over, tried to kill me, because I was interfering with her calf. I was off 
work for three months with leg and back injuries, very lucky to survive. 
“When I first began here, you could go to farms with 15 cows and do 
14 calls a day. Today, you go into farms with as many as 700 cows and 
spend hours. It’s become much more about production, about facility 
help, monitoring, inspections. Farmers are now looking for the vet to 
provide analysis of their herds. You’re advising on vaccination protocols. 
We also look at the environment, at lameness issues, mastitis, infection 
rates, and udder health. And above all, the one that we spend the 
most time on is fertility. If you don’t give the correct advice and there’s 
production loss for five years for close to a thousand cows, can you 
imagine? Now, I don’t think there’s any easy way for vets. You have to 
have a wider range of skills. 
“I still go out to the farms every week, and occasionally perform clinical 
surgery. But I’m now a senior partner within the practice, and do more 
planning. In 1994, Beeston Animal Health was started and is the shop 
that you see today. We advise farmers and when appropriate sell them 
what are essentially main core veterinary products as well as peripheral 
products like vaccines and wormers. I always thought that as a vet, I 
was in a better place to offer advice on those products than somebody 
who had very minimal training. Plus I’m, if you like, the troubleshooter. 
If I know that a farmer is struggling or complaining about something, 
then there’s the possibility I might go out and say, ‘Look, can I help you?’ 
For I know who to ring up and where to go if there’s a problem.
 
“Today, the Willows Veterinary Group employs 250 people. We split the 
practice into three divisions. There’s the small animal division, which is 
70% of our business; the equine division, 10%; and the farm division, 
about 20%. At the Willows, our hospital in Hartford, are doctors and 
nurses and medical technicians working in teams, specialists in soft 
tissue surgery, orthopedics and internal medicine, visiting cardiologists 
and ophthalmologists. And it’s all quite integrated. We share our facilities, 
our expertise, and knowledge.”

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HE A LT H C A R E PE R SPEC T I V E S: T HE T R O UB L E SH O OT E R

53
CONSUMER HEALTH
The main Novartis Animal Health facilities for aquaculture research and vaccine manufacture are based 
in Prince Edward Island, Canada, where Novartis and predecessor companies have been a pillar of local 
industry for decades. Thanks in part to the local expertise and ﬁ sh farming industry, Novartis was the ﬁ rst 
company with licensed vaccines against two serious ﬁ sh diseases.
n 2007 and 2008 Chile’s ﬂ ourishing aqua-
ulture industry was devastated by an 
pidemic of infectious salmon anemia virus 
(ISAV). The epidemic tore through dozens 
f salmon farms perched along sheltered
aters of fjords that shear the country’s 
outhern coast. By 2009, production of
Atlantic salmon had plunged to about 
200 000 tons from more than 600 000 tons 
n 2006, the peak year before the ISAV epi-
emic. Thousands of jobs were lost, and
ore than half of Chile’s salmon cultivation 
enters suspended production.
Chile wasn’t the ﬁ rst country struck by 
SAV, which is a distant cousin of the inﬂ u-
nza virus. Just as in inﬂ uenza pandemics, 
hance genetic shifts sometimes transform 
oninvasive strains of ISAV into a lethal 
hreat to ﬁ sh lacking immunity. Norway, the 
orld’s number one producer of farmed 
Atlantic salmon, reported the ﬁ rst ISAV 
utbreak in 1984, and endured severe 
pidemics in 1991 and 1992. Salmon farms 
n eastern Canada, Scotland and the Faeroe 
slands were besieged by ISAV in the late
1990s. 
ike those other nations, Chile began 
ebuilding its ﬁ sh farming industry once the 
pidemic abated. Authorities have ordered 
mportant changes to improve the way 
almon are farmed, and two measures have 
roved particularly effective. Regions
fflicted by ISAV were fallowed for several
onths to eliminate the virus. Then com-
anies agreed voluntarily to reintroduce 
nly ﬁ sh vaccinated against ISAV. The vaccine
sed by the vast majority of Chilean salmon
arms is ILAvacc, developed by Novartis 
Animal Health.
he Aqua franchise at Novartis Animal 
ealth has grown dynamically in recent
ears, buoyed by a broad portfolio of 
nnovative vaccines. Novartis was the ﬁ rst 
ompany to offer licensed vaccines against 
oth ISAV and infectious hematopoietic 
ecrosis virus (IHN). The Apex-IHN vaccine 
rom Novartis – based on a novel nucleic 
cid technology – was launched amid an
utbreak of IHN in salmon farms across 
Canada’s British Columbia province. Millions 
f ﬁ sh have received Apex-IHN, and there 
ave been no reported outbreaks of the
isease since introduction of the vaccine 
n 2003.
Compared with conventional inactivated 
iral vaccines, nucleic acid vaccines are 
ighly effective, better tolerated and induce 
 more powerful immune response confer-
ing long-lasting protection. Apex-IHN was
he first nucleic acid vaccine approved for
se in a food animal species, and this pio-
eering vaccine platform is an example of
utting-edge research and development at 
ovartis Animal Health.
Rapid growth of the aquaculture industry
nd the appetite of customers for innova-
ion are what make this business so attrac-
ive,” said Matthias Hofer, Head of the Aqua
ranchise. “We are conﬁ dent that our strong
ipeline of conventional and nucleic acid 
accines will enable us to grow along with 
ur customers.”
AQUACULTURE POWERHOUSE 
Approximately half of seafood consumed by
umans today is produced by aquaculture, 
nd demand is expected to grow dramati-
ally, to 80 million tons by 2030 from about 
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50 million tons in 2008. With ﬁ shing stocks 
epleted or overexploited in many parts of 
he world, global catch of wild fish is ex-
ected to decline slightly in coming decades, 
s aquaculture production climbs steadily
o meet rising demand.
he main Novartis facilities for aquaculture
esearch and vaccine manufacture are 
ased in the Prince Edward Island province 
n eastern Canada. Despite its remote loca-
ion and modest population of about 
145 000 residents, the island is a power-
ouse within the tight-knit ranks of global
quaculture.
or decades, Novartis and predecessor 
ompanies have been a pillar of local industry. 
he Aqua franchise has fostered close links
ith the Atlantic Veterinary College of the 
niversity of Prince Edward Island, a world 
eader in fish health research. In 2010, 
ovartis further strengthened that relation-
hip by establishing the Novartis Research 
Chair in Fish Health at Atlantic Veterinary 
College, a faculty appointment that aims to 
dvance the basic science of fish diseases 
nd health management.
ver the past ﬁ ve years, Novartis Animal 
ealth has invested more than USD 13 mil-
ion in operations on Prince Edward Island, 
ncluding a USD 2.8 million expansion of the 
Aqua franchise’s research and development 
enter, and construction of a new manufac-
uring facility in the province’s capital city, 
Charlottetown. “This is an ongoing commit-
ent that will help us maintain a leadership 
osition and support the growth of the 
almon industry worldwide,” said George 
Gunn, MRCVS, Division Head, Novartis 
Animal Health, and member of the Executive 
Committee of Novartis. 
he investment program also mirrors 
he provincial government’s commitment to 
xpand the local biotechnology industry 
nder an “Island Prosperity Strategy” 
nveiled in 2007. “In the longer term, bio-
roducts from the sea constitute an 
merging area of immense potential,” 
uthors of the Island Prosperity Strategy
eclared. To foster growth of more than 30 
 rms in the nascent biotech sector, Prince
dward Island pledged extensive interaction 
ith industry and pursuit of new collabora-
ions within the region, across the country
nd indeed, throughout the world. “We live 
n a global context and we need global link-
ges if we are to succeed and prosper,” the
trategy concluded.
Michael Mayne, Ph.D., Deputy Minister 
or Innovation and Advanced Learning, and
 principal architect of the Island Prosperity 
trategy, highlighted the importance of the 
ovartis connection for the ongoing eco-
omic rejuvenation of the province. “When 
ou think about the historic culture of a
mall place like Prince Edward Island, it’s 
een embedded for hundreds of years in 
arming and ﬁ shing. We are trying to broaden 
he base of those traditional industries.
ovartis can capture that energy and turn 
t to its advantage,” Mr. Mayne said.
Biotech is one of the key areas where
e believe we can rapidly mobilize the 
roops and rally around companies like 
ovartis Animal Health. Part of my job is to
ake sure that Novartis grows here. Not just 
tays, but grows.”
o Mr. Gunn, Prince Edward Island 
rovides an example of enhancing compet-
tiveness while advancing economic and 
ocial conditions of the local community in 
hich it operates. “It’s a classical case of
hared value,” he added. “We start with a 
usiness that has value to the company 
ecause we are trying to sell products and
ltimately make a proﬁ t. But we end up with
omething that has huge value to society.” 
FROM ANTIBIOTICS TO VACCINES 
he roots of Novartis operations on Prince 
dward Island stretch back more than 25 
ears, to a management buyout of a port-
olio of veterinary vaccines from Canada’s

55
Connaught Laboratories. The new company, 
alled Aqua Health Ltd., was drawn to Prince 
dward Island by an attractive funding
ackage provided by the provincial govern-
ent. In 2001 Novartis acquired Aqua Health.
As part of a global healthcare group, the
ew Novartis Aqua franchise beneﬁ tted 
rom an industrywide shift to prevention –
hrough use of vaccines – from traditionally 
eavy use of antibiotics. In Norway, annual 
onsumption of antimicrobial drugs for 
herapeutic use in farmed ﬁ sh peaked in 
1987 at almost 50 tons. The comparable 
 gure for 2010 was less than 1 ton.
It has been a double-win for salmon 
arms,” Mr. Hofer said. “It makes their oper-
tions more sustainable, and vaccines are a 
ore cost-effective way to prevent disease.”
Atlantic salmon are vaccinated once they 
ave attained a weight of about 30 grams 
ut before they are moved to the sea for the
ubsequent two years of development, when 
isk of infection is greatest. Most conventional 
accines expose ﬁ sh to an inactivated form 
f a whole bacteria or virus, boosted with an
djuvant, or additive, that enhances immune
esponse and subsequent protection.
ucleic acid vaccines, such as the pio-
eering Apex-IHN vaccine from Novartis 
Animal Health, use only the relevant genetic 
omponents of the virus so there is no pos-
ibility of inducing the disease. The genetic 
omponents of the vaccine are inserted into a 
ircular piece of nucleic acid called a plasmid. 
njected into the muscle of the ﬁ sh, the vac-
ine acts by carrying information about the 
irus directly to cells, mimicking the natural 
nfection of the virus. The Apex-IHN vaccine
as been approved in Canada.
Building on that initial success with the 
ucleic acid technology, Novartis is devel-
ping a novel vaccine against pancreas dis-
ase, a major threat to ﬁ sh health caused by 
he salmonid alphavirus. Subtypes of the 
irus have been identiﬁ ed to date in Ireland, 
cotland and Norway, and the disease costs
 sh farmers tens of millions of dollars per 
ear in lost sales. If development and testing 
re successful, the new pancreas disease vac-
ine would be the ﬁ rst nucleic acid vaccine
pproved in Europe, another groundbreaking
chievement for Novartis Animal Health. 
MONITORING SEA LICE
ea lice represent another prime target for 
ovartis researchers. Sea lice are natural 
eawater parasites that colonize the skin of
 sh and attack underlying tissue. With phys-
cal and immunological integrity severely 
ompromised, secondary infection and death 
requently follow unless lice numbers are 
ightly controlled. In recent years, several 
ountries have reported the emergence of 
ea lice strains resistant to treatments that 
reviously were highly effective.
iminished efﬁ cacy of a sea-lice-control 
roduct led to a massive infestation of sea
ice in New Brunswick in 2010. Provinces in 
astern Canada are investing aggressively, 
oth to identify risk factors leading to such
nfestations and to maintain regular moni-
oring programs that allow preventive steps 
o be taken early enough to mitigate effects 
f an outbreak.
Mark Fast, Ph.D., the Canadian scientist 
ho holds Atlantic Veterinary College’s 
ovartis Research Chair, has a longstanding 
nterest in sea lice. In a complementary col-
aboration, Novartis Animal Health joined
ith academic and industrial supporters in 
orway during 2011 to establish an inter-
ational Sea Lice Research Center. Based at 
he University of Bergen, the new center will 
ecome the world’s leading center for
esearch on sea lice and related parasites.
NEW MARKETS
As a relatively young industry, continued 
rowth of aquaculture is expected as com-
anies such as Marine Harvest diversify into
roduction of new farmed species ranging
rom halibut and cod to sea bass and sea 
ream. Geographical diversiﬁ cation will 
lso drive growth, especially in Asia, where 
raditions of ﬁ sh farming extend back over
any centuries. 
According to the United Nations Food 
nd Agricultural Organization, production of
armed salmon reached 1.5 million tons in 
2008. In the same year, aquaculture output 
n China exceeded 32 million tons, or 62% of 
lobal production by volume and 51% by 
alue. Aquaculture production in 2008 ex-
eeded 1 million tons each in India, Vietnam,
ndonesia, Thailand and Bangladesh, ahead 
f Norway and Chile in global rankings. 
ngoing industrialization of aquaculture 
cross the region promises to boost produc-
ivity and open new markets for Novartis 
Animal Health. 
ovartis Animal Health is scouting for 
pportunities to gain an early foothold in 
Asia’s aquaculture markets. “We want to get 
o know the customers and potential species 
etter,” Mr. Gunn said. “I expect to see an 
volution in Asia similar to salmon farming 
n Europe and North and South America. It
ill take time, but ultimately ﬁ sh farming will 
e possible in new areas, thanks to our vac-
ines – and we will help to bring prosperity 
o many communities in Asia, as well.”
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An onset of malaria
EUGENE RICHARDS: “The district hospital in the bustling, dusty 
Tigrian town of Alamata sits behind a gated wall. With its dozen or so 
buildings and rush of people in and out, it can be likened to a kind 
of village in itself. The rooms in each of its wards are high-ceilinged, 
barely lit, spare (no TV, drapes, screens on the windows), yet cleaner 
and more welcoming than you would think possible with there being 
but two doctors and a modest staff overseeing 70 beds in all. 
“A telephone call had come from the hospital this morning. Though 
it was mid-November – which means the peak season for malaria 
in Ethiopia had passed – two patients suffering the mosquito-borne 
disease were now in their care. One was a 17-year-old boy who’d 
been comatose when he was rushed in; the other, a 3-year-old girl.
 
“Ushered into the room, we were introduced to the boy, Berhe Birhanu, 
who was lying in the bed closest to the door. Half-asleep, attached 
to an IV, he was staring up at his brother Habtu, who was lovingly 
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57
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suffered repeated bouts of the disease. Berhe alone had had three 
attacks since September. But this time, in addition to the shivering, the 
fever, and the pain in his arms and legs, Berhe couldn’t stop throwing 
up and his urine was ‘changing to the color of cola.’ When he was 
brought to the hospital, he was delirious, unconscious. His family was so 
frightened they didn’t dare leave his bedside. Even when his condition 
began to visibly improve, they feared he might die. And then if he did 
die, it would be left to them to carry him home.
“The ward for young children was at the far end of the district hospital. 
It was a long narrow room, tidily kept, that had pale blue mosquito nets 
hanging above each of the beds. Mosquito netting can be a little like winter 
ice on a window, revealing what’s behind it only as muted colors and 
shapes. At first glance, after entering, I could barely see 3-year-old 
Kurfay were but a few feet away, slumped forward in their chairs, clearly 
exhausted. In time we would come to learn that the grandmother’s own 
long-term health had sometimes been so precarious that she had had 
difficulty caring for her family. As for Kurfay, he’d grown weary worrying 
both about the fate of Berhe and his own recent loss of income. With 
their father ‘gone from the area,’ it had become his responsibility to 
support the family. He did so working long, long hours as a barber. But 
now he was losing 50 birr a day in business for each of the seven days 
he’d spent bedside at the hospital, a significant amount of money in a 
country where the average income is the equivalent of about $300 a year.
 “‘But why do all of you come to the hospital every day?’ I asked through 
the interpreter. The brothers drew closer to Berhe and explained that 
malaria was nothing new to their family. Each of the five children had

59
HE A LT H C A R E PE R SPEC T I V E S: A N O NSE T O F M A L A R I A
Ferhan Derbie, lying on a bed in the arms of her grandmother. When I 
said hello, the child’s mother, Ergo Mohammed, barely looked up. She 
reached for her baby’s hand, adjusted and readjusted the IV line, wiped 
at her own eyes with the hem of her shawl. It became clear that though 
Dr. Getachew, the medical director of the hospital, had told her that her 
daughter could very soon return home, she remained apprehensive. 
Every five months since she’d been born, little Ferhan had suffered an 
attack of malaria, which began with the telltale fever and produced 
seizures. The girl’s mother and her father Derbie Nigus, a local merchant, 
would immediately rush her to the local clinic for treatment. Afterwards, 
her parents did what they could to prevent the illness from recurring; 
they kept their mud-and-stone house as clean as possible and employed 
mosquito netting over their beds. Still their only daughter was stricken 
again and again.
“Though Ferhan’s prognosis was good – she was in fact scheduled to 
be discharged from the hospital the following morning – her mother 
remained sick with worry. So many children in their village had died, 
and months earlier, a close friend of her husband had died. The scourge 
of malaria, though under attack, is still with us.”

60
N O VA RT I S  G R O U P A N N UA L  R E PO R T  2 0 11
CONTENTS
CORPORATE CITIZENSHIP 
Citizenship at Novartis 
62
 
Commitment to Patients 
70
 
Commitment to People and Communities 
72
 
Commitment to the Environment 
76
 
Commitment to Ethical Business Conduct 
78 
 
Independent Assurance Report 
81
CORPORATE CITIZENSHIP
Corporate Citizenship at Novartis is integral to how 
we operate and key to our success.
Our Corporate Citizenship commitment rests on four pillars:
atients
We help patients worldwide share the beneﬁ ts of advances 
in medicine and technology. Even as we seek to prevent, 
diagnose and treat disease, we forge innovative, sustainable 
commercial models to expand access to healthcare.
eople and Communities
We want to ensure that we treat our people with respect and 
fairness, and that we are integrated in the communities in 
which we live and work.
nvironment
Careful stewardship of natural resources – particularly tight 
control of greenhouse gas emissions, energy efﬁ ciency and 
waste – is important to us.
thical Business Conduct
We strive for high performance with integrity.

Indicator
2011
2010
2009
2008
2007
Economic 1
Net sales in USD billions
58.6
50.6
44.3
41.5
38.1
Net income in USD billions; % of net sales
9.2; 16%
10; 20%
8.5; 19%
8.2; 20%
6.5; 17%
Core Research & Development in USD billions; % of net sales
9.2; 16%
8.1; 16%
7.3; 16%
6.8; 16%
6.2; 16%
Purchased goods and services 2 in USD billions; % of net sales
26.8; 46%
22.3; 44%
21.3; 48%
20.3; 49%
19.4; 51%
Personnel costs in USD billions; % of net sales
14.9; 26%
12.2; 24%
10.9; 25%
10.6; 26%
9.9; 26%
Taxes in USD billions; % of net income before taxes
1.5; 14%
1.7; 15%
1.5; 15%
1.3; 14%
0.9; 13%
Dividends in USD billions; % of net income attributable to Novartis shareholders 3
5.8; 63%
5.4; 55%
4.5; 53%
3.9; 49%
3.3; 51%
Cash returned to shareholders via second-line share repurchases in
USD billions; % of Group total net income
2.4; 26%
0; 0%
0; 0%
0.3; 0%
4.7; 39%
Share price at year-end (CHF)
53.70
54.95
56.50
52.7
62.1
Patients 4
Access to medicine: value in USD millions
1 784
1 544
1510
1259
937
Access to medicine: number of patients reached in millions
89.6
85.5
79.5
73.7
65.7
People and Communities
Full-time equivalent positions
123 686
119 418
99 834
96 717
98 200
Resignations (incl. retirements); separations; hiring (% of associates)
8; 4; 15
8; 3; 14
8; 3; 14
10; 5; 14
9; 4; 17
Women in management 5: % of management; % of Board of Directors
36%; 18.2%
36%; 16.7%
35%; 16.7%
37%; 8.3%
35%; 8.3%
Number of associate nationalities
153
149
144
143
139
Lost-time injury and illness rate (per 200 000 hours worked) 1,6,7
0.15
0.18
0.22
0.34
0.42
Total recordable case rate (per 200 000 hours worked) 1,6,7,8
0.54
0.73
0.93
1.09
1.42
Transportation-related injuries leading to lost time 1,6,7
26
49
58
77
92
Environment 1,7,9
Contact water use, excluding cooling water (million m3)
16.0
15.1
15.0
15.1
15.4
Energy use (million GJ), on site and purchased
17.4
17.6
17.0
16.9
16.8
GHG emissions, Scope 1 vehicles  (1000 t)
155
168
176
183
197
GHG emissions, total Scope 1, including vehicles, and Scope 2 (1000 t)
1 459
1 507
1 510
1 526
1 498
Total operational waste not recycled (1000 t), hazardous and non-hazardous
142
154
141
138
175
Ethical Business Conduct
Novartis associates trained on Code of Conduct via e-learning course 10
14 419
18 302
29 493
15 990
16 697
Associates completing certification on Code of Conduct
33 080
29 835
26 300
26 750
27 000
Cases of misconduct reported; substantiated 11
1 522; 825
1 236; 743
913; 541
884; 374
906; 421
Dismissals and resignations related to misconduct 11
384
608
564
217
249
Total number of suppliers
225 500
241 365
206 155
228 769
228 558
Suppliers informed of Novartis Third-Party Guidelines
(annual sales of more than USD 100 000 and not requiring a self-declaration)
45 203
39 575
45 858
28 792
61 715
Suppliers to confirm key standards (self-declaration)
3 926
3 388
842
1 157
1 377
1 Data for 2007 have been adjusted to exclude Consumer Health Nutrition operations divested in
2007, unless otherwise stated
2 As included in the Net Novartis Added Value Statement
3clude Consumer  Tf-3338 23.023 5.439 re f q 382.151 163.839 23.0233e5ea.439r((a3)h24.0233e5ea.439r((a3)h24.0233e5ea.439r((a3)h24.0233e5ea.439r((a3)h24.02.385 Eh24.1/T1_1 1 Tf 0.031t18.r 195e82

63
According to WHO estimates, the number
f malaria cases worldwide decreased by 
ore than 40% between 2004 and 2009,
hile the number of malaria deaths declined 
y 22% during the same period. In 2008,
N Secretary-General Ban Ki-moon unveiled 
 new Global Malaria Action Plan calling for 
alaria prevention and treatment programs 
o become universally available for at-risk 
opulations by the end of 2010.
eiterating those objectives in April 
2010, he declared: “Where countries have
een able to provide bed nets and treatment 
o signiﬁ cant proportions of their popula-
ions, malaria cases and deaths have fallen 
y as much as 50%. Overall child mortality 
ates have declined, too. These achieve-
ents show that the battle against malaria 
an be won ... and give great cause for opti-
ism in our work toward the Millennium
evelopment Goals.” 
ELIMINATING MALARIA
Buoyed by remarkable progress in control
f malaria, major international agencies, 
haritable donors and a growing number of
overnments in endemic countries now aim 
o eliminate malaria. “There are countries 
liminating malaria in all endemic regions 
f the world,” said Robert Newman, M.D., 
irector of the WHO’s Global Malaria 
rogram. “With the highly effective interven-
ions now available, no one should die from
alaria. If we can achieve universal access 
nd utilization of these interventions while 
nvesting in research to develop tomorrow’s 
ransformative tools, then the country and 
egional goals of malaria elimination will 
ecome a reality.” 
Currently 32 nations are pursuing an
limination strategy and appear likely to 
ucceed, provided they are adequately 
upported by donors and international 
rganizations. Elimination is a more distant
rospect for many countries in sub-Saharan 
Africa, however, reﬂ ecting both the high
ntensity of local transmission and substan-
ial movement of people across borders, 
hich creates the constant potential for 
alaria importation. 
ovartis is making signiﬁ cant contribu-
ions to the global campaign to eliminate 
alaria. One example is a study in Burkina
aso in which Coartem is being used to treat
symptomatic carriers of malaria parasites
o reduce disease transmission. Gametocytes, 
he sexual stage of the malaria parasite,
o not cause malaria symptoms but are
esponsible for transmission of the disease 
hen ingested by a mosquito in a blood 
eal and inoculated into the next person
itten. Several studies have conﬁ rmed that 
apid clearance of gametocytes by Coartem
reaks the cycle of transmission between
he mosquito and human hosts. Depending
n results of the Burkina Faso study,
xpected during 2012, countries might 
onsider mass administration of ACTs to 
tanch parasite transmission.
At the same time, however, the need for
ew drugs has been heightened by the
mergence of resistance to ACTs in parts 
f Asia. The WHO has presented a global 
lan to contain artemisinin resistance but 
arned in a recent report there may be a lim-
ted window “for containing or eliminating 
rtemisinin resistance before it spreads to 
igh transmission areas, endangering all 
ecent advances in malaria control.” 
ovartis scientists have discovered two 
ew classes of antimalarials in the past two 
ears. One promising compound, known by 
he research number NITD609, completed 
n initial clinical study and began a Phase II 
linical trial during 2011. NITD609 belongs 
o a new class of antimalarial compounds 
nown as spiroindolones that work by sup-
ressing protein synthesis in malaria para-
ites, a novel mechanism of action.
n late 2011 the journal Science Express 
eported discovery by Novartis researchers 
f another new class of antimalarial com-
ounds. This class of dual-acting com-
ounds – known as imidazolopiperazines, 
r IZPs – targets the malaria parasite at both 
he liver and blood stages of its reproductive 
ycle. Parasites ﬁ rst infect the liver before 
oving to red blood cells; to eliminate 
alaria, researchers believe that future 
ntimalarials will have to work against both 
lood and liver stages. The lead candidate
n the IZP class from Novartis is expected to
egin clinical testing during 2012.
POOLED RESOURCES
iscovery and early development of 
ITD609, as well as the IZP class, were the
esult of pooled resources and efforts of
cientists at the Novartis Institute for 
ropical Diseases (NITD) in Singapore, the 
Genomics Institute of the Novartis Research 
oundation based in La Jolla, California, and 
he Novartis Institutes for BioMedical 
esearch in Basel, Switzerland, as well as 
xternal collaborators. 
ith Coartem, and potentially these latest 
iscoveries, Novartis has tackled the biggest 
nmet need – treatment of severe uncom-
licated malaria caused by the parasite 
Plasmodium falciparum, the deadliest form
f the disease. Yet to reach the goal of elim-
nation, research in coming years must focus 
n other niche indications that traditionally
ave not received attention.
Elimination of malaria is a daunting 
hallenge, and to reach that goal we need 
ew medicines,” said Thierry Diagana, 
h.D., Malaria Program Head at NITD. “There 
re many areas of unmet need, and future
reatments for malaria will need to target 
peciﬁ c niches to drive out the disease,” he 
dded. “It is an opportunity to change the
ap – and that doesn’t come around very 
ften. Novartis is tackling these challenges 
ead-on.”
Areas of unmet need range from the
eed for new drugs to treat severe malaria 
nd effective treatment of pregnant women 
2 | G R O UP R E V IE W 
16 | HE A LT H C A R E P O R T FO L I O 
6 0  |  C O R P O R AT E  C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E 
114 | C O MPE NS AT I O N R E P O R T 
13 8 | F IN A N C I A L R E P O R T
 
 
Citizenship at Novartis

64
N O VA RT I S  G R O U P A N N UA L  R E PO R T  2 0 11
o drugs that block disease transmission 
hat could be used in mass drug adminis-
ration programs in certain areas where
ncidence of the malaria already has been 
educed signiﬁ cantly. Another major unmet 
eed is a treatment against Plasmodium 
vivax, a strain of the malaria parasite common 
n Latin America and Asia. P. vivax 
alaria 
epresents a tougher target because some 
arasites not only cause an acute infection
ut also remain dormant in the liver from 
hich they trigger recurrent bouts of the 
isease. “So far P. vivax as been pretty 
uch ignored. It is an example of the new
irections in drug discovery needed to
ake serious progress toward elimination,” 
Mr. Diagana said.
SUPPLY CHAIN MANAGEMENT 
nreliable supply chains have frustrated 
fforts to enhance access to medicine in 
ub-Saharan Africa. Sustaining medical 
tocks in rural areas often is a tougher 
roblem than getting the medicines to
Africa in the ﬁ rst place.
n 2009 Novartis designed and launched
 novel program that adapts mobile phones 
s a tool for supply chain management. 
nown as SMS for Life, the system automat-
cally sends a weekly text message to all health 
osts and health facilities in a country, re-
uesting reports on stock levels of medicines
gainst malaria – in particular artemisinin-
ased combination therapies (ACTs) such as 
Coartem that the World Health Organization 
ecommends as ﬁ rst-line treatment. Replies 
re collected to provide an overview of stock 
tatus and needs.
n addition to stock management of med-
cines and, in some cases, rapid diagnostic
ests and other healthcare products, SMS 
or Life enables healthcare systems to track 
onsumption, improving accuracy of fore-
asting and timely orders to avert running 
ut of stock. The ﬁ rst big test of SMS for Life
as a pilot program in parts of Tanzania. 
uring 2011 the program was scaled up to 
over all 5 000 health facilities across the 
ountry. Collection of stock information was
xpanded to medical stores managed by
anzania’s Ministry of Health, allowing for the 
 rst time a weekly overview of total stock
ationwide, whether held in a health facility, 
 hospital or the Ministry’s own regional and 
entral stores. 
An epidemiological forecasting model 
esigned by the Swiss Tropical and Public
ealth Institute has been integrated to SMS 
or Life, assessing burden of malaria as the 
asis for projections of future demand for
edicines and diagnostic tests. “That will
llow the Ministry of Health time to plan for 
he ﬁ rst time,” said Jim Barrington, program
irector for SMS for Life. “The system will 
how if they are ordering enough and even 
alculate requirements by age group.”
rom 2012, Tanzania’s Ministry of Health
ill assume responsibility for management 
nd funding of SMS for Life for a minimum 
eriod of three years. Operating costs for 
ach health district are estimated at about
SD 100 per year: Affordability was a crucial 
arget for the project. The model is also fully
ommercial for all network operators; four 
obile phone companies in Tanzania make
oney on SMS messages sent back and 
orth. “For future sustainability, we said from 
he start that SMS for Life had to be viable 
t a price point the poorest countries could 
fford, without donations,” Mr. Barrington 
dded. 
UPGRADING INFORMATION
Additional products can easily be added to 
he stock monitoring system: A new pilot 
rogram funded by Novartis is under way
n ﬁ ve districts of Tanzania to track stock
evels for medicines against leprosy and
uberculosis. “If successful, we would expect
he Ministry of Health to want to take that 
ver, as well; the incremental operating 
ost would be marginal for the system,” Mr. 
Barrington said. 
he amount and sophistication of
nformation collected via SMS for Life also 
an be upgraded easily. “Today Tanzania is 
sing the cheapest, most basic mobile 
hone, and the data being collected is 
imited to what can be sent accurately and 
eliably in a text message,” he added. “As 
echnology moves into Africa, and health 
acilities switch to smartphones or even 
omputers, the system will be able to 
rovide additional functionality.” 
nterest in SMS for Life is spreading 
apidly. Ghana has started a six-month pilot 
rogram, jointly funded by Novartis and the
wiss Tropical and Public Health Institute,
o track 10 products related to malaria, as 
ell as antibiotics and even supplies of 
lood. According to estimates, 50% of insti-
utional maternal mortality in the region is 
elated to hemorrhages during childbirth, 
nd women have died awaiting transfusions
hile searches for blood were under way. 
Many of these deaths could be avoided 
hrough improved monitoring and manage-
ent of blood supplies.
enya is testing SMS for Life to help
anage stocks of malaria medicines. In
ddition, it will collect weekly data from health 
acilities on the number of patients visiting 
 facility, the number tested for malaria with
apid diagnostic tests, and the number of
ositive test results that led to treatment 
ith antimalarial medicines. The reports will
e aggregated automatically to provide 
ational surveillance data each week.
ata on case management is essential 
o assess the cost-effectiveness of rapid
iagnostic tests that were rolled out simul-
aneously with the SMS for Life pilot in 
enya. Because infants and young children 
re exceptionally vulnerable to malaria, 
ealthcare professionals still treat virtually

65
NOVARTIS ACCESS-TO-MEDICINE PROJECTS 2011
Value
Project
Description
Target region
(USD millions)
Patients
Malaria 1
Provide Coartem without profit for public sector use
Africa, Asia, Latin America
269
84 470 000
Leprosy/WHO 2,3
Eliminate leprosy by providing free medications 
Global
6
318 000
to all patients worldwide with WHO
Tuberculosis 2,3
Donate fixed-dose combinations
Tanzania
2
121 000
Fascioliasis 4
Provide Egaten free of charge to treat patients 
Bolivia, Egypt, Iran, Madagascar,
0.1
170 000
infected with fascioliasis
Switzerland, Vietnam, Yemen
Novartis Foundation for 
Improve health and quality of life of poor people 
Developing countries
10
3 713 000
Sustainable Development (NFSD) 5,6 in developing countries through think tank, policy
and project work
Novartis Institute 
Discover novel treatments and prevention methods 
Developing countries
15
-
for Tropical Diseases (NITD) 5
for major tropical diseases; NITD discoveries to be
available in poor endemic countries without profit
Novartis Vaccines Institute 
Develop effective and affordable vaccines for 
Developing countries
10
-
for Global Health (NVGH) 5
neglected infectious diseases of developing countries
US patient assistance program 
Assist patients experiencing financial hardship, 
United States
269
103 000
(PAP) 2 (excl. Gleevec)
without third-party insurance coverage for their medicines
Gleevec US PAP 2,7
Within capability of Novartis, continue to ensure access
United States
144
4 000
for patients in the US who cannot afford the drug
Glivec Global PAP/
Within capability of Novartis, continue to ensure access
Global 
933
47 000
Tasigna Global PAP 2,7,8
for patients outside the US who cannot afford the drug
(excluding US)
Alcon medical missions 9
Provide traveling medical teams with Alcon products
Developing countries
49
705 000
Alcon US patient assistance 9
Assist patients experiencing financial hardship 
United States
17
19 000
(all programs)
by providing Alcon products
Emergency relief and 
Support humanitarian organizations
Global
59
-
other donations
Total
1 784
89.6 million
1During 2011, 84.5 million Coartem treatments reached patients based on a preliminary analysis of local distribution. Of these, 43.9 million treatments came from shipments completed in 2010, and
40.6 million from shipments in 2011. A total of 100.1 million treatments were shipped in 2011. Value was calculated using the number of treatments shipped in 2011 and the ex-factory price of
Coartem to private-sector purchasers in malaria-endemic developing countries, excluding private-sector buyers using the Affordable Medicines Facility for malaria, minus payments to Novartis to cover
costs under terms of the public-private partnership with the WHO, which formally ended in May 2011. These payments were received through the WHO, UNICEF and other procurement agencies,
acting on behalf of governments and other public sector institutions in developing countries eligible to receive Coartem at the not-for-profit price.
2Ex-factory price to private market
3Value and patients are based on WHO estimates
4Manufacturing costs
5Novartis operating costs
6Patients number indicates beneficiaries of projects supported by NFSD and partners; beneficiaries include patients, healthcare professionals and members of health insurance schemes.
7US donations of Tasigna are included in US patient assistance program
8Value and patients include donations under shared contribution and co-pay models
9Full US retail value
2 | G R O UP R E V IE W 
16 | HE A LT H C A R E P O R T FO L I O 
6 0  |  C O R P O R AT E  C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E 
114 | C O MPE NS AT I O N R E P O R T 
13 8 | F IN A N C I A L R E P O R T
 
 
Citizenship at Novartis

66
N O VA RT I S  G R O U P A N N UA L  R E PO R T  2 0 11
ll fever in under-5s with antimalarial drugs. 
But studies in some African countries have
hown that only a relatively small proportion 
f fevers in adults is actually caused by
alaria. Use of rapid diagnostic tests more 
han covered their cost in these studies by 
educing waste and unnecessary use of
Coartem and other ACTs.
QUALITY EYE CARE FOR PATIENTS IN NEED
Alcon, our newest division, also has a long
istory of corporate responsibility. Alcon’s 
ork focuses on training new eye care pro-
essionals and continuously developing 
heir skills.
ne of the highlights in 2011 has been 
Alcon’s sponsorship of a three-week pro-
ram of the Orbis Flying Eye Hospital in
laanbaatar, Mongolia.
he Orbis Flying Hospital is part airborne 
ye hospital, part mobile ophthalmic teaching
acility, that carries an international medical 
eam to developing countries around the 
orld. With the specially equipped DC-10 jet 
ircraft parked at an airport, local doctors, 
urses and technicians work alongside the
edical team and observe surgeries per-
ormed in the operating room on board.
uring the recent program in Mongolia, 
ore than 80 local ophthalmologists
eceived training. 
ince the first program in 1982, the 
rbis Flying Eye Hospital has traveled to 
ore than 80 countries and saved the sight 
f millions of people. Alcon joined forces 
ith the Orbis Flying Hospital before that
aiden ﬂ ight and, over three decades, has 
rovided ﬁ nancial contributions, ophthalmic 
quipment and medical supplies. 
he Orbis Flying Hospital is a corner-
tone of Alcon’s support to medical training
nitiatives in developing countries through 
ospital-based programs, fellowships and 
nline consultations.
n yet another initiative, Alcon is helping 
o bring eye care to remote rural areas of China 
y providing operating room equipment 
sed to refurbish a Lifeline Express Hospital 
ye Train. In addition, Alcon is supporting the 
stablishment of regional training centers 
esponsible for core training of resident eye 
are doctors. The training centers will be 
ocated in capital cities of less developed 
Chinese provinces and, like the eye trains, 
ill improve access to cataract surgery for
eople in need.
he first eye train went into service in 
1997, and today four trains provide more
han 12 000 cataract operations per year for 
eople in regions with limited local access
o quality eye care. Each eye train includes 
onsultation rooms, sanitization rooms, 
perating theaters and recovery rooms 
quipped with the latest Alcon medical 
quipment and eye care technology.

67
CORPORATE CITIZENSHIP: KEY TARGETS AND RESULTS FOR 2011 AND KEY TARGETS FOR 2012
ACCESS TO MEDICINE
Targets 2011
Results 2011
Targets 2012
Complete rollout of Coartem Dispersible in the 
public sector. Continue rollout of Coartem and 
Coartem Dispersible under phase one of AMFm.
Broaden the Arogya Parivar portfolio with four 
additional products covering two therapeutic areas.
In 2011, more than 90 million Coartem treatments 
provided, both to the public sector and under phase 
one of AMFm, including 50 million treatments of 
Coartem Dispersible.
Rabipur vaccine (antirabies) added to Arogya port-
folio. Three additional products for gastrointestinal 
health being evaluated for smaller pack sizes.
Complete rollout of Coartem and Coartem
ispersible under phase one of AMFm. Further 
xpand access to Coartem and Coartem
ispersible in selected malaria endemic countries.
mprove Arogya supply chain efﬁ ciency for remote 
illages by appointing direct distributors.
NOVARTIS INSTITUTE FOR TROPICAL DISEASES
Targets 2011
Results 2011
Targets 2012
Proof-of-concept studies with NITD609. Start 
of clinical trials with second compound. Deliver 
dengue or TB early pipeline compounds.
Phase I of NITD609 completed, POC declaration 
postponed to early 2012 due to nonscientiﬁ c-related 
issues. KAF156 will enter Phase I in 2012. Two 
compounds – against malaria caused by P. vivax 
and tuberculosis – reach candidate selection phase.
nter Phase IIa with NITD609 (POC) and Phase I 
ith KAF156.

69
 HE A LT H C A R E PE R SPEC T I V E S: S O ME T HIN G B E YO ND T HE MSE LV E S

70
N O VA RT I S  G R O U P A N N UA L  R E PO R T  2 0 11
COMMITMENT TO PATIENTS
or years surgery was the only treatment 
ption available for patients diagnosed with 
ubependymal giant cell astrocytoma (SEGA), 
 rare type of brain tumor associated with 
uberous sclerosis complex. That changed
n September 2011, when European regula-
ory agencies approved a Novartis medicine 
nown by the common name everolimus, for
reatment of SEGA in patients age 3 years
nd older.
egulatory approval is a major milestone 
ut further negotiations over pricing and 
eimbursement with individual European
ountries are necessary before patients gain 
road access to a new drug. Those negotiations
an take months – or even years – to conclude.
o-called “expanded access programs”
llow companies to offer treatment with an
nvestigational drug outside of a clinical 
rial for patients who lack satisfactory treat-
ent options.
n collaboration with more than 60 clin-
cs in nine European countries, Novartis has
stablished an expanded access program 
roviding treatment with everolimus at no
ost for about 150 SEGA patients until reim-
ursement talks are completed and the 
rug becomes commercially available in 
hose countries. 
Through expanded access programs,
e are absolutely committed to bridge the
ap between regulatory trials and commer-
ial availability of a drug in a given country,” 
aid Guido Guidi, M.D., Head Region Europe
or Novartis Oncology. “While reimburse-
ent talks are under way, patients ﬁ nd 
hemselves with no treatment options 
espite approval of a new medicine. Because 
ovartis medicines often are ﬁ rst-in-class,
e feel a particular responsibility to address 
ccess issues.”
ovartis established an expanded access 
rogram for everolimus in a second indication,
reatment of pancreatic neuroendocrine 
umors. An expanded access program has
lso been established for another medicine,
uxolitinib, used to treat primary myeloﬁ brosis.
After completion of two successful 
hase III trials early in 2011, we began to 
ear from physicians in many countries, 
sking for access to ruxolitinib,” said Renaud 
Capdeville, M.D., Global Program Head for 
he medicine that is also widely known by 
he research number INC424.
n an initial step, a “compassionate use” 
rogram provided access to ruxolitinib for 
bout 500 patients. During the summer,
owever, an expanded access program was
stablished to complement the compas-
ionate use initiative.
The expanded access program is a
linical study with broader scope and more 
articipating centers than the compassion-
te use program. Physicians enroll patients
nto the program who receive treatment if
hey fulfill preset criteria,” Dr. Capdeville 
NEWS IN 2011
Access-to-medicine programs reach more than 89 million patients in 2011 and, together with our R&D institutes for diseases 
of the developing world, are valued at USD 1.7 billion, or 3% of net sales. 
Novartis and collaborators announce discovery of a new dual-acting class of antimalarial compounds called IZPs with potential to 
both prevent and treat malaria infections. NITD609, another promising antimalarial compound, completes an initial clinical study 
and begins a Phase II clinical trial. 
Novartis continues work to expand access to healthcare in India with addition of Rabipur antirabies vaccine to product portfolio of 
Arogya Parivar, our social business initiative in rural areas, and with Alcon’s support of Orbis International’s pediatric ophthalmology 
initiative to create 50 new eye clinics by 2015.

71
aid. “It is an opportunity to collect addi-
ional data, especially on safety. Physicians 
ho haven’t participated in the registration 
rials learn more about the drug and can
mprove treatment of this disease that is
till not well understood in routine clini-
al practice.” 
hile it is difﬁ cult to predict participa-
ion, Dr. Capdeville expects the expanded 
ccess program, also known as the JUMP 
rial, to enroll at least 1 000 patients from
undreds of hospitals around the world. A 
 o
lobal initiative, the program is open to 
atients in all countries except the United 
tates, where Incyte Inc. retains commer-
ial rights to ruxolitinib. 
n conjunction with the expanded access 
rograms, Novartis is working with European 
edical societies and patient advocacy 
rganizations to establish registries for 
uberous sclerosis complex, myelodysplastic 
yndrome and myelofibrotic syndrome.
ospitals and clinics participating in the
xpanded access programs are expected to
rovide data about diagnosis and case
anagement of more than 5 000 patients. 
All research performed conforms to relevant 
uropean Union legislation relating to 
mplementation of good clinical practice, 
rocessing of personal data and free move-
ent of such data. 
The idea with the registries is ﬁ rst to
dentify where the patients are, then to
nderstand their previous clinical history and
nmet medical needs,” Dr. Guidi explained.
here possible, Novartis has consulted 
ith patient advocacy groups about design 
f the registries as well as the expanded
ccess programs. In some cases, initial 
esigns have been modiﬁ ed to enhance 
ccess and improve convenience for partic-
pating patients. 
By working together with key stakehold-
rs we are able to go beyond the normal role
f a company in simply providing a drug,” 
r. Guidi said.
ROOM FOR IMPROVEMENT
ovartis has been a leader in the battle 
gainst rare cancers for more than a decade. 
he discovery and development of Gleevec/
Glivec, a breakthrough treatment against 
hronic myeloid leukemia and other types
f rare cancers, enabled Novartis to pioneer
xpanded access programs and global 
atient assistance programs that have 
elped more than 30 000 patients around 
he world obtain treatment that they other-
ise would not have been able to afford.
he commitment to chronic myeloid leu-
emia and other rare cancers also led to 
evelopment of Tasigna, a successor medi-
ine from Novartis. Though initially approved 
or treatment of patients resistant to 
Gleevec/Glivec, Tasigna is currently an
ption for all chronic myeloid leukemia 
atients. Clinical studies have demonstrated 
hat compared with Gleevec/Glivec, Tasigna 
roduces faster, deeper and more durable 
olecular responses. 
n collaboration with Novartis, the Euro-
ean LeukemiaNet, an academic network 
omprising 175 cancer centers in 33 coun-
ries, has launched the European Treatment 
utcomes Study (EUTOS). The initiative aims 
or further improvements in the treatment
f chronic myeloid leukemia. The vision of
UTOS is that there may come a day when 
 signiﬁ cant proportion of patients could 
ltimately discontinue therapy and remain 
n deep molecular remission.
esults of the ENESTnd Phase III trial 
omparing Gleevec/Glivec and Tasigna sup-
orted that vision. In a paper published in 
he medical journal
Lancet Oncology, 
NESTnd investigators recommended fur-
her study of the possibility that patients
ho achieve long-term molecular remissions 
ight be able to safely discontinue therapy. 
Proof-of-concept studies have been under-
aken with [Gleevec/Glivec  demonstrating 
hat treatment cessation is possible in a 
inority of highly selected patients with 
urable molecular remissions,” the authors
rote. “Future studies investigating the dis-
ontinuation of [Tasigna  therapy in patients 
chieving durable molecular remission is an 
mportant next step.”
It may sound a little strange for a health-
are company like Novartis to work together 
ith physicians with the ultimate aim of 
alting treatment with a drug we are selling,” 
r. Guidi said. “But it is a new way of doing
usiness – and a vision we hope to achieve 
or as many of our drugs as we can.”
MONITORING OUTCOMES
naugurated in 2007, EUTOS has focused on
mproving diagnosis and treatment through 
tandardized evaluation and monitoring of
hronic myeloid leukemia. For example, 
ata from a patient registry established by 
UTOS have helped to create a new, stan-
ardized risk score. 
n a paper published in the journal Blood,
 working group presented data showing the 
ew EUTOS score had better predictive 
ower than two other scores previously used 
y physicians. 
nder the EUTOS program, participating 
hysicians are offered plasma level moni-
oring across Europe. A central facility in 
Bordeaux, France, is coordinating certiﬁ cation 
f laboratories based on a common protocol.
Molecular monitoring based on poly-
erase chain reaction technology (PCR) is
he most sensitive and accurate currently 
vailable. The EUTOS program provides 
tandardized PCR testing, and more than 
50 molecular monitoring laboratories in 28
ountries are cooperating under the EUTOS 
rogram to minimize inter-lab variation.
We create a robust environment to col-
ect information about the disease and what 
eally matters for the patient,” Dr. Guidi said. 
We bring clinicians and patients on board 
or this discussion and then make it clear
ow we hope to inﬂ uence outcomes. It is a
olistic and comprehensive approach.”
2 | G R O UP R E V IE W 
16 | HE A LT H C A R E P O R T FO L I O 
6 0  |  C O R P O R AT E  C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E 
114 | C O MPE NS AT I O N R E P O R T 
13 8 | F IN A N C I A L R E P O R T

72
N O VA RT I S  G R O U P A N N UA L  R E PO R T  2 0 11
COMMITMENT TO PEOPLE AND COMMUNITIES
Be Healthy is a Group-wide initiative launched
uring 2011 to help associates at Novartis 
Group companies around the world embrace 
ealthy lifestyles.
articipation is voluntary: Associates are
ncouraged to take control of their personal 
ealth at work as well as in their private lives. 
Be Healthy places a particular focus on
revention activities. The initiative includes 
ealthy living and screening activities, as 
ell as support for associates with disabilities
r illnesses to help them maintain or regain 
heir ability to perform at home and at work.
Novartis is a healthcare company, and
 feel a great responsibility to offer all
ovartis Group company associates the 
ools they need to live healthy lives,” said 
Joseph Jimenez, Chief Executive Ofﬁ cer of 
ovartis and member of the Executive 
Committee of Novartis. “We all know that we 
hould have regular physical activity every 
ingle day, so I am encouraging all the par-
icipating sites to provide access to a gym 
ither on site or nearby and grant discounts 
r subsidies to all associates so they can 
fford membership.”
I’d also like to offer every associate the 
pportunity to make informed choices about
ating healthier at home or at Novartis,” 
e added. “We are asking cafeterias at our
ompany sites to provide a healthy meal 
very day that is the lowest priced option
n the menu. We also are encouraging 
ealthier food at Novartis-sponsored events.”
ites provide free annual screening for 
lood pressure, cholesterol and other key
ealth indicators, enabling associates to 
know their numbers” and identify occasions 
hen they may want to seek medical atten-
ion. The initial launch in 2011 included 76 
f the largest sites, representing about 80% 
f associates worldwide, and an additional
88 sites will introduce Be Healthy during 
2012. 
Be Healthy builds on a long tradition 
f health and well-being programs for
ssociates. Importantly, Be Healthy is the 
 rst global health initiative at Novartis, 
nsuring all Group company associates have 
ccess to a recommended level of activities 
nd opportunities to take a proactive 
pproach to lifestyle.
ocal programs cover four pillars – move, 
r physical exercise; choose, eating healthy 
t home and at work; know, monitoring key 
ealth indicators; and manage, providing 
upport such as personalized plans so that 
ssociates can return to work and perform 
n an environment that enables them to con-
ribute optimally after an absence due to an 
llness or injury. 
uring 2011, thousands of associates
nd family members took part in health 
romotion activities at all major Novartis 
NEWS IN 2011
Be Healthy, a Group-wide initiative providing opportunities for afﬁ liate associates to take control of their personal health, launches 
at 76 sites globally.
Novartis conducts second Group-wide Global Employee Survey; strong, 88% response rate demonstrates a shared commitment 
to making Novartis an even better place to work.
Novartis Institutes for BioMedical Research hold inaugural Health Equity Symposium that explores biological foundations of health 
disparity and steps to refocus healthcare research to address these disparities.

ASSOCIATES BY REGION AND SEGMENT AS OF DECEMBER 31 1
Canada and
Asia/Africa/
United States
Latin America
Europe
Australasia
Total
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
Pharmaceuticals
12 869
13 704
4 557
4 390
26 338
26 275
16 763
15 040
60 527
59 409
Alcon
9 347
9 175
1 794
2 033
7 410
6 704
4 436
4 196
22 987
22 108
Sandoz
1 442
1 349
2 532
2 427
15 595
15 308
4 808
4 452
24 377
23 536
Vaccines and Diagnostics
1 530
1 394
114
83
3 676
3 604
802
313
6 122
5 394
Consumer Health
1 797
1 731
890
737
3 567
3 432
2 036
1 828
8 290
7 728
Shared services
124
117
25
23
281
268
52
50
482
458
Corporate
133
117
25
21
686
599
57
48
901
785
Total
27 242
27 587
9 937
9 714
57 553
56 190
28 954
25 927
123 686
119 418
1Full-time equivalent positions. 2010 segments restated to reflect the new segment allocation introduced during 2011 as explained in detail on page 159.
73
ites including Group headquarters in Basel, 
witzerland. Programs offered there ranged
rom free ﬂ u vaccinations and cholesterol,
lood pressure and blood sugar screenings
o hearing and vision testing. Smoking ces-
ation programs so far show promising 
esults: 41% of participants remain smoke-
ree after six months.
At global headquarters of the Sandoz 
ivision, in Holzkirchen, Germany, more than 
2 000 associates have been screened for
kin cancer during the past two years.
ovartis Canada offers subsidized meals
ith healthy menu choices and reduced
alt content. Weekly “weight watchers at 
ork” meetings include free consultations
ith dietitians. 
Be Healthy aims to foster local initiatives. 
Being healthy doesn’t always mean making 
rastic changes in lifestyle,” Mr. Jimenez said. 
Even little things like walking up stairs can 
dd up to a big difference in overall health.” 
FOCUS ON EMERGING MARKETS
nderscoring the strategic importance of 
merging markets, Novartis maintained 
 strong focus during 2011 on career
evelopment of associates in key emerging
arkets. During the year, more than 3 000 
ssociates attended development programs
t the Novartis China University and the
ovartis Business Academy in Russia. 
A program sponsored by Mr. Jimenez
alled LEAD was introduced to complement 
xisting leadership development activities in 
merging markets. LEAD offers participants 
aried learning opportunities over 12 months, 
ncluding multiple sessions of experience-
ased learning with senior Group executives 
ncluding Novartis Chairman Daniel Vasella, 
Mr. Jimenez and other members of the 
xecutive Committee of Novartis. 
A separate initiative, BOOST, supports 
ssociates from emerging markets during 
heir stay at Group headquarters in Basel. 
BOOST connects participants with mentors, 
nd provides introductions to members of 
enior management and targeted learning 
xperiences to support career development 
nd success in their roles.
Moving to a new country and taking 
n a new role is rewarding,” said Juergen 
Brokatzky-Geiger, Ph.D., Head of Human 
esources and member of the Executive 
Committee of Novartis. “But the transition 
an be challenging, which is why we created
BOOST. The program delivers twin beneﬁ ts: 
ersonal development for individual asso-
iates and greater diversity of candidates
or internal roles across Novartis.”
2 | G R O UP R E V IE W 
16 | HE A LT H C A R E P O R T FO L I O 
6 0  |  C O R P O R AT E  C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E 
114 | C O MPE NS AT I O N R E P O R T 
13 8 | F IN A N C I A L R E P O R T
 
 
Commitment to People and Communities

74
N O VA RT I S  G R O U P A N N UA L  R E PO R T  2 0 11
The villages miles away
SHIWAGA HAGOS: “When I was a young girl, I had a sister who was 
pregnant. She accidentally died and nobody really knew the reason why. 
Now I think that this is what motivated me to want to do this work. At 
one time I had thought about being a doctor, but didn’t have the grades 
in secondary school to continue. Then I joined this program. In order to 
qualify, you undertake a course of studies for one year, receive on-the-
job training, then later, refresher courses so that we won’t forget what 
we’ve learned. 
“I have been a health extension worker for six years now, which means 
I work to solve people’s health problems. I work in the clinic two days 
a week, but most of the time I visit patients in their villages, which 
can be miles away. We walk in order to get there, sometimes for 30 
minutes, sometimes three hours. In the beginning it wasn’t always easy. It 
happened that one day I saw a baby being delivered. There was so 
much bleeding that it shocked me. I didn’t eat for two days. But since 
then I have assisted in 18 home deliveries. We encourage mothers to 
come to the health center to have their babies, but sometimes they can’t 
get there. In the time that we’ve been doing this work, we’ve managed 
to decrease the deaths of pregnant mothers and their babies.
“But not everything works out. Once I traveled to a village to work with 
a mother who had HIV. I took the best care of the child that I could, 
brought the child food, fed her, so that at times I felt like she was my 
daughter. But still she got sicker and passed away. I was badly hurt by 
this situation, full of doubts about what I can do. The baby was just 
eight months old.
“Now, each health extension worker visits 45 patients a week, and 
serves many functions. We do inoculations and distribute information 
about family health. Before they started this program, families would 
regularly have more than seven children. We’re teaching people how to 
use contraceptives, as well as other methods of family planning, and the 
birth rate is dropping. Still, testing for malaria is a big part of what we do.
“When I meet a patient for the first time at the health clinic, I take a 
medical history. I ask her how she is feeling and where she is living, 
and if it’s in a swampy area with a lot of mosquitoes, does she use nets. 
Then I give her a test, which identifies suspicious malaria, whether it is 
Plasmodium vivax or Plasmodium falciparum. Some years back, people 
in the villages would never allow these tests. Even though we told them 
it was for malaria, they felt suspicious, that we were going to check their 
blood for HIV. Now everyone is willing for us to do a check of either 
malaria or HIV. We have brought lots of awareness.”

75
HE A LT H C A R E PE R SPEC T I V E S: T HE V IL L AG E S MIL E S AWAY

76
N O VA RT I S  G R O U P A N N UA L  R E PO R T  2 0 11
trong programs in place to maintain a high 
evel of awareness about safety. Moreover,
e don’t just wait for accidents to happen – 
ur managers track many leading indicators 
o help prevent accidents from happening 
n the ﬁ rst place. We have made signiﬁ cant 
rogress over the past ﬁ ve years and we can
ransfer that knowledge to Alcon.”
orking closely with peers from the new 
Alcon Division, Mr. Saveal and his team pro-
uced a detailed integration plan for health, 
afety and environment that identiﬁ ed poten-
ial areas for improvement. For example,
njury and illness reporting at the former 
Alcon was limited to manufacturing sites,
esearch and development, the US sales force 
nd US headquarters operations. Novartis 
racks LTIR at all locations worldwide.
uring 2011, the Alcon Division expanded
ts reporting coverage to 95% of associates, 
rom 63% prior to joining Novartis. “We aim 
o include small distribution centers and
ther operations at the Alcon Division to
pproach 100% in 2012,” Mr. Saveal said.
ransparency is another hallmark of
ovartis safety and environmental reporting. 
hile the former Alcon collected and 
eported that data internally, the results 
eren’t communicated externally. Data for 
he Alcon legacy businesses is reported by
ovartis in this year’s annual report.
n 2010, Alcon managers adopted proac-
ive reporting practices introduced by Novartis 
n recent years. Site managers send personal 
mails to their respective division heads, 
An important facet of the integration of 
Alcon, Inc. within Novartis was the enhance-
ent of global health, safety and environ-
ental programs. Activities initiated during 
2011 accentuated a trend of declining injury 
ates at Alcon in recent years. Alcon’s legacy 
usinesses reported their lowest accident 
ates ever during 2011, and current projec-
ions indicate Alcon could reach the Novartis
Group lost-time injury and illness rate 
(LTIR) by 2015. 
t isn’t the ﬁ rst time a new addition to the
ovartis Group achieved signiﬁ cant, sus-
ained improvement in safety. Both Hexal AG 
nd Chiron Inc. achieved signiﬁ cant, sus-
ained reductions in LTIR after being acquired 
y Novartis. Hexal lowered its LTIR from 1.51
njuries per 200 000 hours worked in 2005 to
0.11 in 2010. LTIR in operations of the former 
Chiron fell from 0.76 accidents per 200 000 
ours worked in 2007 to 0.17 in 2010.
his mirrors sustained improvement in 
afety by Novartis. Group-wide LTIR declined 
rom 0.51 accidents per 200 000 hours 
orked in 2005 to 0.18 in 2010. “That may
ot sound like much. But it translates into 
undreds of associates who would have had 
ccidents had we not achieved this substan-
ial ongoing improvement in safety,” said
eith Saveal, Head Corporate Health, Safety, 
nvironment and Business Continuity at 
ovartis. 
We have a very systemic approach to 
ealth, safety and the environment, with rig-
rous measurement and reporting, and 
COMMITMENT TO THE ENVIRONMENT
NEWS IN 2011
United Nations Framework Convention on Climate Change approves Novartis carbon-offset project in Argentina under the UN Clean 
Development Mechanism, with more than 3 million trees planted.
Novartis begins planting for additional carbon-offset project in the Sichuan region of China. Novartis and collaborators including 
the Nature Conservancy plan to plant 10 million saplings on 3 900 hectares by 2015.
Novartis Energy Excellence Awards recognize projects that help reduce our carbon footprint. Of 124 projects submitted in 2011, 
57 have already achieved annual savings of more than USD 11 million, or 3% of Novartis total annual energy costs.

77
eporting each lost time accident during the
ear. In addition, executive committee mem-
ers receive quarterly updates on safety per-
ormance, along with general managers of the 
10 worst-performing country organizations.
uring 2012, accident reduction will 
emain a priority for the new Alcon division.
or all the improvement during 2011, Alcon’s 
TIR at 0.45 accidents per 200 000 hours 
orked remains well above the Novartis 
igure of 0.15.
STRINGENT REQUIREMENTS 
Also, the integration program identiﬁ ed areas 
here Novartis could learn from Alcon. “Alcon 
as done some great work on packaging, 
educing carton size and the amount of card-
oard consumed,” Mr. Saveal said. 
It is something we are working on at 
ovartis but Alcon was already a few years
own the road. Sustainable packaging is like 
nergy conservation. We can save money as 
ell as make a small contribution toward 
aving the planet through responsible stew-
rdship of natural resources.”
egulation of healthcare products – and
rescription medicines in particular – 
mposes stringent requirements on integrity 
nd security of packaging. That includes 
nformation that must be conveyed to patients 
s well as protection from deterioration and
isuse. Yet innovative packaging designs 
hat optimally meet the needs of users,
ogether with use of new materials from
enewable resources, could pave the way to 
nformed selection of raw materials, diminish 
ackage size and minimize consumption of
esources with minimal additional cost.
NOVARTIS HEALTH, SAFETY AND ENVIRONMENT (HSE) DATA 2011
Vaccines and
Novartis Group 1
Pharmaceuticals
NIBR
Sandoz
Diagnostics
Consumer Health 2
Alcon 3
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
HSE personnel
442
435
208
195
26
22
124
129
26
28
47
50
39
Lost-time injury and illness rate (LTIR)
0.15
0.18
0.13
0.20
0.09
0.16
0.18
0.19
0.17
0.17
0.17
0.13
0.45
Total recordable case rate
0.54
0.73
0.53
0.81
0.57
0.68
0.52
0.64
0.48
0.43
0.44
0.74
1.04
Total production (1000 t)
174
168
25
25
0
0
86
87
0.3
0.4
63
56
45
Contact water use (million m3)
16.0
15.1
4.1
4.1
0.6
0.6
8.7
7.8
1.0
1.0
1.6
1.6
1.6
Energy use (million GJ)
17.4
17.6
5.5
5.6
1.3
1.3
7.6
7.7
1.5
1.4
1.5
1.5
2.0
Emissions
Effluent discharge (million m3)
16.9
15.9
4.1
4.3
0.6
0.6
8.6
7.8
1.1
1.0
2.5
2.2
1.4
COD into water (1000 t)
3.9
3.6
0.7
0.8
0.0
0.0
3.1
2.8
0.0
0.0
0.1
0.1
0.0
Sulfur dioxide SO2 (t)
76
82
4.4
7.3
0.5
0.5
69
72
0.1
0.1
0.5
1.5
0.7
Nitrogen oxide NO2 (t)
288
313
103
113
10
12
140
141
11
24
23
22
38
Halogenated VOCs (t)
136
244
1.6
2.1
6.8
6.9
128
235
0.0
0.0
0.0
0.0
0.0
Non-halogenated VOCs (t)
1 050
1 277
217
247
25
26
722
925
1.2
1.9
84
78
21
GHG Scope 1, combustion and process (1000 t)
414
418
139
143
17
18
189
190
37
38
32
28
49
GHG Scope 1, vehicles (1000 t)
155
168
103
120
0.1
0.2
27
25
4.5
4.6
14
13
41
GHG Scope 2, purchased energy (1000 t)
890
922
224
235
81
84
354
381
91
81
139
140
165
Operational waste
Non-hazardous waste not recycled (1000 t)
47
58
7.4
7.1
1.6
1.8
9.3
7.9
23
35
6.5
6.1
3.4
Hazardous waste not recycled (1000 t)
95
96
64
65
1.2
1.4
25
26
1.3
1.2
2.4
2.7
0.7
Non-hazardous waste recycled (1000 t)
39
36
11
11
1.4
1.3
16
15
1.9
2.2
8.2
7.0
6.7
Hazardous waste recycled (1000 t)
90
89
20
38
0.0
0.0
67
51
0.1
0.2
2.5
0.2
0.0
1Novartis Group includes Novartis Corporate; Alcon is not included.
2Consumer Health data include Animal Health, CIBA Vision and OTC.
3Data from newly acquired Alcon sites, excluding CIBA Vision; Alcon data only available for 2011.
2 | G R O UP R E V IE W 
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8 6 | C O R P O R AT E G OV E R N A N C E 
114 | C O MPE NS AT I O N R E P O R T 
13 8 | F IN A N C I A L R E P O R T
 
 
Commitment to the Environment

78
N O VA RT I S  G R O U P A N N UA L R E PO R T  2 0 11
COMMITMENT TO ETHICAL BUSINESS CONDUCT
uring 2011 the Novartis Board of Directors 
pproved a revised Code of Conduct that
akes effect January 1, 2012.
he Code of Conduct is a cornerstone 
f ethical business conduct that reinforces 
esponsible decision making as an essential 
art of the way Novartis Group company 
ssociates think and do business. The Code
f Conduct is an integral part of the employ-
ent contract of every associate worldwide.
Breaches of the Code of Conduct can lead
o disciplinary action, including termination.
mportantly, the Code of Conduct helps 
o enhance engagement of associates 
nd serves as a potent recruiting tool for 
ovartis. “We know that associates are really
otivated by ethical business behavior,”
aid Peter Kornicker, Chief Compliance 
fﬁ cer at Novartis. 
he previous Code of Conduct originally
ated from 1999 and was updated in 2001
n conjunction with the commitment by
ovartis to the United Nations Global 
Compact, the world’s largest corporate 
NEWS IN 2011
Novartis revises its Code of Conduct to address evolving business landscape. Updated Code is principle-based, focusing on standards 
for ethical conduct beyond narrow legal deﬁ nitions.
Business Practices Ofﬁ ce (BPO) provides formal system for dealing with complaints of actual or suspected cases of misconduct. 
During 2011, BPO receives 1 522 complaints that become investigations. 
Novartis again achieves top ratings in corporate responsibility and industry rankings, including number one pharmaceutical com-
pany in Fortune’s list of “World’s Most Admired Companies,” MedAdNews’ “Most Admired Pharmaceutical Company,” and Scrip’s 
“Pharma Company of the Year.” Novartis also receives SAM Gold Class Award, and is included in STOXX Global ESG Leaders indices, 
FTSE4Good Index and Ethibel Excellence Investment Register.
As founding member of consortium WIPO Re:Search, Novartis voluntarily provides intellectual property and expertise under 
royalty-free licenses to qualiﬁ ed researchers worldwide focusing on neglected tropical diseases. The World Intellectual Property 
Organization (WIPO) sponsors the consortium, which includes pharmaceutical companies, leading research institutions and NGOs.
Supreme Court of India holds preliminary hearing on the Glivec patent case in October and schedules full hearing for February 
2012. Through this case, Novartis seeks clarity on the patent system in India to prioritize research investments. More than 45 countries, 
including Russia, China and Taiwan, have recognized the patentable breakthrough innovation associated with Glivec.
itizenship initiative. “A strong Code of
Conduct should reﬂ ect and adapt to the busi-
ess environment, and it is best practice to 
eview and upgrade the Code of Conduct 
egularly,” Mr. Kornicker added.
nternational corporations like Novartis 
ace a demanding compliance environment 
oday, including new laws and regulations 
s well as increased scrutiny and enforce-
ent by authorities. The new Code of 
Conduct is an essential point of reference 
or all associates, and establishes a common
et of standards that apply throughout the 
orld. The revised text is shorter, with simpler 
anguage than the previous version. “You
an’t expect every associate to be a legal 
xpert,” Mr. Kornicker said. “We need to 
ork with general principles and also 
rovide guidance to help associates make 
ecisions in cases where they are in doubt.”
he most signiﬁ cant change to the Code 
f Conduct is the commitment by Novartis 
o ﬁ ve stakeholder groups: patients, associ-
tes, shareholders, healthcare partners and

79
ociety at large. The document now clearly
rticulates principles and standards of 
usiness conduct that apply to these groups 
ho make decisions and take actions that
mpact the success of Novartis.
till, the Code of Conduct is directed ﬁ rst 
nd foremost to associates. The new version
nshrines the core principle of performance 
ssessment at Novartis: The way business
esults are achieved is as important as the
chievement itself. Each associate’s annual
erformance is measured against a written
et of objectives together with an appraisal 
f an individual’s values and behaviors.
iversity and inclusion is also addressed 
n the new Code of Conduct. “We say that
iversity and inclusion, and an inclusive
indset are important to us,” Mr. Kornicker 
dded. “It doesn’t matter if that is actually 
peciﬁ ed in local law or not. This is how we do
t at Novartis.” A section on bribery is another
xample where the Code of Conduct takes a 
ore stringent position than local law in some 
arts of the world. “Many countries prohibit
ribery of public ofﬁ cials, and a number of 
ther counties also prohibit bribing private 
ersons,” Mr. Kornicker explained. “In the
Code of Conduct we say Novartis does not
olerate any form of bribery.”
The Code of Conduct is an excellent 
latform from which to discuss ethical 
usiness behavior in a broader context,” 
Mr. Kornicker added. “From the perspective 
f individual associates and the organization
– and the important role of Novartis leaders 
n fostering integrity and compliance – it is 
ot something that just happens; it needs a 
ositive environment. Obviously the best
olution for misconduct is prevention.”
o that end, the revised Code of Conduct 
nderscores the crucial role of the Business
ractices Ofﬁ ce (BPO), the global framework 
or reporting and investigation of miscon-
uct. Under the Code of Conduct, associates 
re obliged to bring actual or suspected 
isconduct to the attention of the company
hrough a deﬁ ned reporting process.
Associates who report potential misconduct 
r assist in any inquiry or investigation will 
e protected against retaliatory action.
he BPO provides opportunities to 
eport incidents of misconduct in person, 
y letter, email, and integrity telephone and 
eb-based hotlines in 91 countries and 55
anguages. All complaints are investigated 
rofessionally, and the results of investiga-
ions are shared with the appropriate 
anagement.
We work across the entire spectrum – 
rom information and training programs
o increase awareness and engagement 
mong associates, to the BPO framework,” 
Mr. Kornicker said. “We don’t hide the fact 
hat disciplinary sanctions are necessary. 
very year individuals make poor choices,
nd we are disappointed when we have to
erminate associates. But we will not toler-
te misconduct,” he added.
We trust our managers to manage 
any different risks – ﬁ nancial risks, prod-
ct risks and people risks. It is essential that 
e hold our managers responsible for man-
ging compliance risks as an integral part
f the business.”
2 | G R O UP R E V IE W 
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13 8 | F IN A N C I A L R E P O R T
 
 
Commitment to Ethical Business Conduct

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N O VA RT I S  G R O U P A N N UA L  R E PO R T  2 0 11
FURTHER INFORMATION
Topic
Website information
OVERVIEW
Corporate Citizenship at Novartis
Corporate Citizenship targets and results
erspectives on key issues
N Global Compact
Global Reporting Initiative (GRI)
ww.novartis.com/corporate-responsibility
ww.novartis.com/targets2012
ww.novartis.com/key-issues
ww.novartis.com/un-global-compact
ww.novartis.com/gri-report
COMMITMENT TO PATIENTS
verview: patient initiatives
ovartis Malaria Initiative
ovartis Foundation for Sustainable Development (NFSD)
ovartis Institute for Tropical Diseases (NITD)
ovartis Vaccines Institute for Global Health (NVGH)
ww.novartis.com/access
ww.malaria.novartis.com
ww.novartisfoundation.org
ww.novartis.com/nitd
ww.novartis.com/nvgh
COMMITMENT TO PEOPLE AND COMMUNITIES
iversity and Inclusion
Be Healthy: associate health and well-being initiative
ww.novartis.com/diversity-inclusion
ww.novartis.com/be-healthy
COMMITMENT TO ENVIRONMENT
verview: HSE performance
ww.novartis.com/environmental-care
COMMITMENT TO ETHICAL BUSINESS CONDUCT
verview: ethical business conduct
ovartis Code of Conduct
ww.novartis.com/business-conduct
ww.novartis.com/code-of-conduct

81
To the Audit and Compliance Committee of 
the Board of Directors of Novartis AG, Basel
e have performed assurance procedures 
o provide limited assurance on the following
spects of the 2011 Corporate Citizenship 
(CC) reporting of Novartis AG and its consoli-
ated subsidiaries (Novartis Group).
SUBJECT MATTER
he subject of our assurance procedures 
elated to the data and information disclosed 
n the consolidated CC reporting of Novartis 
Group for the year ended December 31, 2011 
as limited to the following:
eporting processes with respect to the CC
eporting and CC key ﬁ gures as well as the 
elated control environment in relation to 
ata aggregation of CC key ﬁ gures.
CC key performance indicators on page 61, 
he “Novartis access-to-medicine projects 
2011” ﬁ gures on page 65 and the “Novartis 
ealth, Safety and Environment (HSE) 
ata 2011” on page 77 as published in 
he “Novartis Annual Report 2011” (CC 
ndicators).
CRITERIA
he management reporting processes with 
espect to the CC reporting and CC key ﬁ gures 
ere assessed against Novartis Group inter-

82
N O VA RT I S  G R O U P A N N UA L R E PO R T  2 0 11
The lives of other people
ZHENGCHEN LIU: “At the beginning, there was a symptom of eye 
bleeding. When I was reading, there was a dot in the center of the 
page, the center of my eyesight. But my problem didn’t originate from 
my eyes. After a lot of physical examinations, I was told the number 
of white cells in my blood should be four to 10. My number was 430. 
Pretty high, pretty high. The doctor said there could be many reasons 
for this. ‘You might have caught a big cold, or,’ he went on, ‘you may 
have leukemia.’ And I knew I didn’t have a cold.
“I don’t remember getting very upset until my parents came to the 
hospital the next morning. Then my tears ran. Suddenly faced with an 
uncertain future, every little thing seemed different, more important, 
from turning on the tap to washing my face to brushing my teeth. In 
China, you see, leukemia is perhaps a more feared word than cancer. 
People are terrified by leukemia, believing if you have a tumor, and 
remove it, you can get well. With leukemia, you might need a trans-
plant, or very expensive medicine. Whatever is needed, it’s not so simple. 
I personally believed leukemia would wholly affect my economic life, 
relationships, what I was doing at the university. I was majoring in 
management. After graduation, people go to banks, into the invest-
ment field, earn lots of money. Now there were questions whether I 
could find a job. Then there was my girlfriend at the time. She came 
from a province in China where the tradition is that the daughter 
should marry very successfully, marry a wealthy businessman. It’s not 
that my girlfriend’s family was wealthy, but that’s the tradition. So she 
had to break up with me. The mother makes this decision and the 
daughter has to obey.
 
“Remembering back, it was just a month after my diagnosis that I 
established the Sunshine Bone Marrow Registry, though the truth is

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that my original motivation for starting this organization was that I 
thought I could save myself. Doctors had led me to believe at first that 
the only hope I had to survive was a bone marrow transplant operation. 
But I had no proper donor. I had hoped that my mother and father’s bone 
marrow was possible, but it turned out this wasn’t a good choice for me.
 
“At the time it was begun, the organization was a student organization, 
like a student union, that we ran in our spare time. Today I would 
describe New Sunshine as a charitable foundation fighting leukemia. 
We have the bone marrow donor registry – so there are now two of them 
in China – a trained staff, and hundreds of volunteers, who provide all 
kinds of support for child and adult leukemia patients. Once I didn’t 
know how to do anything, but even now running this organization can 
be stressful. I’ve learned how to keep calm, to handle my emotions 
when visiting patients, feeling the ups and downs, but I still get 
depressed. There are so many of them and we can’t help them all.
“The only way I know that you can live any kind of good life when you 
have this disease is by making constant adjustments to your expecta-
tions, to yourself. Yesterday was what’s known as Children’s Day in China. 
We visited the children’s wards to give out gifts. Three days ago I was 
waiting for my latest bone marrow test results. Every day is different.”
ANONYMOUS PATIENT: “Before my diagnosis I thought my life would be 
like this: getting a degree, having a baby, living a very normal family life, 
writing some articles to get published, becoming a professor. Then three 
years ago I was diagnosed with chronic myeloid leukemia (CML). 
Suddenly, everything changes, and most of the changes are emotional. I 
had been married five years. My husband wants to have a baby, but I 
don’t think it’s the right time to have a baby now. Baby-wise, I know you 
have to be in deep remission before you can risk stopping the medicine I 
have to take. On top of this, I didn’t tell my mother-in-law or sister-in-
law about my illness. Even now my husband still keeps it a secret. I

85
HE A LT H C A R E PE R SPEC T I V E S: T HE L I V E S O F OT HE R PEO PL E 
guess he doesn’t want to hurt his mother’s feelings, knowing she might 
be afraid of not having a grandchild. And though both my husband and 
I have graduated from the best university in China and both of us have 
good jobs, she might be afraid of how other people might look at me 
and, in turn, at her.
“So there is bias. But where I work now, people are open-minded. They 
don’t look at me differently. Well, looking at someone differently can 
be divided into two different attitudes. The first is feeling sad for a 
person. The second is looking down on them. Feeling sad is reasonable. 
You can’t expect someone to feel happy for you if they know you have 
leukemia. 
“Today my life is more under control, more stable than it was. I must 
take regular tests and sometimes I feel, well, not so right. I am not any 
longer going for my Ph.D., but I am not inactive. I teach part time, then 
I work as a volunteer at the Beijing People’s Hospital, for Professor Qian 
Jiang. You know, so many people from around the country come to see 
her. They start coming at 6 in the morning, though the clinic doesn’t 
open until 8. The doctor then sees 50 to 60 patients during the day. 
I’ve watched her working and she can be in an awful hurry, but patients 
do well under her care. She is getting more and more famous and is, I 
believe, the best, most expert person on CML in this country.
“Sometimes my job here is to put the results of the tests that have been 
done onto paper and in envelopes, and sometimes I have to keep the 
crowds away from the door. Once, when I saw people who needed the 
doctor’s help kneel down before her, I would feel sad. On the other 
hand, you come to feel that compared with the lives of the people in 
front of you, your own life is acceptable. You need to enjoy your life.”

N OVA R T I S  G R O U P  A N N UA L  R E P O R T  2 0 1 1
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CORPORATE GOVERNANCE REPORT
CONTENTS
CORPORATE GOVERNANCE REPORT
Introduction
87
Our Corporate Governance Framework
88
Our Shareholders
88
Our Board of Directors 
92
Our Management
102
The Independent External Auditors
107
Further Information
108
Novartis strives to create sustainable value. Our corporate
governance framework is designed to support this. 
While it complies with all applicable laws and implements 
best corporate governance standards, it is tailor-made 
for Novartis.

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Contents | Introduction
INTRODUCTION
The corporate governance framework of Novartis reflects a system
of checks and balances between the powers of the shareholders,
the Board of Directors and the management with the goal to safe-
guard the interests of Novartis and its shareholders while creating
sustainable value.
Since the creation of Novartis in 1996, the Board of Directors
has continuously improved the corporate governance framework of
Novartis by proactively implementing emerging best corporate gov-
ernance standards long before these were embedded in the Swiss
Code of Best Practice for Corporate Governance (“the Swiss Code”)
or in the law.
In 1999, Novartis established the new position of Lead Director
as a check and balance following the election of Chief Executive
Officer Daniel Vasella, M.D., to the additional post of Chairman.
Moreover, three new Board committees – the Compensation Com-
mittee, the Audit and Compliance Committee and the Corporate
Governance and Nomination Committee – were created, composed
exclusively of independent Board members. 
In 2002, five years before legislation came into force in 2007,
requiring companies to disclose the total compensation of their
executive management group as well as the highest compensation
attributed to a member of the executive management, Novartis had
already implemented even more rigorous disclosure standards by
reporting the individual annual compensation of all members of the
Executive Committee.
In 2004, two years earlier than required for non-US corpora-
tions, Novartis complied with the challenging certification require-
ments under the US Sarbanes-Oxley Act, in particular Section 404
of this Act.
In 2009, the Board of Directors established a new Risk Commit-
tee that oversees the Group’s enterprise risk management,
strengthening the Board of Directors’ supervisory function over
management in this critical area. While fostering a culture of risk-
adjusted decision making, the Risk Committee ensures that reason-
able risk-taking and innovation are not constrained.
In 2010, the Chairman and CEO functions were separated. In
addition several emerging best corporate governance standards
were proactively implemented, including the introduction of a “say-
on-pay” shareholder vote, making changes to our executive com-
pensation system to further strengthen the alignment of incentives
with the long-term success of Novartis and a number of new disclo-
sures, including on qualifications of Board members. 
In 2011, the first “say-on-pay” vote was held, where the share-
holders endorsed the compensation system of Novartis. 
Novartis evaluates emerging best governance standards and
adopts those that are found to be appropriate for Novartis. These
standards are then tailored to Novartis, its business, management,
stakeholders and shareholders with a view to create a corporate
governance regime that supports the creation of sustainable value.
This cannot be achieved by implementing corporate governance
standards “as is” (“one size fits all approach”) and becomes impos-
sible if corporate governance standards (embedded in corporate gov-
ernance codes) are converted into binding, “one size fits all” rules as
is currently contemplated in Switzerland.
In Switzerland, Parliament considers introducing binding, “one
size fits all” rules such as a binding shareholder vote on executive
compensation and a ban on sign-on bonuses. Such rules would
eliminate the flexibility of issuers to adapt corporate governance
recommendations to the specific circumstances and needs of each
individual company. Moreover, if such rules were introduced,
Switzerland would get a corporate governance regime that would
be substantially more restrictive than that of other countries. Such
binding corporate governance rules are not needed. The “market”
(corporate governance rating agencies, proxy voting agencies, insti-
tutional investors, Stock Exchanges) already plays a very effective
role in deciding whether a given explanation is sufficient and plau-
sible or not.  
We note however an encouraging development in that regula-
tors start to acknowledge and seem to become willing to regulate
many corporate governance issues that have been highlighted by
issuers for a long time but did not make it “on the corporate gover-
nance agenda” yet: In 2010, the US Securities Exchange Commis-
sion in its “Concept Release on the U.S. Proxy System” and, in
2011, the European Commission in its green paper entitled “The 
EU Corporate Governance Framework” have noted a number of
such issues, including deficiencies in the proxy system, potential
conflicts of interest and a lack of accuracy and transparency of
proxy advisory firms, and what the European Commission called
“inappropriate short-termism among investors.” On that last point,
we note that the UK government commissioned a review (“The Kay
Review”) on whether the time horizons of investors match those 
of their principals and whether equity markets and government
policies promote long-term horizons of institutional shareholders
and fund managers and sufficiently encourage boards to have a
long-term horizon. 
At the heart of good corporate governance lies a strong Board
of Directors, which represents the interests of the shareholders and
other stakeholders, and the professionalism and integrity of man-
agement, creating the foundation for sustainable value. While the
size, composition and structure of the Board of Directors are easy
to describe and can be easily checked from the outside, it is diffi-
cult to demonstrate that the core processes, like information flow
and decision making, are state-of-the-art. It is even more difficult, if
not impossible, to describe the prevailing board culture, although
the latter is essential for its effective function. Novartis aims to fos-
ter an atmosphere in which Board members can pose challenging

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88
questions, voice dissenting views and secure access to independ-
ent information through extensive contacts with senior Novartis
executives – inside and outside the boardroom. Diversity of a Board
of Directors is a critical success factor for its work. The Novartis
Board of Directors today is diverse in terms of background, inter-
ests and skills.
OUR CORPORATE GOVERNANCE FRAMEWORK 
LAWS AND REGULATIONS
Novartis is subject to the laws of Switzerland, in particular Swiss
company and securities laws, and to the securities laws of the
United States as applicable to foreign private issuers of securities.
In addition, Novartis is subject to the rules of the Swiss Stock
Exchange (SIX Swiss Exchange), including the Directive on Informa-
tion relating to Corporate Governance.
Novartis is also subject to the rules of the New York Stock
Exchange (NYSE) as applicable to foreign private issuers of securi-
ties. The NYSE requires Novartis to describe any material ways in
which its corporate governance differs from that of domestic US
companies listed on the NYSE. Different from corporate governance
rules applicable to domestic US companies listed on NYSE, share-
holders of Novartis do not receive written reports from committees
of the Board of Directors. Also, the external auditors are appointed
by our shareholders at the Annual General Meeting, as opposed to
being appointed by the Audit and Compliance Committee. In addi-
tion, while our shareholders cannot vote on all equity-compensation
plans, they are entitled to hold a consultative vote on the compen-
sation system of Novartis. The vote takes place before every signif-
icant change to the compensation system, but at least every third
Annual General Meeting. Finally, our Board of Directors has set up
a separate Risk Committee that is responsible for risk oversight, as
opposed to delegating this responsibility to the Audit and Compli-
ance Committee.
SWISS CODE OF BEST PRACTICE FOR CORPORATE GOVERNANCE
Novartis applies the Swiss Code of Best Practice for Corporate Gov-
ernance.
NOVARTIS CORPORATE GOVERNANCE STANDARDS
Novartis has incorporated the corporate governance standards
described above into the Articles of Incorporation and the Regula-
tions of the Board of Directors, its Committees and the Executive
Committee (www.novartis.com/corporate-governance).
The Corporate Governance and Nomination Committee regu-
larly reviews these standards and principles in the light of prevail-
ing best practices and makes recommendations for improvements
of the corporate governance framework of Novartis for considera-
tion by the full Board of Directors. 
Additional corporate governance information can be found on the
Novartis website: http://www.novartis.com/corporate-governance
Printed copies of the Novartis Articles of Incorporation, Regula-
tions of the Board and Charters of Board Committees can be
obtained by writing to: Novartis AG, Attn: Corporate Secretary,
Lichtstrasse 35, CH-4056 Basel, Switzerland.
OUR SHAREHOLDERS
SHARES
SHARE CAPITAL OF NOVARTIS AG
The share capital of Novartis AG is CHF 1 372 811 500, fully paid-
in and divided into CHF 2 745 623 000 registered shares, each with
a nominal value of CHF 0.50.
Novartis has neither authorized nor conditional capital. There are
no preferential voting shares; all shares have equal voting rights.
No participation certificates, non-voting equity securities (Genusss-
cheine) or profit-sharing certificates have been issued.
Novartis shares are listed and traded on the SIX Swiss Exchange
(Valor No. 001200526, ISIN CH0012005267, symbol: NOVN) as
well as on the NYSE in the form of American Depositary Receipts
(ADRs) representing Novartis American Depositary Shares (ADSs)
(Valor No. 567514, ISIN US66987V1098, symbol: NVS).
The holder of an ADS has the rights enumerated in the Deposit
Agreement (such as the right to vote and to receive a dividend). The
ADS depositary of Novartis, JPMorgan Chase Bank, New York, hold-
ing the Novartis shares underlying the ADSs, is registered as share-
holder in the share register of Novartis. An ADS is not a Novartis
share and an ADS holder is not a Novartis shareholder. ADS hold-
ers exercise their voting rights by instructing the depositary to exer-
cise their voting rights. Each ADS represents one Novartis share. 
SHARE REPURCHASE PROGRAMS
Novartis began repurchasing its shares in 1999. Since then, five
share repurchase programs have been completed with the repur-
chase of shares worth CHF 19 billion. Shares repurchased under
the first program were not cancelled. However, shares repurchased
under the other four programs were cancelled. At the Annual Gen-
eral Meeting in February 2008, shareholders authorized the Board
of Directors to launch a sixth program to repurchase shares up to
a maximum amount of CHF 10 billion via a second trading line on
the SIX Swiss Exchange. In 2008, a total of six million shares were
repurchased at an average price of CHF 49.42 per share and can-
celled. The share repurchase program was suspended in April 2008
in favor of debt repayment. In December 2010, the Board of Direc-

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Our Corporate Governance Framework | Our Shareholders
tors announced the reactivation of the share repurchase program
to minimize dilution to existing Novartis shareholders in connec-
tion with the proposed merger of Alcon, Inc. into Novartis. In 2010,
no shares were repurchased under the share repurchase program.
In 2011, 39 430 000 shares were repurchased under the share
repurchase program.
CHANGES IN SHARE CAPITAL
During the last three years there were the following changes to the
share capital of Novartis:
Novartis increased its share capital once: On 8 April 2011 for the
purpose of completing the merger of Alcon, Inc. into Novartis AG,
the share capital was increased by CHF 54 million, from CHF
1 318 811 500 to CHF 1 372 811 500, through the issuance of
108 000 000 fully paid-in registered shares with a nominal value of
CHF 0.50 each.
As part of a share repurchase program, Novartis reduced its
share capital once: In 2009 the share capital was reduced by CHF
3 million, from CHF 1 321 811 500 to CHF 1 318 811 500.
CAPITAL CHANGES
Number of shares
Amount of 
capital 
changed
Year
As of Jan 1
Shares
As of Dec 31
in CHF
2009
2 643 623 000
– 6 000 000
2 637 623 000
– 3 000 000
2010
2 637 623 000
0
2 637 623 000
0
2011
2 637 623 000
108 000 000
2 745 623 0001
54 000 000
1Capital increase as set-out above
A table with additional information on changes in the Novartis share
capital can be found in Note 6 to the Financial Statements of
Novartis AG.
CONVERTIBLE OR EXCHANGEABLE SECURITIES
Novartis has not issued convertible or exchangeable bonds,
warrants, options or other securities granting rights to Novartis
shares, other than options granted to associates as an element of
compensation.
SHAREHOLDINGS
SIGNIFICANT SHAREHOLDERS
According to the share register, as of December 31, 2011, the fol-
lowing registered shareholders (including nominees and the ADS
depositary) held more than 2% of the total share capital of Novartis
with the right to vote these shares:1
– Shareholders: Novartis Foundation for Employee Participation,
with its registered office in Basel, Switzerland, holding 4.1%, and
Emasan AG, with its registered office in Basel, Switzerland, hold-
ing 3.2%;
– Nominees: JPMorgan Chase Bank, New York, holding 10.9%,
Nortrust Nominees, London, holding 3.2%, and Mellon Bank,
Everett, Massachusetts, holding 3%; and
– ADS depositary: JPMorgan Chase Bank, New York, holding 11%.
1Excluding 5.76% of the share capital held by Novartis AG, together with Novartis affiliates, 
as treasury shares.
According to a disclosure notification filed with Novartis AG and the
SIX Swiss Exchange, Capital Group Companies, Inc., Los Angeles,
USA, held between 3% and 5% of the share capital of Novartis AG as
of December 31, 2011.
Disclosure notifications pertaining to shareholdings in Novartis
AG that were filed with Novartis AG and the SIX Swiss Exchange are
published on the latter’s electronic publication platform, and can
be accessed via the database search page: 
http://www.six-exchange-regulation.com/obligations/disclosure/
major_shareholders_en.html
Novartis has not entered into any agreement with any share-
holder regarding the voting or holding of Novartis shares.
CROSS SHAREHOLDINGS
Novartis has no cross shareholdings in excess of 5% of capital or
voting rights with any other company.

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DISTRIBUTION OF NOVARTIS SHARES 
The information in the following tables relates only to registered
shareholders and does not include holders of unregistered shares.
Also, the information provided in the tables below cannot be
assumed to be representative of the entire Novartis investor base
since nominees and JPMorgan Chase Bank, as ADS depositary, are
registered as shareholders for a large number of beneficial owners.
As of December 31, 2011, Novartis had more than 164 000 regis-
tered shareholders. 
The following table provides information about the distribution of
registered shareholders by number of shares held:
NUMBER OF SHARES HELD
Number of
registered 
% of registered 
As of December 31, 2011
shareholders
share capital
1–100
20 836
0.05
101–1 000
97 906
1.59
1 001–10 000
41 655
4.25
10 001–100 000
3 837
3.60
100 001–1 000 000
495
5.26
1 000 001–5 000 000
79
6.60
5 000 001 or more 1
35
53.58
Total registered shareholders/shares
164 843
74.93
Unregistered shares
25.07
Total
100.00
1Including significant registered shareholders as listed above
The following table provides information about distribution of re-
gistered shareholders by type:
REGISTERED SHAREHOLDERS BY TYPE
As of December 31, 2011
Shareholders in %
Shares in %
Individual shareholders
96.05
12.37
Legal entities
3.85
39.00
Nominees, fiduciaries
0.10
48.63
Total
100.00
100.00
The following table provides information about registered share-
holders by country:
REGISTERED SHAREHOLDERS BY COUNTRY
As of December 31, 2011
Shareholders in %
Shares in %
France
2.86
1.32
Germany
4.34
3.47
Switzerland 1
89.37
43.03
United Kingdom
0.51
3.07
United States
0.36
44.57
Other countries
2.56
4.54
Total
100.00
100.00
1Excluding 5.76% of the share capital held by Novartis AG, together with Novartis affiliates, as
treasury shares
SHAREHOLDER RIGHTS
RIGHT TO VOTE (“ONE SHARE, ONE VOTE”)
Each share registered with the right to vote entitles the holder to
one vote at General Meetings.
ADS holders may vote by instructing JPMorgan Chase Bank, 
the ADS depositary, to exercise the voting rights attached to the
registered shares underlying the ADSs. JPMorgan Chase Bank
exercises the voting rights for registered shares underlying ADSs
for which no voting instructions have been given by providing 
a discretionary proxy to the independent proxy (unabhängiger
Stimmrechtsvertreter) appointed by Novartis pursuant to Swiss law.
RESOLUTIONS AND ELECTIONS AT GENERAL MEETINGS
The General Meeting passes resolutions and elections with the
absolute majority of the votes represented at the meeting. However,
under the Articles of Incorporation (www.novartis.com/corporate-
governance) the approval of two-thirds of the votes represented at
the meeting is required for: 
– An alteration of the purpose of Novartis AG;
– The creation of shares with increased voting powers;
– An implementation of restrictions on the transfer of registered
shares and the removal of such restrictions;
– An authorized or conditional increase of the share capital;
– An increase of the share capital out of equity, by contribution in
kind, for the purpose of an acquisition of property, or the grant of
special rights;
– A restriction or suspension of rights or options to subscribe;
– A change of location of the registered office of Novartis AG; or
– The dissolution of Novartis AG.
In addition, the law provides for a special quorum also for other re-
solutions, such as, for example, for a merger or spin-off.

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Our Shareholders
OTHER SHAREHOLDER RIGHTS
Shareholders representing at least 10% of the share capital may
request that an extraordinary General Meeting of shareholders be
convened. Shareholders representing shares with an aggregate
nominal value of at least CHF 1 million may request that an item be
included in the agenda of a General Meeting of shareholders. Such
requests must be made in writing at least 45 days before the date
of the General Meeting, specify the item to be included in the
agenda and contain the proposal on which the shareholder
requests a vote. 
Shareholders have the right to receive dividends, appoint
another shareholder, the corporate proxy, the independent proxy or
a custody proxy as proxy and hold such other rights as are granted
under Swiss Law.
SHAREHOLDER REGISTRATION
No restrictions apply on the transferability of Novartis shares. How-
ever, only shareholders registered in the Novartis share register
may exercise their voting rights. In order to be registered, a share-
holder must declare that he or she acquired the shares in his or her
own name and for his or her own account. The Articles of Incorpo-
ration provide that the Board of Directors may register nominees
with the right to vote. For restrictions on registration of nominees,
please see below. 
The Articles of Incorporation provide that no shareholder shall
be registered with the right to vote for more than 2% of the regis-
tered share capital. The Board of Directors may, upon request, grant
an exemption from this restriction. Exemptions are in force for the
registered Significant Shareholders listed under – Our Sharehold-
ers – Shareholdings – Significant Shareholders. In 2011, no exemp-
tions were requested.
The same restrictions apply to holders of ADSs as those hold-
ing Novartis shares.
Given that shareholder representation at General Meetings has
traditionally been low in Switzerland, Novartis considers the restric-
tion on registration necessary to prevent a minority shareholder
from dominating a General Meeting.
The Articles of Incorporation provide that no nominee shall be
registered with the right to vote for more than 0.5% of the regis-
tered share capital. The Board of Directors may, upon request, grant
an exemption from this restriction if the nominee discloses the
names, addresses and the number of shares of the persons for
whose account it holds 0.5% or more of the registered share capi-
tal. Exemptions are in force for the nominees listed under – Our
Shareholders – Shareholdings – Significant Shareholders.
The same restrictions apply to holders of ADSs as those hold-
ing Novartis shares.
The restrictions on registration contained in the Articles of
Incorporation may only be removed by a resolution of the General
Meeting of shareholders, with approval of at least two-thirds of the
votes represented at the meeting.
Shareholders, ADS holders or nominees that are linked to each
other or act in concert to circumvent the restrictions on registration
are treated as one person or nominee for the purposes of the
restrictions on registration.
NO RESTRICTION ON TRADING OF SHARES
The registration of shareholders in the Novartis share register or in
the ADS register kept by JPMorgan Chase Bank does not affect the
tradability of Novartis shares or ADSs. No restrictions are imposed
by Novartis or JPMorgan Chase Bank on the trading of registered
Novartis shares or ADSs. Registered Novartis shareholders or ADS
holders may, therefore, purchase or sell their Novartis shares or
ADSs at any time, including prior to a General Meeting regardless
of the record date. The record date serves only to determine the
right to vote at a General Meeting of Novartis. 
CHANGE-OF-CONTROL PROVISIONS
NO OPTING UP, NO OPTING OUT
The Swiss Stock Exchange Act provides that anyone who, directly,
indirectly or acting in concert with third parties, acquires equity
securities exceeding 33 1/3% of the voting rights of a company –
whether or not such rights are exercisable – is required to make an
offer to acquire all listed equity securities of that company. A com-
pany may raise this threshold to 49% of the voting rights (“opting
up”) or may, under certain circumstances, waive the threshold
(“opting out”). Novartis has not adopted any such measures.
CLAUSES ON CHANGES-OF-CONTROL
There are no change-of-control clauses benefiting Board members.
With respect to members of the Executive Committee, see below
under – Our Management – Contracts with Members of the Execu-
tive Committee.

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BOARD OF DIRECTORS
Chairman: D. Vasella
Vice Chairman: U. Lehner
W. Brody
S. Datar
A. Fudge
P. Landolt
E. Vanni
A. von Planta
W. Wiedeking
M.M.T. Yang
R.M. Zinkernagel
CHAIRMAN’S
COMMITTEE
D. Vasella (Chairman)
S. Datar
U. Lehner
S. Datar (Chairman)
U. Lehner
E. Vanni
A. von Planta
W. Wiedeking
A. von Planta (Chairman)
S. Datar
A. Fudge
U. Lehner
W. Wiedeking
M.M.T. Yang (Chairman)
W. Brody
S. Datar
U. Lehner
E. Vanni
U. Lehner (Chairman)
A. Fudge
P. Landolt
A. von Planta
R.M. Zinkernagel
AUDIT AND
COMPLIANCE
COMMITTEE
RISK COMMITTEE
COMPENSATION
COMMITTEE
CORPORATE GOVER-
NANCE AND NOMI-
NATION COMMITTEE
COMPOSITION OF THE BOARD OF DIRECTORS AND ITS COMMITTEES
OUR BOARD OF DIRECTORS
ELECTION AND TERM OF OFFICE
All Board members are elected individually.
Board members are elected to terms of office of three years or
less by shareholders at General Meetings. The terms of office
among Board members are to be coordinated so that approxi-
mately one-third of all Board members are subject each year to re-
election or election. Under Swiss law, a General Meeting of share-
holders is entitled to remove any Board member at any time,
regardless of his or her remaining term of office. 
The average tenure of Board members is eight years and the
average age is 61. A Board member must retire after reaching 
age 70. Under special circumstances, shareholders may grant an
exemption from this rule and re-elect a Board member for addi-
tional terms of office of no more than three years at a time.
First election
Last election 
End of
Name
Nationality
Year of birth
at AGM
at AGM
current Term
Daniel Vasella, M.D.
CH
1953
1996
2010
2013
Ulrich Lehner, Ph.D.
D
1946
2002
2011
2014
William Brody, M.D., Ph.D.
US
1944
2009
2009
2012
Srikant Datar, Ph.D.
US
1953
2003
2009
2012
Ann Fudge
US
1951
2008
2011
2014
Pierre Landolt, Ph.D.
CH
1947
1996
2011
2014
Enrico Vanni, Ph.D.
CH
1951
2011
2011
2014
Andreas von Planta, Ph.D.
CH
1955
2006
2009
2012
Dr. Ing. Wendelin Wiedeking
D
1952
2003
2009
2012
Marjorie M.T. Yang
CHN
1952
2007
2010
2013
Rolf M. Zinkernagel, M.D.
CH
1944
1999
2009
2012
BOARD MEMBER QUALIFICATIONS
The Corporate Governance and Nomination Committee determines
the criteria for the selection of the Board members and Board com-
mittee members. Factors considered include skills and knowledge,
diversity of viewpoints, professional backgrounds and expertise,
business and other experience relevant to the business of Novartis,
the ability and willingness to commit adequate time and effort to
Board and committee responsibilities, the extent to which person-

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Our Board of Directors
ality, background, expertise, knowledge and experience will interact
with other Board members to build an effective and complemen-
tary Board, and whether existing board memberships or other posi-
tions held by a candidate could lead to a conflict of interest.
The biographies of the Board members (pages 98–101) set out
the particular qualifications that led the Board of Directors to con-
clude that a Board member is qualified to serve on the Board of
Directors, creating a Board that today is diverse in terms of back-
ground, qualifications, interests and skills.
ROLE OF THE BOARD OF DIRECTORS AND THE BOARD COMMITTEES
The Board of Directors is responsible for the overall direction and
supervision of the management and holds the ultimate decision-
making authority for Novartis AG, except for those decisions
reserved to the shareholders.
The Board of Directors has delegated certain responsibilities to
five committees: Chairman’s Committee, Compensation Commit-
tee, Audit and Compliance Committee, Corporate Governance and
Nomination Committee and Risk Committee as set out below
(responsibilities described with the terms “overseeing” or “review-
ing” are subject to final approval by the Board of Directors).
Number of meetings held 
in 2011/approximate average
duration of each meeting
Responsibilities
Membership comprises
Attendance
Link
THE BOARD OF DIRECTORS
9/7
The primary responsibilities of the Board of Directors include:
Daniel Vasella 1
9
Articles of Incorporation of 
– Setting the strategic direction of the Group;
Ulrich Lehner 
9
Novartis AG 
– Determining the organizational structure and governance of the Group;
William Brody 
9
– Appointing, overseeing and dismissing key executives and planning 
Srikant Datar 
9
Regulations of the Board 
their succession; 
Ann Fudge
9
of Directors, its Committees 
– Determining and overseeing the financial planning, accounting, 
Pierre Landolt 
7
and the Executive Committee 
reporting and controlling;
Enrico Vanni 2
7
of Novartis AG 
– Approving the annual financial statements and the corresponding 
Andreas von Planta 
9
(Board Regulations)
financial results releases; and
Wendelin Wiedeking 
9
– Approving major transactions and investments.
Marjorie M.T. Yang 
9
http://www.novartis.com/
Rolf M. Zinkernagel
8
corporate-governance
THE CHAIRMAN’S COMMITTEE
6/2
The primary responsibilities of this committee include:
Daniel Vasella 1
6
Charter of the Chairman’s
– Commenting on significant matters before the Board of Directors
Srikant Datar 2
5
Committee
makes a decision;
Ulrich Lehner
6
– Recommending key executive appointments to the Board of Directors;
http://www.novartis.com/
– Dealing with Board matters arising in between Board meetings, 
corporate-governance
including the taking of required preliminary actions; and 
– Approving transactions and investments as delegated by the
Board of Directors.
THE AUDIT AND COMPLIANCE COMMITTEE
6/3
The primary responsibilities of this committee include:
Srikant Datar 1,3
6
Charter of the Audit and 
– Overseeing the internal auditors;
Ulrich Lehner 3
6
Compliance Committee 
– Supervising the external auditors and selecting and nominating 
Enrico Vanni 4
3
the external auditors for election by the meeting of the shareholders;
Andreas von Planta
6
http://www.novartis.com/
– Overseeing the accounting policies, financial controls and  
Wendelin Wiedeking
6
corporate-governance
compliance with accounting and internal control standards;
– Approving  quarterly financial statements and financial results releases;
– Overseeing internal control and compliance processes and procedures;
and
– Overseeing compliance with laws and external and internal regulations. 
The Audit and Compliance Committee has the authority 
to retain external consultants and other advisors.
1Chair
2Since February 2011
3Audit Committee Financial Expert as defined by the US Securities and Exchange Commission (SEC)
4Since April 2011

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Number of meetings held 
in 2011/approximate average
duration of each meeting
Responsibilities
Membership comprises
Attendance
Link
THE RISK COMMITTEE
4/2
The primary responsibilities of this committee include:
Andreas von Planta 1
4
Charter of the Risk Committee 
– Ensuring that Novartis has implemented an appropriate and effective 
Srikant Datar
4
risk management system and process;  
Ann Fudge 2
3
http://www.novartis.com/
– Ensuring that all necessary steps are taken to foster a culture
Ulrich Lehner
4
corporate-governance
of risk-adjusted decision making without constraining reasonable 
Wendelin Wiedeking
4
risk-taking and innovation; 
– Approving guidelines and reviewing policies and processes; and
– Reviewing with management, internal auditors and external auditors 
the identification, prioritization and management of the risks, the
accountabilities and roles of the functions involved with risk management,
the risk portfolio and the related actions implemented by management.
The Risk Committee has the authority to retain
external consultants and other advisors.
THE COMPENSATION COMMITTEE
5/1.5
The primary responsibilities of this committee include:
Marjorie M.T. Yang 1
5
Charter of the 
– Designing, reviewing and recommending to the Board compensation 
William Brody
4
Compensation Committee
policies and programs;
Srikant Datar
5
– Advising the Board on the compensation of the Board members;
Ulrich Lehner
4
http://www.novartis.com/
– Approving the employment terms of key executives;
Enrico Vanni 3
4
corporate-governance
– Deciding on the variable compensation of the Chief Executive Officer, 
the members of the Executive Committee and other key executives 
for the past year; and
– Deciding on the base salary and the total target compensation 
of the Chief Executive Officer, the members of the Executive Committee 
and other key executives for the coming year. 
The Compensation Committee has the authority to retain external 
consultants and other advisors.
THE CORPORATE GOVERNANCE AND 
NOMINATION COMMITTEE
3/2
The primary responsibilities of this committee include:
Ulrich Lehner 1
3
Charter of the Corporate 
– Designing, reviewing and recommending to the Board corporate 
Ann Fudge
3
Governance and Nomination 
governance principles; 
Pierre Landolt
2
Committee 
– Reviewing on a regular basis the Articles of Incorporation with a view 
Andreas von Planta
3
to reinforcing shareholder rights;
Rolf M. Zinkernagel
3
http://www.novartis.com/
– Reviewing on a regular basis the composition and size of the Board 
corporate-governance
and its committees;
– Reviewing annually the independence status of each Board member;
– Reviewing directorships and agreements of board members for
conflicts of interest and dealing with conflicts of interest;
– Identifying candidates for election as Board member;
– Assessing existing Board members and recommending to the Board 
whether they should stand for re-election;  
– Preparing and reviewing the succession plan for the CEO; and   
– Developing and reviewing an orientation program for new Board members 
and an ongoing education plan for existing Board members.
The Corporate Governance and Nomination Committee has the authority 
to retain external consultants and other advisors.
1Chair
2Since February 2011
3Since April 2011

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Our Board of Directors
THE FUNCTIONING OF THE BOARD OF DIRECTORS
The Novartis Board of Directors takes decisions as a whole, supported
by its five Board committees (Chairman’s Committee, Compensation
Committee, Audit and Compliance Committee, Corporate Gover-
nance and Nomination Committee and Risk Committee). Each Board
committee has a written charter outlining its duties and responsi-
bilities and is led by a Chair elected by the Board of Directors.
The Board of Directors and its Board committees meet regularly
throughout the year. The Chairs set the agendas of their meetings.
Any Board member may request a Board meeting, a meeting of a
Board committee, a meeting of the independent Board members or
the inclusion of an item on the agenda of such meetings. Board
members are provided, in advance of meetings, with materials
intended to prepare them to discuss the items on the agenda. 
THE CHAIRMAN
The Chairman provides leadership to the Board of Directors in its
governance role, oversees that the strategy agreed by the Board of
Directors is implemented by the Chief Executive Officer and his
reports, provides support and advice to the Chief Executive Officer,
reviews the yearly objectives and prepares the performance evalu-
ation of the Chief Executive Officer before approval by and feed-
back session with the Board of Directors, works closely with the
Chief Executive Officer in nominating and evaluating members and
permanent attendees of the Executive Committee and in establish-
ing succession plans for key management positions, represents
Novartis with stakeholders and oversees Internal Audit.
MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors has meetings with the members of the Exec-
utive Committee, private meetings without members of the Executive
Committee and meetings of only the independent Board members.
Topics addressed in the meetings with the Executive Committee
include strategy, business reviews and major projects, investments
and transactions. Topics addressed in private meetings include per-
formance evaluation of top management, succession planning and
Board self-evaluation.
As long as the Chairman is not independent, Dr. Ulrich Lehner,
Vice-Chairman, chairs sessions of the independent Board members
and leads the independent Board members in case of a crisis or
matters requiring their separate consideration or decision. Moreover,
every independent Board member may request separate meetings
of the independent Board members if the need arises. Dr. Ulrich
Lehner also leads the Board if the Chairman is incapacitated.
In 2011, there were nine meetings of the Board of Directors and
six meetings of the independent Board members.
INDEPENDENCE OF BOARD MEMBERS 
The independence of Board members is a key corporate gover-
nance issue. Accordingly, Novartis established independence crite-
ria that are intended to reflect international best-practice standards.
These independence criteria (last revised on October 16, 2008) can
be found on the Novartis website:
www.novartis.com/investors/governance-documents.shtml
The Corporate Governance and Nomination Committee annually
submits to the Board of Directors a proposal concerning the deter-
mination of the independence of each Board member. For this
assessment, the Committee considers all relevant facts and circum-
stances of which it is aware. 
In its meeting on December 14, 2011, the Board of Directors deter-
mined that all of its members, except for Dr. Vasella, were independent.
Dr. Vasella, the Chairman, was until January 31, 2010 also the
Chief Executive Officer. The Board of Directors has delegated Rolf
M. Zinkernagel, M.D., to the Scientific Advisory Board of the Novartis
Institute for Tropical Diseases (NITD), and both Dr. Zinkernagel, M.D.
and William Brody, M.D. to the Board of Directors of the Genomics
Institute of the Novartis Research Foundation (GNF). The Board 
of Directors concluded that these activities are supervisory and 
not consultatory in nature and do not affect Dr. Zinkernagel’s or 
Dr. Brody’s independence as a Board member.
RELATIONSHIP OF NON-EXECUTIVE BOARD MEMBERS WITH NOVARTIS
With the exception of Dr. Vasella none of the Board members is or was
a member of the management of Novartis AG or of any other Novartis
Group company in the three financial years preceding 2011.
There are no significant business relationships of any Board
member with Novartis AG or with any other Novartis Group company.
INFORMATION AND CONTROL SYSTEMS OF THE BOARD OF DIRECTORS 
VIS-À-VIS MANAGEMENT
INFORMATION ON THE MANAGEMENT
The Board of Directors ensures that it receives sufficient informa-
tion from the Executive Committee to perform its supervisory duty
and to make decisions that are reserved for the Board of Directors.
The authority of the Board of Directors to determine the compen-
sation of the members of the Executive Committee is an important
element to ensure the alignment of Executive Committee members
with the interests of Novartis and its shareholders. 
The Board of Directors obtains the information required to perform
its duties through several means:
– the Chief Executive Officer informs the Board regularly about cur-
rent developments;
– the minutes of Executive Committee meetings are made available
to the Board members;
– meetings or teleconferences are held as required between Board
members and the Chief Executive  Officer;
– the Board of Directors regularly meets with all members of the
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– the Board of Directors is updated in detail by each Division Head
on a quarterly basis;
– by invitation, other members of management are invited to attend
Board meetings to report on areas of  the business within their
responsibility; and
– Board members are entitled to request information from mem-
bers of the Executive Committee or any other Novartis associate,
and may also visit any Novartis site.
BOARD COMMITTEES 
Board committees regularly meet with management and, at times,
outside consultants to review the business, better understand appli-
cable laws and policies affecting the Group and support the Board
of Directors and the management in meeting the requirements and
expectations of stakeholders and shareholders.
In particular, the Chief Financial Officer, the Group General
Counsel and representatives of the external auditors are invited to
meetings of the Audit and Compliance Committee. Furthermore,
the Heads of Internal Audit, Financial Reporting and Accounting,
Compliance, as well as the Business Practices Officers, report on a
regular basis to the Audit and Compliance Committee.
The Audit and Compliance Committee reviews financial reporting
processes on behalf of the Board of Directors. For each quarterly and
annual release of financial information, the Disclosure Review Commit-
tee reviews the release for accuracy and completeness of disclosures.
The Disclosure Review Committee is chaired by the Chief Financial Offi-
cer and is attended by the Group General Counsel, the Heads of the
Divisions, the Heads of Finance of the Divisions and the Heads of the fol-
lowing Corporate Functions: Treasury, Financial Reporting and Account-
ing, Internal Audit and Investor Relations. Decisions made by the Dis-
closure Review Committee are reviewed by the Audit and Compliance
Committee before publication of the quarterly and annual release.
The Risk Committee oversees the risk management system and
processes, as well as reviews the risk portfolio of the Group to
ensure appropriate and professional management of the risks. For
this purpose the Corporate Risk Management function and the risk
owners of the Divisions report on a regular basis to the Risk Com-
mittee. The Group General Counsel and the Head of Internal Audit
are also invited to the meetings.
NOVARTIS MANAGEMENT INFORMATION SYSTEM 
Novartis produces comprehensive consolidated financial state-
ments on a monthly basis. These are typically available within ten
days of the end of the month and include the following:
– consolidated income statement of the month, quarter-to-date and
year-to-date in accordance with International Financial Reporting
Standards (IFRS), as well as on a year-to-date and quarterly basis
adjustments to arrive at Core results as defined by Novartis. The
IFRS figures are compared to the prior year period and targets in
both USD and on a constant currency basis;
– consolidated balance sheet as of the month end in accordance
with IFRS in USD;
– consolidated cash flow on a year-to-date basis in accordance with
IFRS in USD; and
– supplementary data on a monthly, quarterly and year-to-date
basis such as free cash flow and gross and net liquidity, head-
count, personnel costs, and working capital as defined by Novartis
and on a USD basis where applicable.
The above information is made available to the members of the
Board on a monthly basis. An analysis of the key deviations from
prior year or target is also provided.
The Board also receives on a quarterly basis an outlook of the
full year results in accordance with IFRS and Core, together with
related commentary prior to the release of the quarterly results.
On an annual basis, in the fourth quarter of the year, the Board
receives and approves the operating and financial targets for the
following year.
In the middle of the year, the Board also reviews and approves
the Strategic Plan for the next five years and the consolidated
income statement in USD in accordance with IFRS and Core con-
tained in the Plan.
The Board does not have direct access to Novartis’ financial and
management reporting systems but can at any time request more
detailed financial information on any aspect that is presented to it.
INTERNAL AUDIT
The Internal Audit function carries out operational and system
audits in accordance with an audit plan approved by the Audit and
Compliance Committee; assists organizational units in the accom-
plishment of objectives by providing an independent approach 
to the evaluation, improvement and effectiveness of their internal
control framework; prepares reports regarding the audits it has
performed; and reports actual or suspected irregularities to the
Audit and Compliance Committee and the Chairman. The Audit and
Compliance Committee regularly reviews the scope of Internal
Audit, the audit plans and the results of the internal audits.
RISK MANAGEMENT
The Corporate Risk Management function reports to the independ-
ent Risk Committee of the Board of Directors. The Compensation
Committee works closely with the Risk Committee to ensure that
the compensation system does not lead to excessive risk-taking by
management (for details see our Compensation Report).
Organizational and process measures have been designed to
identify and mitigate risks at an early stage. Organizationally, the indi-
vidual divisions are responsible for risk and risk mitigation, with spe-
cialized corporate functions, such as Group Finance, Group Quality
Operations, Corporate Health, Safety, Environment and Business
Continuity, providing support and controlling the effectiveness of risk
management by the Divisions in these respective areas.

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Our Board of Directors
From left to right: Pierre Landolt, Wendelin Wiedeking, Marjorie Mun Tak Yang, Ulrich Lehner, Ann Fudge, Daniel Vasella, Rolf M. Zinkernagel, 
Andreas von Planta, Enrico Vanni, William Brody, Srikant Datar
BOARD OF DIRECTORS
MEMBERS
HONORARY CHAIRMAN
Alex Krauer, Ph.D.
CORPORATE SECRETARY
Charlotte Pamer-Wieser, Ph.D.
Daniel Vasella, M.D.
Chairman
Swiss, age 58
Ulrich Lehner, Ph.D. 
Vice Chairman
German, age 65
William Brody, M.D., Ph.D.
American, age 67
Srikant Datar, Ph.D. 
American, age 58
Ann Fudge
American, age 60
Pierre Landolt, Ph.D.
Swiss, age 64
Enrico Vanni, Ph.D. 
Swiss, age 60
Andreas von Planta, Ph.D.
Swiss, age 56
Dr. Ing. Wendelin Wiedeking 
German, age 59
Marjorie Mun Tak Yang
Chinese, age 59
Rolf M. Zinkernagel, M.D.
Swiss, age 67

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Daniel Vasella, M.D. 
Swiss, age 58
Function at Novartis AG Daniel Vasella, M.D., is Chairman
of the Board of Directors for Novartis AG. He served as
Chief Executive Officer (CEO) and executive member of
the Board of Directors for 14 years following the merger
that created Novartis in 1996. Dr. Vasella was appointed
Chairman in April 1999.
Other activities Dr. Vasella is a member of the board of
directors of PepsiCo, Inc. He is also a member of the
International Board of Governors of the Peres Center 
for Peace in Israel, the International Business Leaders
Advisory Council for the Mayor of Shanghai, the Global
Health Program Advisory Panel of the Bill & Melinda
Gates Foundation, and is a foreign honorary member 
of the American Academy of Arts and Sciences. He is also
a member of the Board of Trustees of the Carnegie
Endowment for International Peace. In addition, Dr. Vasella
serves as a member of several industry associations and
educational institutions.
Professional background Before the Novartis merger, 
Dr. Vasella was CEO of Sandoz Pharma Ltd. and a member
of the Sandoz Group Executive Committee. From 1988 to
1992, he was with Sandoz Pharmaceuticals Corporation
in the United States, prior to which he held a number of
medical positions in Switzerland. He graduated with an
M.D. from the University of Bern in Switzerland and com-
pleted executive training at the Harvard Business School
in the United States. He was also awarded an honorary
doctorate by the University of Basel.
Key 
knowledge/experience 
Leadership, 
Biomedical
Science and Global Marketing experience – former CEO of
Novartis; advisory panel member for international health
and development foundation. Industry experience – board
member for global consumer goods company.
Ulrich Lehner, Ph.D. 
German, age 65
Function at Novartis AG Ulrich Lehner, Ph.D., has been a
member of the Board of Directors since 2002. He qualifies
as an independent Non-Executive Director. He serves as
Vice Chairman and Chairman of the Corporate Governance
and Nomination Committee. He is also a member of the
Audit and Compliance Committee, the Risk Committee,
the Chairman’s Committee, and the Compensation
Committee. The Board of Directors has appointed him as
Audit Committee Financial Expert.
Other activities Mr. Lehner is member of the share-
holders’ committee of Henkel AG & Co. KGaA, Chairman
of the Supervisory Board of Deutsche Telekom AG, and
serves as a member of the supervisory boards of E.ON AG,
ThyssenKrupp AG, Porsche Automobil Holding SE and
Henkel Management AG, all in Germany. He is also a
member of the shareholders’ committee of Dr. August
Oetker KG and Krombacher Brauerei, both in Germany.
Professional background Mr. Lehner graduated in busi-
ness administration and mechanical engineering from
the Darmstadt University of Technology, Germany, in
1975. From 1975 to 1981, he was an auditor with KPMG
Deutsche Treuhand-Gesellschaft AG in Duesseldorf. In
1981, he joined Henkel KGaA. After heading the
Controlling Department of Fried. Krupp GmbH in
Germany from 1983 to 1986, Mr. Lehner returned to
Henkel as Finance Director. From 1991 to 1994, he
headed Henkel Asia-Pacific Ltd. in Hong Kong, and from
1995 to 2000, he served as Executive Vice President,
Finance/Logistics, of Henkel KGaA. From 2000 to 2008,
Mr. Lehner served as Chairman of the Management Board
of Henkel KGaA.
Key knowledge/experience Leadership and Global
experience – chairman of supervisory board of global
telecommunication company; former chairman of the
management board of global consumer goods company.
Industry experience – member of supervisory boards of
global energy, automotive and manufacturing technology
companies.
William Brody, M.D., Ph.D.
American, age 67
Function at Novartis AG William Brody, M.D., Ph.D., has
been a member of the Board of Directors since 2009. He
qualifies as an independent Non-Executive Director. He is
a member of the Compensation Committee.
Other activities Dr. Brody is President of the Salk Institute
for Biological Studies, La Jolla, Calif., United States. He is
also a member of the boards of directors of the US-based
International Business Machines Corp. and Kool Smiles
Inc., and the mutual funds boards of T. Rowe Price. He is
a member of numerous professional associations, and
also serves on the advisory boards of various government
and nonprofit organizations.
Professional background Dr. Brody earned his bachelor’s
and master’s degrees in electrical engineering from the
Massachusetts Institute of Technology before completing
his M.D. and Ph.D. at Stanford University. Following
training in cardiovascular surgery and radiology he held
various academic positions, including Professor for
Radiology
and Electrical Engineering at Stanford 
University and Director of the Department of Radiology 
at The Johns Hopkins University. From 1996 to 2009, he
was president of The Johns Hopkins University, and 
since 2009, president of the Salk Institute for Biological
Studies in the United States. He is a member of the US
National Academy of Engineering and the Institute of
Medicine.
Key 
knowledge/experience 
Leadership, 
Biomedical
Science, Healthcare and Education experience – president
of leading US scientific research institution; former pres-
ident of leading US university. Global, Engineering and
Technology experience – former board member of global
technology company.

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Srikant Datar, Ph.D.
American, age 58
Function at Novartis AG Srikant Datar, Ph.D., has been 
a member of the Board of Directors since 2003. He
qualifies as an independent Non-Executive Director. He 
is Chairman of the Audit and Compliance Committee, 
and a member of the Chairman’s Committee, the Risk
Committee and the Compensation Committee. The Board
of Directors has appointed him as Audit Committee
Financial Expert.
Other activities Mr. Datar is Arthur Lowes Dickinson
Professor 
at 
the 
Graduate 
School 
of 
Business 
Administration at Harvard University. He is also a member
of the board of directors of ICF International Inc. and of
Stryker Corp., both in the United States, and of KPIT
Cummins Infosystems Ltd., India.
Professional background Mr. Datar graduated with
distinction in mathematics and economics from the
University of Bombay, India, in 1973. He is a Chartered
Accountant, and holds two master’s degrees and a Ph.D.
from Stanford University. Mr. Datar has worked as an
accountant and planner in industry, and as a professor 
at Carnegie Mellon University, Stanford University and
Harvard University all in the United States. His research
interests are in the areas of cost management, measure-
ment of productivity, new product development, time-
based competition, incentives and performance evalua-
tion. He is the author of many scientific publications, 
and has received several academic awards and honors.
Mr. Datar has advised and worked with numerous compa-
nies in research, development and training.
Key knowledge/experience Leadership and Education
experience – former senior associate dean and current
professor of leading US university. Global and Industry
experience – board member of global professional serv-
ices firm; board member of global leading medical tech-
nology company; board member of Indian high-technol-
ogy company.
Ann Fudge
American, age 60
Function at Novartis AG Ann Fudge has been a member
of the Board of Directors since 2008. She qualifies as an
independent Non-Executive Director. She is a member of
the Corporate Governance and Nomination Committee,
and the Risk Committee.
Other activities Ms. Fudge serves on the board of
directors of General Electric Co., on the board of directors
of Unilever, UK/Netherlands and on the board of 
directors of Infosys, India. She is a trustee of the New
York-based Rockefeller Foundation and the Atlanta-based
Morehouse College, and is chairman of the US Programs
Advisory Panel of the Bill & Melinda Gates Foundation.
Ms. Fudge is further a member of the Harvard University
Corporation Committee on Finance. She also is on the
board of the Council on Foreign Relations.
Professional background Ms. Fudge received her bach-
elor’s degree from Simmons College and her MBA from
Harvard University Graduate School of Business in the
United States. She is former chairman and CEO of Young
& Rubicam Brands. Before that, she served as president
of the Beverages, Desserts and Post Division of Kraft
Foods Inc.
Key knowledge/experience Leadership and Marketing
experience – former chairman and CEO of global mar-
keting communications company; former president of
leading consumer products business unit. Global and
Industry experience – board member of global technology
company and global consumer goods company.
Pierre Landolt, Ph.D.
Swiss, age 64
Function at Novartis AG Pierre Landolt has been a
member of the Board of Directors since 1996. He qualifies
as an independent Non-Executive Director. He is a member
of the Corporate Governance and Nomination Committee.
Other activities Mr. Landolt is currently chairman of the
Sandoz Family Foundation and oversees the development
of the foundation in several investment fields. He is a
member of the board of directors of Syngenta AG. He is a
partner with unlimited liabilities of the Swiss private bank
Landolt & Cie. In Brazil, Mr. Landolt serves as president of
the Instituto Fazenda Tamanduá, the Instituto Estrela de
Fomento ao Microcrédito, AxialPar Ltda. and Moco
Agropecuaria Ltda. In Switzerland, he is chairman of
Emasan AG and Vaucher Manufacture Fleurier SA, vice
chairman of Parmigiani Fleurier SA, and is on the board 
of the Syngenta Foundation for Sustainable Agriculture. He
is a member of the board of EcoCarbone SA, France, and
Swiss Amazentis SA. He is also vice chairman of the Mon-
treux Jazz Festival Foundation.
Professional background Mr. Landolt graduated with a
bachelor’s degree in law from the University of Paris-
Assas. From 1974 to 1976, he worked for Sandoz Brazil
SA. In 1977, he acquired an agricultural estate in the
semi-arid Northeast Region of Brazil and, over several
years, converted it into a model farm in organic and
biodynamic production. Since 1997, Mr. Landolt has 
been associate and chairman of AxialPar Ltda., Brazil, 
an investment company focused on sustainable devel-
opment. In 2000, he co-founded EcoCarbone SA, France,
a company active in the design and development of
carbon-sequestration processes. In 2007, he co-founded
Amazentis SA, Switzerland, a startup company active in
the convergence space of medication and nutrition.
Key knowledge/experience Banking and Industry experi-
ence; International and Emerging Market experience –
partner of private bank; chairman and vice chairman 
of luxury goods companies. Leadership and Global
experience – President of large family investment holding;
board member of global agribusiness company; board
member of sustainable agriculture foundation.
Our Board of Directors

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Enrico Vanni, Ph.D.
Swiss, age 60
Function at Novartis AG Enrico Vanni, Ph.D., has been a
member of the Board of Directors since 2011. He quali-
fies as an independent Non-Executive Director. He is a
member of the Audit and Compliance Committee, and the
Compensation Committee.
Other activities Since his retirement as director of 
McKinsey & Company in 2007, Mr. Vanni has been an
independent consultant. He is currently a member of sev-
eral boards of directors in industries from healthcare to
private banking, for nonlisted companies including
Eclosion2, Denzler & Partners SA and Banque Privée BCP
(Suisse) SA.
Professional background Mr. Vanni holds an engineering
degree in chemistry from the Federal Polytechnic School
of Lausanne, Switzerland, a Ph.D. in chemistry from the
University of Lausanne, as well as a Master of Business
Administration from INSEAD in Fontainebleau, France. He
began his career as a research engineer at International
Business Machines Corp. in California, and joined
McKinsey & Company in Zurich, Switzerland, in 1980. He
managed the Geneva office for McKinsey from 1988 to
2004, and consulted for companies in the pharmaceutical,
consumer and finance sectors. He led the company’s
European pharmaceutical practice and served as member
of the Partner review committee of the firm prior to his
retirement in 2007. As an independent consultant, Mr.
Vanni has continued to support leaders of pharmaceutical
and biotechnology companies on core strategic challenges
facing the healthcare industry.
Key knowledge/experience Global industry experience –
senior consultant of global pharmaceutical/biotech
companies, consumer goods and financial institutions.
Science experience – research engineer in technology
company and management of projects in global pharma-
ceutical R&D. Leadership experience – office manage-
ment of global consultant company and leadership of its
European pharmaceutical practice.
Andreas von Planta, Ph.D.
Swiss, age 56
Function at Novartis AG Andreas von Planta, Ph.D., has
been a member of the Board of Directors since 2006. 
He qualifies as an independent Non-Executive Director.
He is Chairman of the Risk Committee, and a member 
of the Audit and Compliance Committee, as well as the
Corporate Governance and Nomination Committee.
Other activities Mr. von Planta is chairman of the
Schweizerische National-Versicherungs-Gesellschaft AG
and a board member of Holcim Ltd., both in Switzerland.
He is also a board member of various Swiss subsidiaries
of foreign companies and other nonlisted Swiss compa-
nies. He is a member of the Board of Editors of the Swiss
Review of Business Law and is a former chairman of the
Geneva Association of Business Law. Mr. von Planta is
chairman of the regulatory board of the SIX Swiss
Exchange AG.
Professional background Mr. von Planta holds lic. iur. and
Ph.D. degrees from the University of Basel, Switzerland,
and an LL.M. from Columbia University School of Law,
New York, United States. He passed his bar examinations
in Basel in 1982. Since 1983 he has lived in Geneva and
worked for the law firm Lenz & Staehelin, where he
became a partner in 1988. His areas of specialization
include corporate law, corporate governance, corporate
finance, company reorganizations, and mergers and
acquisitions.
Key knowledge/experience Leadership and Global experi-
ence – chairman of insurance company; board member 
of global construction materials manufacturer. Industry
experience – partner of leading Swiss law firm.
Dr. Ing. Wendelin Wiedeking
German, age 59
Function at Novartis AG Dr. Ing. Wendelin Wiedeking has
been a member of the Board of Directors since 2003. He
qualifies as an independent Non-Executive Director. He is
a member of the Audit and Compliance Committee, and
the Risk Committee.
Other activities Mr. Wiedeking was chairman of the
executive board of Porsche Automobil Holding SE and of
Dr. Ing. h.c. F. Porsche AG, both in Germany, until July
2009. Since then he has been an entrepreneur.
Professional background Mr. Wiedeking graduated in
mechanical engineering in 1978 and worked as a scien-
tific assistant in the machine tool laboratory of the 
Rhine-Westphalian College of Advanced Technology in
Germany. His professional career began in 1983 in
Germany as director’s assistant in the production and
materials management area of Dr. Ing. h.c. F. Porsche AG
in Stuttgart-Zuffenhausen. In 1988, he moved to Glyco
Metall-Werke KG in Wiesbaden as Division Manager, where
he advanced by 1990 to the position of Chief Executive
Officer and Chairman of the Board of Management of
Glyco AG. In 1991, he returned to Dr. Ing. h.c. F. Porsche
AG as production director. A year later, the supervisory
board appointed him spokesman of the executive board
(CEO), then chairman in 1993.
Key knowledge/experience Leadership, Global and Indus-
try experience – former chairman and CEO of global auto-
motive company. Engineering and Technology experience –
former chairman and CEO of manufacturing supply com-
pany.

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Marjorie Mun Tak Yang
Chinese, age 59
Function at Novartis AG Marjorie Mun Tak Yang has been
a member of the Board of Directors since 2008. She
qualifies as an independent Non-Executive Director. She
is Chairman of the Compensation Committee.
Other activities Ms. Yang is Chairman of the Esquel Group,
Hong Kong, China. She is a member of the Executive
Council of the Hong Kong Special Administrative Region.
In China, she is a member of the National Committee of
the Chinese People’s Political Consultative Conference.
She currently serves on the boards of Swire Pacific Ltd.,
and The Hong Kong and Shanghai Banking Corp. Ltd. in
Hong Kong, and on the boards of a number of nonlisted
companies. In January 2010 she was appointed as
Chairman of the Council of the Hong Kong Polytechnic
University. She also serves on the advisory boards of
Harvard Business School, and Tsinghua School of
Economics and Management. From 2001 to 2011, 
Ms. Yang was a member of the MIT Corp.
Professional background Ms. Yang graduated with a
bachelor’s degree in mathematics from Massachusetts
Institute of Technology and holds a master’s degree from
Harvard Business School, both in the United States. From
1976 to 1978, she was an associate in Corporate Finance,
Mergers and Acquisitions, with the First Boston Corpora-
tion in New York, United States. In 1979, she returned to
Hong Kong and became a founding member of Esquel
Group. She was appointed chairman of the Group in 1995.
Key knowledge/experience
Leadership, Global and
Industry experience – chairman of global textile manufac-
turing company. Education and Science experience –
trustee of leading US research university; leadership roles
at multiple universities.
Rolf M. Zinkernagel, M.D. 
Swiss, age 67
Function at Novartis AG Rolf M. Zinkernagel, M.D., has
been a member of the Board of Directors since 1999. He
qualifies as an independent Non-Executive Director. He is
a member of the Corporate Governance and Nomination
Committee.
Other activities Dr. Zinkernagel was Vice President of the
International Union of Immunological Societies until 2010.
He is a member of the scientific advisory boards of 
Bio-Alliance AG, Germany; Aravis General Partner Ltd.,
Cayman Islands and Switzerland; Telormedix, Switzerland;
X-Biotech, Canada; Novimmune, Switzerland; Cancevir,
Switzerland; Nuvo Research Inc., Canada; ImVision,
Germany; MannKind, United States; and Biomedical
Sciences International Advisory Council, Singapore. Dr.
Zinkernagel is also a science consultant to Chilka Ltd.,
Cayman Islands; Ganymed, Germany; and Zhen-Ao Group,
China. He is a member of the scientific advisory panel of
Swiss Re, Switzerland.
Professional background Dr. Zinkernagel graduated from
the University of Basel, Switzerland, with an M.D. in 1970.
From 1992 to 2008, he was a professor and director 
of the Institute of Experimental Immunology at the
University of Zurich, and after retirement in 2008 contin-
ues to be active at the University of Zurich. Dr. Zinkernagel
has received many awards and prizes for his work 
and contribution to science, notably the Nobel Prize in
medicine, which he was awarded in 1996.
Key knowledge/experience
Biomedical Science and
Education experience – former professor and director at
leading Swiss university. Leadership and Global experience –
member of scientific advisory boards of numerous global
biotech companies; member of major international
research councils.
Our Board of Directors

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Joseph Jimenez
Chief Executive Officer
COMPOSITION OF THE EXECUTIVE COMMITTEE
1Permanent attendee until December 31, 2011, full member as per January 1, 2012
Felix R. Ehrat1
General Counsel
Jon Symonds
Chief Financial Officer
Jeff George
Sandoz
Andrin Oswald
Vaccines and
Diagnostics
Naomi Kelman1
OTC
George Gunn
Animal Health
Corporate
Responsibility
Kevin Buehler
Alcon
Mark C. Fishman
Biomedical Research
David Epstein
Pharmaceuticals
Juergen Brokatzky-
Geiger
Human Resources
OUR MANAGEMENT
COMPOSITION OF THE EXECUTIVE COMMITTEE
The Executive Committee is headed by the Chief Executive Officer. The
members of the Executive Committee are appointed by the Board of
Directors. The Chairman may appoint or remove non-voting Perma-
nent Attendees to attend the meetings of the Executive Committee. As
of December 31, 2011, there were 2 Permanent Attendees attending
meetings of the Executive Committee.
The organizational structure and the details of the responsibility
of the Executive Committee are set forth in the Board Regulations
(www.novartis.com/corporate-governance).
The Board of Directors has not concluded any contracts with
third parties to manage the business. 
ROLE AND FUNCTIONING OF THE EXECUTIVE COMMITTEE
The Board of Directors has delegated to the Executive Committee
the coordination of the Group’s day-to-day business operations.
This includes:
– Developing policies, strategies and strategic plans for approval by
the Board of Directors and implementing those approved by the
Board of Directors;
– Submitting to the Board of Directors and its committees proposed
changes in management positions of material significance, invest-
ments, financial measures, acquisitions or divestitures, contracts
of material significance and budgets;
– Preparing and submitting quarterly and annual reports to the
Board of Directors or its committees;
– Informing the Board of Directors of all matters of fundamental
significance to the businesses;
– Recruiting, appointing and promoting senior management;
– Ensuring the efficient operation of the Group and achievement of
optimized results;
– Promoting an active internal and external communications policy;
and 
– Dealing with any other matters as are delegated by the Board of
Directors to the Executive Committee.
THE CHIEF EXECUTIVE OFFICER
In addition to other duties that may be assigned by the Board of
Directors, the Chief Executive Officer, supported by the Executive
Committee, is responsible overall for the management and per-
formance of the business, leads the Executive Committee, builds
and maintains an effective executive team and represents Novartis
with major customers, financial analysts, investors and with the
media. 
CONTRACTS WITH MEMBERS OF THE EXECUTIVE COMMITTEE
In accordance with good corporate governance, employment con-
tracts with members of the Executive Committee do not contain
unusually long notice periods, change-of-control clauses or sever-
ance payments.

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From left to right: Juergen Brokatzky-Geiger, Naomi Kelman, Joseph Jimenez, Andrin Oswald, Mark C. Fishman, Felix R. Ehrat, George Gunn, 
Jonathan Symonds, Kevin Buehler, Jeff George, David Epstein
EXECUTIVE COMMITTEE
MEMBERS
Joseph Jimenez
American, age 52
Juergen Brokatzky-Geiger, Ph.D.
German, age 59
Kevin Buehler
American, age 54
Felix R. Ehrat, Ph.D.
Swiss, age 54
David Epstein
American, age 50
Mark C. Fishman, M.D.
American, age 60
Jeff George
American, age 38
George Gunn, MRCVS
British, age 61
Naomi Kelman
American, age 52
Andrin Oswald, M.D.
Swiss, age 40
Jonathan Symonds
British, age 52
SECRETARY
Bruno Heynen
Our Management

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MEMBERS OF THE EXECUTIVE COMMITTEE
Joseph Jimenez
American, age 52
Joseph Jimenez has been Chief Executive Officer (CEO) of Novartis
since 2010. Mr. Jimenez is responsible for leading the company’s
diversified healthcare portfolio of leading businesses in innovative
pharmaceuticals, eye care, generics, vaccines and diagnostics,
OTC and animal health. Previously Mr. Jimenez served as Division
Head, Novartis Pharmaceuticals. He led the transformation of the
pharmaceutical portfolio to balance mass market and specialty
products, and significantly increased the percentage of sales from
newly launched products. Mr. Jimenez also worked to realign the
division’s commercial approach to focus on the individual needs of
customers, and incorporated more technological tools to better
connect with patients and customers. Mr. Jimenez joined Novartis
in April 2007 as Division Head, Novartis Consumer Health. Previ-
ously, he served as president and CEO of the North America busi-
ness for the H.J. Heinz Co., and as president and CEO of Heinz in
Europe from 2002 to 2006. Prior to joining Novartis, he was a
nonexecutive director of AstraZeneca PLC, United Kingdom, 
from 2002 to 2007. He was also an advisor for the private equity
organization Blackstone Group in the United States. Mr. Jimenez
is a member of the board of directors of Colgate-Palmolive Co. 
He graduated in 1982 with a bachelor’s degree from Stanford
University and in 1984 with a Master of Business Administration
from the University of California, Berkeley.
Juergen Brokatzky-Geiger, Ph.D. 
German, age 59
Juergen Brokatzky-Geiger, Ph.D., has been Head of Human 
Resources of Novartis since 2003. He is a member of the Executive
Committee of Novartis. Mr. Brokatzky-Geiger joined Ciba-Geigy
Ltd. in 1983 as a laboratory head in the Pharmaceuticals Division
in Switzerland. After a job rotation in the United States, he held
positions of increasing responsibility in Research and Develop-
ment (R&D), including Group Leader of Process R&D, Head of
Process R&D, and Head of Process Development and Pilot Plant
Operations. During the merger of Ciba-Geigy and Sandoz in
1996, Mr. Brokatzky-Geiger was appointed Integration Officer 
of Technical Operations. He later became the Head of Chemical
and Analytical Development, and served as the Global Head 
of Technical R&D from 1999 to 2003. Mr. Brokatzky-Geiger is 
a member of the board of Bachem AG. Mr. Brokatzky-Geiger
graduated with a Ph.D. in chemistry from the University of
Freiburg, Germany, in 1982.
Felix R. Ehrat, Ph.D. 
Swiss, age 54
Felix R. Ehrat, Ph.D., has been Group General Counsel and a
permanent attendee of the Executive Committee of Novartis
since October 2011. As of January 1, 2012, he is a full member
of the Executive Committee. Mr. Ehrat is a leading practitioner of
corporate, banking, and mergers and acquisitions law, as well as
an expert in corporate governance and arbitration. He started 
his career as an associate with Baer & Karrer Ltd. in Zurich in
1987, became partner in 1992, and advanced to senior partner
(2003 to 2011) and executive chairman of the board (2007 to
2011) of the firm. Mr. Ehrat is chairman of Globalance Bank AG
in Switzerland, and a member of the board of Liechtensteinische
Landesbank AG in Liechtenstein. Previously, Mr. Ehrat was
chairman of Banca del Gottardo, and a board member of Julius
Baer Holding AG, Austriamicrosystems AG, Charles Voegele
Holding AG, and Carlo Gavazzi Holding AG. Mr. Ehrat was admit-
ted to the Zurich bar in 1985 and received his doctorate of 
law from the University of Zurich in 1990. In 1986, he completed
an LL.M. at McGeorge School of Law in the United States. His
past memberships and positions include: the International Bar
Association, where he was co-chair of the Committee on Corporate
and M&A Law from 2007 to 2008; Association Internationale des
Jeunes Avocats, where he was president from 1998 to 1999; and
the Swiss Arbitration Association, the Zurich Bar Association, and
the Swiss Bar Association.
Kevin Buehler 
American, age 54
Kevin Buehler has been Division Head, Alcon, since April 2011.
He is a member of the Executive Committee of Novartis. Mr. Buehler
was president and chief executive officer of Alcon Inc. from 2009
to 2011. He began his career with Alcon in 1984 as a regional
sales manager in the Consumer Products Division, and held
positions of increasing responsibility before being named direc-
tor of sales and marketing. In 1996, he became director of
Alcon’s US Managed Care and Falcon Generic Pharmaceutical
groups, and became vice president in 1998. The following year
he returned to the US Consumer Products Division as vice
president and general manager. Mr. Buehler moved to the
International Division in 2002 as vice president and regional
manager, Latin America and Caribbean. He was later named area 
vice president, Latin America, Canada, Australia and Far East. 
Mr. Buehler also served as senior vice president, global markets,
and chief marketing officer. Prior to joining Alcon, he worked 
for The Gillette Co. and Snyder Drug Stores. Mr. Buehler holds a
Bachelor of Science degree from Carroll University in Waukesha,
Wis., in the United States, with concentrations in business
administration and political science. He completed the Harvard
Program for Management Development in 1993.

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David Epstein
American, age 50
David Epstein has been Division Head, Novartis Pharmaceuticals,
since 2010. He also is responsible for Group Emerging Markets,
a group of selected countries with integrated divisional busi-
nesses. He is a member of the Executive Committee of Novartis.
Prior to his current appointment, Mr. Epstein served as Head of
Novartis Oncology for nearly 10 years. In addition, Mr. Epstein
led the Molecular Diagnostics Unit since its creation in 2008.
Before joining Novartis, Mr. Epstein was an associate in the
strategy practice of the consulting firm Booz Allen Hamilton Inc.
in the United States. Mr. Epstein joined Sandoz, a predecessor
company of Novartis, in 1989, and held various leadership posi-
tions of increasing responsibility for the company, including
Chief Operating Officer of Novartis Pharmaceuticals Corporation
in the United States and Head of Novartis Specialty Medicines. 
Mr. Epstein graduated with a bachelor’s degree in pharmacy
from Rutgers University College of Pharmacy in 1984, and with
a Master of Business Administration in finance and marketing
from New York’s Columbia University Graduate School of Business
in 1987.
Mark C. Fishman, M.D.
American, age 60
Mark C. Fishman, M.D., has been President of the Novartis
Institutes for BioMedical Research (NIBR) since 2002. He is a
member of the Executive Committee of Novartis. Before joining
Novartis in 2002, Dr. Fishman was chief of cardiology and
director of the Cardiovascular Research Center at Massachusetts
General Hospital, and was professor of medicine at Harvard
Medical School, both in the United States. Dr. Fishman completed
his internal medicine residency, chief residency and cardiology
training at Massachusetts General Hospital. Dr. Fishman gradu-
ated with a bachelor’s degree from Yale College in 1972 and 
an M.D. from Harvard Medical School in 1976. He has been hon-
ored with many awards and distinguished lectureships, and is a
member of the Institute of Medicine of the National Academies
and a Fellow of the American Academy of Arts and Sciences, both
in the United States.
Jeff George
American, age 38
Jeff George has been Division Head, Sandoz, since 2008. He is a
member of the Executive Committee of Novartis. Mr. George
joined the Vaccines and Diagnostics Division of Novartis in 2007
as Head of Commercial Operations for Western and Eastern
Europe. He then advanced to Head of Emerging Markets for 
the Middle East, Africa, Southeast Asia and CIS at Novartis
Pharmaceuticals. Before joining Novartis, Mr. George was a
Senior Director of Strategy and Business Development at Gap
Inc., San Francisco, United States. From 2001 to 2004, he was 
an Engagement Manager with McKinsey & Company, also in 
San Francisco. Mr. George received a Master of Business
Administration from Harvard University in 2001. He graduated in
1999 with a master’s degree from The Johns Hopkins University’s
School of Advanced International Studies, where he studied
international economics and emerging markets political econ-
omy. In 1996, he received his bachelor’s degree in international
relations from Carleton College in Northfield, Minn., in the United
States.
George Gunn, MRCVS
British, age 61
George Gunn has been Division Head, Novartis Animal Health,
and Head, Corporate Responsibility, since March 2011. He is a
member of the Executive Committee of Novartis. Before joining
Novartis, Mr. Gunn was president of Pharmacia Animal Health,
based in the United States. Previously, he spent more than 
15 years in positions of increasing responsibility in healthcare
companies. He worked as a veterinary surgeon for nine years
before joining the industry. Mr. Gunn joined Novartis in 2003 as
Head of Novartis Animal Health, North America. In January 2004,
he assumed his position as Head of the Animal Health Business
Unit. In addition to this role, he was Division Head, Novartis
Consumer Health, from 2008 to 2011. Mr. Gunn graduated with
a bachelor of veterinary medicine and surgery degree from the
Royal (Dick) School of Veterinary Studies in the United Kingdom
in 1973. He graduated with a diploma in veterinary state medi-
cine from the same school in 1978. In 2008, he received an
honorary doctorate in veterinary medicine and surgery from the
University of Edinburgh.
Our Management

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Naomi Kelman 
American, age 52
Naomi Kelman has been Division Head, Novartis OTC and a
permanent attendee of the Executive Committee of Novartis
since March 2011. As of January 1, 2012, she is a full member
of the Executive Committee. Before joining Novartis, Ms. Kelman
was president of LifeScan North America, part of the Johnson &
Johnson Diabetes Care Franchise. Ms. Kelman joined Johnson &
Johnson in 2000, and held several leadership roles within the
Consumer as well as the Medical Device and Diagnostic sectors.
She also was president of Johnson & Johnson Vision Care for the
Americas. Prior to joining Johnson & Johnson, Ms. Kelman held
positions of increasing responsibility at Bristol-Myers Squibb Co.
in the Clairol Division, and oversaw expansion of some of the
company’s biggest consumer brands into the Europe, Middle
East and Africa regions. Ms. Kelman also was managing director
of the Matrix Essentials business for Europe and then vice pres-
ident of marketing for the worldwide Matrix Essentials business.
Prior to her time at Bristol-Myers Squibb, she worked in Finance
at American Express Co. Ms. Kelman received both her bachelor’s
and Master of Business Administration degrees from Cornell
University in the United States.
Andrin Oswald, M.D.
Swiss, age 40
Andrin Oswald, M.D., has been Division Head, Novartis Vaccines
and Diagnostics, since 2008. He is a member of the Executive
Committee of Novartis. Previously, Dr. Oswald was Chief
Executive Officer (CEO) of Speedel Holding AG and Global 
Head of Pharmaceutical Development Franchises in the Novartis
Pharmaceuticals Division, both in Switzerland. Dr. Oswald joined
Novartis in 2005 as Assistant to the Chairman and CEO. Before
his appointment as Head of Development Franchises, he served
as Head of the Country Pharmaceuticals Organization (CPO) 
and Country President for Novartis in South Korea. Dr. Oswald
joined Novartis from McKinsey & Company, Switzerland, where
he was an associate principal. Between 2002 and 2003, he 
was a delegate of the International Committee of the Red Cross
(ICRC) to Nepal. He holds a doctorate in medicine from the
University of Geneva.
Jonathan Symonds
British, age 52 
Jonathan Symonds has been Chief Financial Officer (CFO) of
Novartis since 2010. He is a member of the Executive Committee
of Novartis. Before joining Novartis in 2009, Mr. Symonds was
partner and managing director of Goldman Sachs Group Inc. in
the United Kingdom. He also has eight years of experience as
CFO of AstraZeneca PLC, and previously held positions as Group
Finance Director at Zeneca and partner at KPMG. From 2004 to
2007, Mr. Symonds was a director of Diageo PLC and chairman
of the audit committee. Other previous roles include director and
audit committee chairman of Qinetiq PLC, chairman of the 100
Group of Finance Directors, joint chairman of the Business Tax
Forum, board member of the Accounting Standards Board, and
founder of the Oxford University Centre for Business Taxation
Research, all in the United Kingdom. Mr. Symonds graduated
with a first class degree in business finance from the University
of Hertfordshire, United Kingdom, in 1980, and became a Fellow
of Chartered Accountants in 1982. He is a Commander of the
British Empire (CBE).

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The Independent External Auditors
THE INDEPENDENT EXTERNAL AUDITORS 
DURATION OF THE MANDATE AND TERMS OF OFFICE 
Based on a recommendation by the Audit and Compliance Commit-
tee, the Board of Directors nominates an independent auditor for
election at the Annual General Meeting. PricewaterhouseCoopers
(PwC) assumed its existing auditing mandate for Novartis in 1996.
Peter Kartscher, auditor in charge, and Michael P. Nelligan, global
relationship partner, began serving in their respective roles in 2009.
The Audit and Compliance Committee ensures that the auditor in
charge is rotated at least every five years. 
INFORMATION TO THE BOARD OF DIRECTORS AND THE AUDIT 
AND COMPLIANCE COMMITTEE
The independent auditor, PwC, is responsible for opining on
whether the audited consolidated financial statements comply with
International Financial Reporting Standards (IFRS) and Swiss law
and whether the separate parent company financial statements of
Novartis AG comply with Swiss law. Additionally, PwC is responsi-
ble for opining on the effectiveness of internal control over financial
reporting.
The Audit and Compliance Committee, acting on behalf of the
Board of Directors, is responsible for overseeing the activities of
PwC. During 2011, the Audit and Compliance Committee held 6
meetings. At each of these meetings, PwC was invited to attend dur-
ing the discussion of agenda items that dealt with accounting,
financial reporting or auditing matters and any other matters rele-
vant for their audit.
On an annual basis, PwC provides to the Audit and Compliance
Committee the written disclosures required by Rule 3526, “Com-
munications with Audit Committees Concerning Independence,” of
the Public Company Accounting Oversight Board (PCAOB), and the
Audit and Compliance Committee and PwC discuss PwC’s inde-
pendence from Novartis and Novartis’ management. 
The Audit and Compliance Committee recommended to the
Board of Directors, and the Board of Directors approved, inclusion
of the audited financial statements in the Annual Report for the year
ended December 31, 2011.
The Audit and Compliance Committee, on a regular basis, eval-
uates the performance of PwC and, once yearly, based on a per-
formance evaluation, recommends to the Board of Directors
whether PwC should be proposed to the Annual General Meeting for
election. Also, once yearly, the auditor in charge and the global rela-
tionship partner report to the Board of Directors on the activities of
PwC during the current year and on the audit plan for the coming
year and answer any questions or concerns Board members might
have on the performance of PwC, or on the work PwC has con-
ducted or is planning to conduct. 
In order to assess the performance of PwC, the Audit and Com-
pliance Committee requires a self-evaluation report from PwC, holds
private meetings with the Chief Executive Officer, the Chief Finan-
cial Officer and with the Head of Internal Audit and, if necessary,
obtains an independent external assessment.  The Board of Direc-
tors also meets with the auditor in charge and the global relation-
ship partner. Criteria applied for the performance assessment of
PwC include technical and operational competence, independent
and objective view, sufficient resources employed, focus on areas of
significant risk to Novartis, willingness to probe and challenge, abil-
ity to provide effective, practical recommendations and open and
effective communication and coordination with the Audit and Com-
pliance Committee, the Internal Audit function and management. 
PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES 
The Audit and Compliance Committee’s pre-approval is required
for all services provided by PwC. These services may include audit
services, audit-related services, tax services and other services.
Pre-approval is detailed as to the particular services or cate-
gories of services, and is subject to a specific budget. PwC and man-
agement report, on a quarterly basis, to the Audit and Compliance
Committee regarding the extent of services provided in accordance
with this pre-approval and the fees for the services performed to
date. The Audit and Compliance Committee may also pre-approve
additional services on a case-by-case basis. 
AUDITING AND ADDITIONAL FEES
PwC charged the following fees for professional services rendered
for the 12-month periods ended December 31, 2011 and Decem-
ber 31, 2010: 
2011
2010
USD thousands
USD thousands
Audit Services
30 060
23 675
Audit-Related Services
2 480
2 140
Tax Services
1 550
1 485
Other Services
190
110
Total
34 280
27 410
Audit Services are defined as the standard audit work performed
each year in order to issue opinions on the parent company and
consolidated financial statements of the Group, to issue opinions
relating to the effectiveness of the Group’s internal controls over
financial reporting, and to issue reports on local statutory financial
statements. Also included are audit services that can only be pro-
vided by the Group auditor, such as auditing of non-recurring trans-
actions and implementation of new accounting policies, audits of
accounting infrastructure system controls, pre-issuance reviews of

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quarterly financial results, consents and comfort letters and any
other audit services required for SEC or other regulatory filings.
Audit-Related Services include those other assurance services
provided by the independent auditor but not restricted to those that
can only be provided by the auditor signing the audit report. They
comprise amounts for services such as acquisition due diligence
and related audits, audits of pension and benefit plans, IT infra-
structure control assessments, contractual audits of third-party
arrangements, assurance services on corporate citizenship report-
ing and compliance with corporate integrity agreements, and con-
sultation regarding new accounting pronouncements.
Tax Services represent tax compliance, tax returns, assistance
with historical tax matters and other tax-related services.
Other Services include training in the finance area, advice for
process improvements, benchmarking studies, assessment of cer-
tain non-financial processes and license fees for use of accounting
and other reporting guidance databases. 
FURTHER INFORMATION 
THE GROUP STRUCTURE OF NOVARTIS
NOVARTIS AG AND GROUP COMPANIES
Under Swiss company law, Novartis AG is organized as a corpora-
tion which has issued shares of common stock to investors. The
registered office of Novartis AG is Lichtstrasse 35, CH-4056 Basel,
Switzerland.
Business operations are conducted through Novartis Group
companies. Novartis AG, a holding company, owns directly or indi-
rectly all companies worldwide belonging to the Novartis Group.
Except as described below, the shares of these companies are not
publicly traded. The most important Novartis subsidiaries and asso-
ciated companies are listed in Note 31 to the Group’s consolidated
financial statements.
DIVISIONS
The wholly-owned businesses of Novartis are divided on a worldwide
basis into six operating divisions, Pharmaceuticals, Alcon (eye care),
Vaccines and Diagnostics, Sandoz (generics), Over-the-Counter and
Animal Health, and Corporate activities.
MAJORITY HOLDINGS IN PUBLICLY TRADED GROUP COMPANIES
76% of Novartis India Limited, with its registered office in Mumbai,
India, and listed on the Bombay Stock Exchange (ISIN
INE234A01025, symbol: HCBA). The total market value of the 24%
free float of Novartis India Limited was USD 92.3 million at Decem-
ber 31, 2011, using the quoted market share price at the year end.
Applying this share price to all the shares of the company the mar-
ket capitalization of the whole company is USD 391.5 million.
SIGNIFICANT MINORITY HOLDINGS IN PUBLICLY TRADED COMPANIES
Novartis AG holds
– 33.3% of the bearer shares of Roche Holding AG, with its regis-
tered office in Basel, Switzerland, and listed on the SIX Swiss
Exchange (Valor No. 1203211, ISIN CH0012032113, symbol:
RO). The market value of the Group’s interest in Roche Holding
AG, as of December 31, 2011, was USD 9.45 billion. The total mar-
ket value of Roche Holding AG was USD 147.4 billion. Novartis
does not exercise control over Roche Holding AG, which is inde-
pendently governed, managed and operated.
– 31.1% of Idenix Pharmaceuticals, Inc., with its registered office in
Delaware, USA, and listed on NASDAQ (Valor No. 1630029, ISIN
US45166R2040, symbol: IDIX). The total market value of the
66.48% free float of Idenix Pharmaceuticals, Inc. was USD 529.3
million at December 31, 2011, using the quoted market share
price at the year end. Applying this share price to all the shares
of the company the market capitalization of the whole company
is USD 793.3 million. Novartis does not exercise control over
Idenix Pharmaceuticals, Inc., which is independently governed,
managed and operated.
INFORMATION OF OUR STAKEHOLDERS
INTRODUCTION 
Novartis is committed to open and transparent communication
with shareholders, financial analysts, customers, suppliers and
other stakeholders. Novartis aims to disseminate material develop-
ments in its businesses in a broad and timely manner that complies
with the rules of the SIX Swiss Exchange and the NYSE.

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Further Information
COMMUNICATIONS
Novartis publishes an Annual Report each year that provides infor-
mation on the Group’s results and operations. In addition to the
Annual Report, Novartis prepares an annual report on Form 20-F
that is filed with the SEC. Novartis discloses quarterly financial
results in accordance with IFRS and issues press releases from time
to time regarding developments in its businesses. 
Novartis furnishes press releases relating to financial results
and material events to the SEC via Form 6-K. An archive containing
Annual Reports, annual reports on Form 20-F, and quarterly results
releases, as well as related materials such as slide presentations
and conference call webcasts, is on the Novartis Investor Relations
website (www.novartis.com/investors). The archive is available on
the Novartis website: 
http://www.novartis.com/newsroom/media-releases/index.shtml
Information contained in reports and releases issued by Novartis is
only correct and accurate at the time of release. Novartis does not
update past releases to reflect subsequent events and advises
against relying on them for current information.
INVESTOR RELATIONS PROGRAM
An Investor Relations team manages the Group’s interaction with
the international financial community. Several events are held each
year to provide institutional investors and analysts various oppor-
tunities to learn more about Novartis.
Investor Relations is based at the Group’s headquarters in
Basel, Switzerland. A part of the team is located in New York to coor-
dinate interaction with US investors. Information is available on the
Novartis website: www.novartis.com/investors. Investors are also
welcome to subscribe to a free e-mail service on this site.
WEBSITE INFORMATION
Topic
Information
Share Capital
Articles of Incorporation of Novartis AG 
http://www.novartis.com/corporate-governance
Novartis key share data
http://www.novartis.com/key-share-data
Shareholder Rights
Articles of Incorporation of Novartis AG 
http://www.novartis.com/corporate-governance
Investor Relations information 
http://www.novartis.com/investors
Board Regulations
Board Regulations
http://www.novartis.com/corporate-governance
Executive Committee
Executive Committee
http://www.novartis.com/executive-committee
Novartis Code for Senior Financial Officers
Novartis Code of Ethical Conduct for CEO and Senior Financial Officers
http://www.novartis.com/corporate-governance
Additional Information
Novartis Investor Relations 
http://www.novartis.com/investors

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N O V
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I am who I am
ANDRINA WATTS: “My mother is half-English, half-Austrian. My father’s 
from Barbados. He was a teacher, an art teacher. It wasn’t the time for 
mixed marriages, and for black and white people to get together when 
my parents got married. That was 1963.
“Born in 1967, I went to grade school, junior school (loved it), to a 
secondary school, then to the all-girls’ school my mother had gone to. 
That’s when I was first made aware of the color of my skin. On the 
third day there, I was told by this group of girls that I had to choose 
to sit with black people or white people, or get my head kicked in. I 
turned around and said, ‘I’m not black and I’m not white and I don’t 
have to do this,’ then went home and waited for my mom to come 
from work. Still I knew I had to face them. So I went back to school 
the next day and said, ‘No, I’m not making a choice. I am who I am. 
If you don’t like what you see, then don’t look.’
“I walked out with my exams at 16, went to college, met my husband, 
who’s adorable, who’s a duty facilities manager. Now obviously we 
hadn’t made plans back then to have any children, then I fell preg-
nant. My first son was a bruiser, a watermelon. But my husband was 
an amazing dad, and the longer we’re together, the more I love him. 
It’s all in what you say to people, how you treat people. That’s his 
belief. So with my mum looking after her grandson, I went back to 
work. Then, when I was in my 20s I got sick. I was doubled over; 
my lung had collapsed. They put rings in, inflated it, and discharged 
me from the hospital. But a week later, my lung collapsed again and 
they had to do surgery, because there were ulcers and blisters now 
growing on it.
“Ten weeks later I went back to work, making what I thought was a 
recovery. The doctors did recommend that, because of the condition of 
my lungs, I shouldn’t have any more children. They said, ‘We want 
to sterilize you,’ and I agreed to it. But when I was 26, my husband 
really wanted to have another child, so I spoke to my GP and they 
agreed to try to reverse it. And it worked. I was 24 hours in labor 
with my second son, yet he was so worth it. About a year later I got 
sick again. Same thing: lung collapsed, ulcerated with blisters. I was 
in the hospital eight weeks, had the surgery, went home. They said 
they had everything sorted out, that it can’t happen again. Then last 
September I went out one evening to this huge social event and BAM! 
Can’t breathe in the car. I’m coughing, suffocating, and didn’t know 
what it was.
“I’d held a full-time job for 15 years, looked after my children, used to 
do four or five aerobic classes a week. I used to smoke, but smoking 
wasn’t ever the be-all of my life. If I had a couple of cigarettes a day, 
it would have been a miracle. Anyway, I’d arranged this massive 
bash for my boss, who was retiring, and had really struggled to 
breathe all night. My friend, I said to her, ‘Could you take me home

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fast would I have to drive to kill myself outright? You know, it happens.
People do do these things. Occasionally I still do think it now. On a bad 
day, when I’m run down so and can’t breathe, but have to pretend that I 
can. Because, you know, at work, you have to be somebody else. We all do.
“Everyone at my job is fully aware of my illness. However, when the 
CEO says, ‘Hi, Andrina, how are you doing?’ I don’t go, ‘I can’t breathe 
today.’ I just go, ‘Yeah I’m great, how you doin’?’ You can’t slip into that 
abyss of ‘Oh my God! I feel so pathetically sorry for myself.’
“Funny thing, though, I had to give up high heels, which to me was a 
huge thing. I used to run around in work in three-and-a-half-inch heels; 
they were an extension of me. Oh I still buy them, just don’t wear them 
to walk in, because when you’re trying to breathe and walk, it’s hard. I 
couldn’t walk up a hill now. After 100 yards I struggle. I have portable 
now,’ and went home thinking my breathing would start to improve. The 
last thing I ever wanted to do is alarm my children, my husband. I’m a 
real control freak and always have been. So I rang my mum who took 
me to my doctor. Then they put me in an ambulance, I was that ill.
“I started on different treatments, different lung function tests, till they 
delivered the blow that my lungs are knackered, are bad. We don’t know
what I had in my 20s, but six years ago I was diagnosed with COPD. 
I have lung function less than 32% now and have to struggle getting 
air in. And the air that I do get in, I struggle even more to distribute it 
around my body, to make my legs, my arms work. The disease, they tell 
me, is throughout my lungs. So where am I now? I suppose my lungs are 
about 70, 75 years old, maybe. I’ve said, ‘Why me? God, why is this 
happening to me?’ And then you know, you have the dawning, don’t you? 
It sets in. I would drive on the M25 and think: If I drive into that lorry, how

113
oxygen, which I carry in my car, but don’t wear at work, because people 
can then have preconceived ideas about you, treat you like you can’t 
do your job, can’t function. Still, the doctors say I’m very lucky. They 
say, ‘You’re not typical. You don’t fit the bill. If we hadn’t had the lung 
function results, when we looked at you, we would have determined 
that you were perfectly healthy.’ Back in September, what they were 
saying was, ‘Enough is enough. You can’t possibly carry on.’ But for 
some reason, my body compensates.
“I’ve always had a very full life. I love my job, am passionate about what 
I do. I work for a company that’s totally supported me, is fully aware of 
all of this. But still, for how much I love it here, this isn’t my real world. 
My real world is my family. And that’s what keeps me going. Being a 
mom and a wife. Still, you can’t help but dig deeper and deeper.
“If I was 70 years old – which is where I should be with the state of 
my lungs – and you told me I had six, seven years to live, I would be 
pleased. I would actually think I were an extremely lucky bugger. But 
I’m 42. You give me seven years, I won’t see my 50th. I won’t see my 
grandchild go to bloody school. You know I’m very vain. I am. We all 
have our vanities. I don’t know why I look like this, don’t know why I’ve 
survived this, or why I can still work. I don’t know, I think it is pure, 
sheer, gut determination that it’s not going to beat me. It’s not going to 
beat me.”
HE A LT H C A R E PE R SPEC T I V E S: I A M W H O I A M

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COMPENSATION REPORT
Novartis aspires to be an employer of choice and to attract
and retain best-in-class talents around the world. 
Our compensation plans are designed to support our goal as
a preeminent global healthcare company. They provide
competitive compensation and benefits for world-class
talents in a competitive market. They are aligned with our
business performance objectives that are key to our
sustained success while being transparent, coherent and
aligned with our pay-for-performance philosophy. Our
compensation system aims to encourage entrepreneurship
and, at the same time, deter excessive risk-taking to enhance
short-term financial gain at the expense of the long-term
health of the Group.
The Compensation Report describes our compensation
system, including our compensation philosophy, details on
the compensation plans and the compensation paid for
2011 performance. 
CONTENTS
COMPENSATION REPORT
2011 Actions of Novartis and of the 
Compensation Committee
115
Compensation of the Board of Directors
116
Compensation of Executives and Other Associates
118
2011 Compensation of the Members
of the Executive Committee
128

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Contents | 2011 Actions of Novartis 
and of the Compensation Committee
2011 ACTIONS OF NOVARTIS AND OF THE
COMPENSATION COMMITTEE
We seek to constantly innovate, to discover and develop important
new medicines and vaccines, and to market them successfully to
our customers. We abide by regulatory and legal requirements and
operate in an ethical and transparent manner. The health benefits we
offer to our consumers are our primary concern, and we put their
health and safety ahead of any financial considerations. These val-
ues are embedded in the way we hire, train and compensate our
employees throughout Novartis. Our compensation programs rein-
force employee performance that is consistent with our purpose and
aspirations and discourage behavior that is inconsistent with our val-
ues and expectations. 
We consider excellent performance central to the way we do busi-
ness. Best-in-class innovation helps patients and creates sustainable
returns and long-term value, which in turn allow us to adequately
reward our employees and shareholders, and pay taxes. Our com-
pensation system incentivizes our organization to thrive and perform
in the short and long-term without taking imprudent or unreason-
able risks. Yet, the business environment ahead of us will become
even more challenging. The healthcare industry is currently facing a
number of critical challenges, such as the uncertainties surrounding
the global debt crisis, recent substantial regulatory changes and price
cuts. Simultaneously, global competition in the healthcare industry
and the pressure for realizing efficiencies are increasing even further. 
We are convinced that the best answer to these challenges is to
focus on our primary purpose and core values and to invest to con-
tinuously deliver innovative or best price solutions for patients and
customers. This also requires an increasing attention to our busi-
ness efficiency and cost effectiveness. A compensation system that
allows Novartis to attract the best-in-class talent and motivates
associates to perform to their full potential is critical for sustainable
value creation, ethical business behavior and appropriate risk tak-
ing. It also aligns the interests of our employees with those of our
shareholders and stakeholders. 
We intend to keep our compensation system at a state-of-the-art
level and to maintain a dialogue with our stakeholders. As a result, we
regularly review our compensation system, taking into account the
interests and feedback of our stakeholders. This entails trade-offs, as
frequent changes of the compensation system create confusion inter-
nally and externally. In our experience it takes 3 to 5 years until a
large organization as ours fully understands and aligns behind a new
approach. 
At the 2011 Annual General Meeting, Novartis shareholders were
invited to express their views on our compensation system through 
a consultative vote (a so-called “say on pay” vote). A majority of
Novartis shareholders supported our current compensation system. 
We also had an opportunity to collect valuable remarks and com-
ments in relation to our compensation system. In addition, manage-
ment met with our stakeholders to engage in a fruitful dialogue after
the 2011 Annual General Meeting. 
On the basis of the preparatory work done by the Compensation
Committee and the Corporate Governance and Nomination Commit-
tee, the Board of Directors noted and thoroughly analyzed the com-
ments made by our shareholders in relation to the 2010 Compensa-
tion Report, with a view to identifying potential enhancements to the
design, operation and disclosure of our compensation system. As a
result, we have decided to further promote the long-term orientation,
transparency and governance of our compensation system by taking
the following steps: 
– We decided to further increase comparability by providing the
value of the shares and other equity instruments used for com-
pensation purposes at the undiscounted market value used in
preparing the Group’s consolidated financial statements, despite
the fact that they are subject to multi-year vesting periods;
– For members of the Executive Committee, the Compensation
Committee shifted the weighting of awards under its Equity Plan
“Select” toward performance vesting through its Long-Term Per-
formance Plan. For 2011, this shift between these two plans rep-
resented a reduction of the awards under the Equity Plan “Select”
by 33% on average; 
– We harmonized the vesting period for participants of the equity
plan “Select” by increasing it to three years globally;
– We decided to disclose the actual duration of the CEO’s notice
period, which is 12 months; and
– The Compensation Committee Charter was amended to reinforce
the importance of risk management in our compensation system.
The Board of Directors believes that the compensation system is
appropriate for Novartis given the Company’s objectives. Moreover,
the Compensation Committee confirms that Novartis compensation
plans for all associates (including for the Chief Executive Officer and
Executive Committee members) are aligned with the healthcare
industry practice.
The Members of the Compensation Committee
Marjorie M.T. Yang (chair)
William Brody 
Srikant Datar 
Ulrich Lehner
Enrico Vanni
For further information on the Compensation Committee organization and responsibilities, see Cor-
porate Governance Report – Our Board of Directors – Role of the Board of Directors and the Board
Committees – The Compensation Committee.

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COMPENSATION OF THE BOARD OF DIRECTORS
PHILOSOPHY FOR THE BOARD OF DIRECTORS COMPENSATION
Today, the members of boards of directors of global companies face
increasing responsibilities and have to deal with issues that require
ever higher levels of expertise and engagement. As a global health-
care company, Novartis has appointed members of the Board of
Directors who bring these required skills. Novartis has set the com-
pensation for the members of the Board of Directors at a level that
allows for the attraction and retention of high-caliber members. The
members of its Board of Directors do not receive variable compen-
sation, underscoring their focus on long-term corporate strategy,
supervision and governance.
COMPENSATION STRUCTURE
Board 
compensation
Fixed compensation
Yes
Variable compensation
No
COMPENSATION OF THE MEMBERS OF THE BOARD OF DIRECTORS
The Board of Directors determines the compensation of its mem-
bers each year, based on a proposal by the Compensation Com-
mittee. 
The compensation of the Chairman is based on a contract,
which provides for Dr. Daniel Vasella a fixed remuneration of CHF
12.2 million, indexed to the average compensation increase for
associates based in Switzerland. One third of his total compensa-
tion is paid out in monthly cash installments; the remaining two-
thirds are in the form of unrestricted Novartis shares that are
granted to him each year at the closing market price of the under-
lying share at the end of the day at grant date, in 2011 on January
19, 2011. Following his term as Chairman, Dr. Vasella agreed to
continue to make available his know-how to Novartis and to refrain
from activities that compete with any business of Novartis for a
multi-year period. Dr. Vasella will receive fair market compensation
in return for his services and for complying with the restriction not
to compete. Dr. Vasella carries forward tradable options, shares and
benefits (including pension) as a result of his 14-year tenure as our
CEO. In his current capacity he receives no variable compensation,
tradable options or equity other than the shares that are part of his
retainer as Chairman.
The other members of the Board of Directors receive an annual
fixed Board membership fee and additional fees for committee
chairmanships, committee memberships, and other functions to
compensate for their increased responsibilities and engagements.
They do not receive additional fees for attending meetings. With the
exception of the Chairman, the members of the Board of Directors
can choose to receive their fees in cash, shares, or a combination
of both and they receive neither share options nor pension bene-
fits.
The fee rates for Board membership and functional roles of
other members of the Board of Directors are as follows:
BOARD MEMBER ANNUAL FEE RATES (EXCL. CHAIRMAN)
Annual fee (CHF)
Board membership
350 000
Vice Chairman
350 000
Board Committee chairmanship
10 000
Chairman’s Committee membership
150 000
Audit and Compliance Committee membership
100 000
Risk Committee membership
50 000
Compensation Committee membership
50 000
Corporate Governance and Nomination Committee membership
50 000
Delegated board membership 1
125 000
1The Board of Directors has delegated Rolf M. Zinkernagel to the Scientific Advisory Board of the
Novartis Institute for Tropical Diseases (NITD). The Board of Directors has delegated both Rolf M.
Zinkernagel and William Brody to the Board of Directors of the Genomics Institute of the
Novartis Research Foundation (GNF).
BENCHMARK
The level of pay for the members of the Board of Directors is set
based on benchmarks that include the remuneration of members
of board of directors of comparable healthcare companies (see also
the list of benchmark companies under “Compensation of Execu-
tives and other associates – Competitive Positioning”, p.126) and
selected leading Swiss companies (i.e. UBS, Nestlé and Credit
Suisse).

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Compensation of the Board of Directors
BOARD MEMBER COMPENSATION IN 2011 1
Corporate
Annual cash 
Shares 
Governance
compen-
(Market
Board 
Audit and
Compen-
and
Delegated 
sation 
value)
Other
Total
member-
Vice
Chairman’s
Compliance
Risk
sation 
Nomination
board 
(CHF)
(CHF)
Shares 
Shares 
(CHF)
(CHF)
ship
Chairman
Committee
Committee
Committee
Committee
Committee
membership
(A)
(B)2
(Number)
(Tax value)3
(C)
(A)+(B)+(C)
Daniel Vasella
Chair
Chair
•4
•4
•4
•4
4 060 004
8 786 7355
160 6355 4 906 4255
654 2076
13 500 9468
Ulrich Lehner
•
•
•
•
•
•
Chair
1 110 000
–
–
–
62 6507
1 172 650
William Brody 9
•
•
•
229 688
295 325
5 399
295 325
–
525 013
Srikant Datar
•
•
Chair
•
•
550 250
159 779
2 921
159 779
–
710 029
Ann Fudge
•
•
•
450 000
–
–
–
–
450 000
Pierre Landolt 10
•
•
106 000
294 013
5 375
294 013
24 1777
424 190
Enrico Vanni
•
•
•
425 000
75 048
1 372
75 048
29 4047
529 4528
Andreas von Planta
•
•
Chair
•
448 000
112 026
2 048
83 712
32 6857
592 711
Wendelin Wiedeking
•
•
•
132 500
367 529
6 719
367 529
30 9657
530 994
Marjorie M.T. Yang
•
Chair
410 000
–
–
–
24 7197
434 719
Rolf M. Zinkernagel 11
•
•
•
–
650 000
11 883
650 000
34 3817
684 381
Total 12
7 921 442 10 740 454
196 352
6 831 831
893 188
19 555 084
See note 12 to the Financial Statements of Novartis AG for 2010 data.
1 Does not include reimbursement for travel and other necessary business expenses incurred in the performance of their services as these are not compensation.
2 The value of the shares reflected in this column has been calculated based on market value of the shares at grant date. All shares were granted as per January 19, 2011 against the prevailing share
price of CHF 54.70.
3 A Board member who is tax resident in Switzerland can voluntarily choose to block the shares. In 2011 Daniel Vasella blocked his shares for ten years and Andreas von Planta for five years. The
value of the shares reflected in this column has been calculated using the tax value methodology described under - 2011 Compensation of the Executive Committee Members - Compensation in
2011 - Valuation Principles.
4 Daniel Vasella attended the meetings of these Committees as a guest without voting rights.
5 Includes 12 188 shares paid in 2011 related to the grant of 2010.
6 Includes social security costs due by the individual and paid by the company, pension and life insurance.
7 Includes social security costs due by the individual and paid by the company.
8 Does not include Board member compensation granted by Alcon, Inc. until April 8, 2011.
9 The Board of Directors has delegated William Brody to the Board of Directors of the Genomics Institute of the Novartis Research Foundation (GNF).
10 According to Pierre Landolt, the Sandoz Family Foundation is the economic beneficiary of the compensation.
11 The Board of Directors has delegated Rolf M. Zinkernagel to the Scientific Advisory Board of the Novartis Institute for Tropical Diseases (NITD) and to the Board of Directors of the Genomics Institute
of the Novartis Research Foundation (GNF).
12 Alexandre F. Jetzer-Chung and Hans-Jörg Rudloff were members of the Board of Directors until February 22, 2011. Their compensation was reported in the 2010 Annual Report.
SHARES AND SHARE OPTIONS OWNED BY MEMBERS 
OF THE BOARD OF DIRECTORS
Shareholders want Board members to align their interests with the
rest of the shareholders. Among other requirements, the members
of the Board of Directors are thus required to own at least 5 000
Novartis shares within three years after joining the Board of Direc-
tors. As of December 31, 2011, all members of the Board of Direc-
tors who have served at least three years on the Board of Directors
have complied with the share ownership guidelines.
The last year in which Novartis granted share options to non-
executive members of the Board of Directors was 2002. The total
number of vested and unvested Novartis shares and share options
owned by members of the Board of Directors and “persons closely
linked”1 to them as of January 19, 2012, is shown in the following
tables.
As of January 19, 2012, none of the members of the Board of
Directors together with “persons closely linked”1 to them owned 1%
or more of the outstanding shares of Novartis, either directly or
through share options.
1“Persons closely linked” are (i) their spouse, (ii) their children below age 18, (iii) any legal entities
that they own or otherwise control, and (iv) any legal or natural person who is acting as their
fiduciary.

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SHARES OWNED BY BOARD MEMBERS
Number of
shares1,2
Daniel Vasella
3 306 730
Ulrich Lehner
22 193
William Brody
10 532
Srikant Datar
20 263
Ann Fudge
7 008
Pierre Landolt 3
40 442
Enrico Vanni
4 839
Andreas von Planta
111 628
Wendelin Wiedeking
40 901
Marjorie M.T. Yang
18 000
Rolf M. Zinkernagel
34 683
Total 4
3 617 219
1Includes holdings of “persons closely linked” to Board members (see definition under – Share
and Share Options by Members of the Board of Directors).
2Each share provides entitlement to one vote.
3According to Pierre Landolt, the Sandoz Family Foundation is the economic beneficiary of all
shares.
4Alexandre F. Jetzer-Chung and Hans-Jörg Rudloff were members of the Board of Directors until
February 22, 2011. Their holdings were reported in the 2010 Annual Report.
SHARE OPTIONS OWNED BY BOARD MEMBERS
Number of
share options1
Daniel Vasella
2 433 2902
Ulrich Lehner
William Brody
Srikant Datar
Ann Fudge
Ulrich Lehner

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BUSINESS PERFORMANCE METRICS
Market share
Net sales
Free cash flow
Operating income
People and organizational
development
Organizational effectiveness and
productivity
Innovation
ers and debt holders) (see also Note 26 to the Group’s audited con-
solidated financial statements for information regarding the NVA).
Objective setting for members of the Executive Committee and
associates
At the beginning of each performance year, the CEO and each of the
executives directly reporting to him determine together the busi-
ness objectives and respective metrics applicable to each of the
divisional and global functional leaders. In the same manner, each
line manager and each associate directly reporting to her or him set
the objective and metrics applicable to the next-level associate. As
a principle, all written objectives are reviewed by two hierarchical
levels, including the direct and the indirect supervisors. 
The business objectives are measured against key performance
metrics, while the individual performance is derived from the busi-
ness objectives established at the Group, division, function, coun-
try or business area levels.
These financial and operational metrics have been selected
because they define in a balanced way how successful we are in
meeting our strategic objectives and creating sustainable value to
our shareholders.
Depending on functional responsibility, non-financial objectives
typically include research and development performance; product
launches; successful implementation of growth and productivity ini-
tiatives; process improvements; leadership and people management
and successful acquisitions, disposals and licensing transactions. 
Objectives are set each year at ambitious levels to motivate a
high degree of business performance appropriately balancing the
short- and long-term objectives.
Decisions and actions leading to results must be consistent with
Novartis Values and Behaviors, which describe the desired conduct
of associates and set boundaries and guidelines as an important
building block for the culture of our Group. The Novartis Values and
Behaviors provide a focus on quality, commitment, candor, com-
passion, loyalty and integrity.
Novartis does not disclose specific business objectives for the
upcoming year because they often constitute business secrets, the
disclosure of which would signal areas of strategic focus and impair
the Group’s ability to leverage these areas for competitive advan-
tage. For example, disclosure of our cash-flow objectives would pro-
vide insight into timing of large capital investments or acquisitions.
In addition, knowledge of the objectives could be used by competi-
tors to recruit key executives from Novartis. Disclosing specific
objectives and metrics would also give our competitors insight into
key market dynamics and areas that could be used against Novartis
competitively by industry consultants or competitors targeting
existing customers.
PERFORMANCE EVALUATION
Our performance management system and “pay for performance”
principle have spurred a culture of meritocracy at Novartis. We
believe that pay for performance is only sustainable when fair per-
formance evaluation procedures ensuring integrity and fairness are
in place. Performance evaluation is conducted at all levels of the
organization.
The people performance management evaluation process con-
sists of two reviews per year – a mid-year and a year-end review.
During such formal meetings, associates and managers evaluate
performance against the objectives set at the beginning of the year.
In assessing performance, managers focus on results-oriented
measures, as well as on how results were achieved. The “four eyes”
rule ensures that associates’ annual objectives and performance
evaluations are reviewed separately by two levels of supervisors.
Process for performance evaluation of the CEO
At the end of a business year, the CEO prepares and presents to the
Chairman and the Board of Directors a self-appraisal assessing
actual results against the previously agreed-upon objectives, taking
into account the audited financial results as well as Novartis Values
and Behaviors. Subsequently, the Board of Directors discusses the
self-appraisal without the CEO being present. It evaluates the extent
to which targeted objectives have been achieved and, to the extent
possible, compares these results with peer industry companies, tak-
ing into account general economic and financial criteria and indus-
try developments. The Board of Directors later shares its appraisal
with the CEO. 
Process for performance evaluation of members of the Executive
Committee
In January, the Board of Directors meets with the CEO to review and
discuss the performance and objectives of the Executive Committee
members for the previous year, taking into account the financial
results, the level of achievement of financial and non-financial objec-
tives, as well as Novartis Values and Behaviors and the general eco-
nomic and business environment. In addition to the year-end review,
the mid-year performance of the CEO is reviewed by the Chairman
while the results of the other Executive Committee members are eval-
uated by the CEO and then discussed with the Chairman.

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Compensation of Executives and Other Associates
COMPENSATION ELEMENTS
Annual base 
compensation
Variable 
compensation
Benefits
Long-Term Performance Plan (LTPP)
Equity Plan “Select”
Special Share Awards
Annual
incentive
Equity based 
long-term incentive
VARIABLE COMPENSATION
Cash
Equity Share Ownership Plan (ESOP)
Leveraged Share Savings Plan (LSSP)
Talent Review
Our People Performance Management evaluation process is com-
plemented with an annual Organization and Talent Review in which
organizational needs and career aspirations of associates are dis-
cussed. The review includes the assessment of strengths, weak-
nesses and potential for growth. The Organization and Talent
Review has become an integral tool for top management in succes-
sion planning, and the scope of the program has steadily expanded
from a few dozen executives a decade ago to almost 25 000
prospective leaders today.
Because performance appraisals impact significant elements of
reward, we ensure each year that there is consistency of perform-
ance ratings across the entire Group.
COMPENSATION DETERMINATION
Compensation determination for the CEO
Based on the performance evaluation appraisal made by the Board
of Directors, the Compensation Committee decides at its January
meeting on the CEO’s total compensation and the target compen-
sation for the coming year without the presence of the CEO. In
reaching its decision, the Compensation Committee takes into
account other relevant factors, including available benchmark infor-
mation and the advice of the Compensation Committee advisor.
Compensation determination for the Executive Committee members
In the presence of the CEO and based on his recommendations, the
Compensation Committee decides on the variable compensation
for the other Executive Committee members and other selected key
executives for the previous year. At the same meeting, the Compen-
sation Committee decides on the target compensation for these
executives for the coming year.
Compensation determination for other associates
Based on the year-end performance rating, line managers and next-
level line managers determine the incentive awards for each asso-
ciate under review, as well as the target compensation for the com-
ing year. The Compensation Committee determines the grants for
all equity compensation plans in aggregate. 
ELEMENTS OF OUR COMPENSATION PROGRAMS
The primary elements of our compensation system are:
– Annual base compensation – A fixed annual salary
– Variable compensation – Rewards for individual and business
performance 
– Benefits – Including pension and healthcare benefits
ANNUAL BASE COMPENSATION (SALARY)
The level of base compensation reflects each associate’s key areas
of responsibilities, job characteristics, seniority, experience and skill
sets. It is paid in cash, typically monthly, and is set according to
local practice, designed to provide our associates with fixed com-
pensation to ensure a reasonable standard of living relative to that
offered by our peer companies. 
In general, base compensation is reviewed annually to ensure
that competitive pay is maintained.
VARIABLE COMPENSATION
The goal of variable compensation is to reward Novartis associates
according to their performance and in a manner consistent with the
“pay for performance” principle. 
At lower levels, variable compensation is paid in cash, while at
managerial levels, variable compensation is generally composed of
annual cash incentive and an equity based long-term incentive.
Novartis believes that variable compensation should specifically
emphasize long-term incentives to align the interests of our asso-
ciates with those of long-term shareholders. This also reflects the
crucial importance of innovation and the long product development
and commercialization cycles that characterize our industry. The
amount of variable compensation is based on results and calcu-
lated as a percentage (0-200%) of target variable compensation.

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ANNUAL INCENTIVE
The annual incentive ensures that the associates focus on individ-
ual objectives and objectives defined by the business over a single
financial year. These objectives include objectives as market share,
innovation, and people management, which also positively influ-
ence the long-term performance. It rewards performance in the last
12 months in relation to these objectives and reinforces the “pay for
performance” principle.
In principle, the annual incentive is paid in cash and is capped
at 200% of target. However, a number of associates in certain coun-
tries and certain key executives worldwide are encouraged to invest
their annual incentive in a share savings plan. Under the share sav-
ings plan, they will receive their annual incentive awards fully or
partially in Novartis shares in lieu of cash. As a reward for their par-
ticipation in the share savings plan, Novartis matches their invest-
ments in shares after a holding period of three or five years. As a
rule, no shares are matched under these plans if an associate leaves
Novartis prior to the expiration of the holding period for reasons
other than retirement, disability or death. Thus, through the partic-
ipation in the share savings plan our associates are incentivized to
remain with Novartis in the long-term, while sharing in the future
financial success of Novartis and further aligning with the long-term
interests of our shareholders. 
Novartis currently has three share savings plans:
– Employee Share Ownership Plan (ESOP): In Switzerland, the ESOP
is available to about 12 688 associates. Participants within this plan
may choose to receive the incentive (i) 100% in shares, (ii) 50% in
shares and 50% in cash or (iii) 100% in cash. After expiration of a
three-year holding period of Novartis shares invested under the
ESOP, each participant will receive one free matching share for
every two Novartis shares invested. A total of 5 050 associates chose
to receive shares under the ESOP for their performance in 2011.
– United Kingdom Plan: In the United Kingdom, 2 790 associates can
invest up to 5% of their monthly salary in shares (up to a maximum
of GBP 125) and also may be invited to invest all or part of their net
annual incentive in shares. Two invested shares are matched with
one share with a holding period of three years. During 2011, about
1 870 associates elected to participate in this plan.
– Leveraged Share Savings Plan (LSSP): Worldwide 30 key executives
were invited to participate in a leveraged share savings plan based
on their performance in 2011. Instead of cash, their annual incen-
tive was awarded in shares and subject to a holding period of five
years. At the end of the holding period, Novartis will match the
invested shares at a ratio of 1-to-1 (i.e. one share awarded for
each invested share). 
Associates may only participate in only one of these plans in any
given year.
EQUITY BASED INCENTIVES
The long-term incentive is designed to focus on our objective of
long-term sustainable shareholder value creation and to support
our “pay for performance” principle by using equity based com-
pensation with a three year vesting period. 
These long-term incentives awarded by Novartis aim at retaining
our key talents, encouraging the realization of multi-year business
objectives and aligning our associates with our shareholders’ interests
by tying the value realized to the change in the share price at vesting.
The equity based long-term incentive is subject to the achievement
of predetermined performance objectives either at grant or at vesting.
Novartis offers two long-term incentive plans, the Equity Plan
“Select” based on yearly results with a vesting period of three years
and the Long-Term Performance Plan based on the average results
of a three-year period.
In exceptional cases, Novartis may also grant special share awards.
Equity Plan “Select”
The Equity Plan “Select” is a global equity incentive plan under
which all associates, including Executive Committee members, may
annually be eligible for a grant, which is capped at 200% of target.
The Equity Plan “Select” allows its participants to choose the form
of their equity compensation in restricted shares (or, in some juris-
dictions, RSUs1), tradable share options, or a combination of both,
with a vesting period of three years.
Tradable share options expire on their 10th anniversary from
grant date. Each tradable share option granted to associates enti-
tles the holder to purchase after vesting (and before the 10th
anniversary from grant date) one Novartis share at a stated exercise
price that equals the closing market price of the underlying share
at the grant date January 19, 2012. 
1In some jurisdictions, RSUs are granted rather than shares. Each RSU is equivalent in value to one
Novartis share and is converted into one share at the vesting date. RSUs do not carry any dividend
or voting rights, except for USA where employees receive a dividend equivalent during the vesting
period for 2009 and 2010 grants. Each restricted share is entitled to voting rights and payment of
dividends during the vesting period.

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6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T
138 | F I N A N C I A L R E P O R T
123
Compensation of Executives and Other Associates
2011 EQUITY VALUE AWARDED UNDER THE EQUITY PLAN “SELECT”
Executive Committee members
Other associates 
5%
95%
The terms of the tradable share options granted since 2008 are
shown in the table below.
TERMS OF SHARE OPTIONS
Exercise price
Vesting (years)
Term
Grant year
(CHF/USD)
(CH/other countries)
(years)
2012
54.20/58.33
3/3
10
2011
54.70/57.07
2/3
10
2010
55.85/53.70
2/3
10
2009
53.65/46.42
2/3
10
2008
64.05/57.96
2/3
10
If a participant leaves Novartis for reasons other than retirement, dis-
ability or death, unvested shares, RSUs and share options are for-
feited, unless determined otherwise by the Compensation Commit-
tee (for example, in connection with a reorganization or divestment).
In Switzerland, the participants in this plan can choose between
restricted shares or RSUs and tradable share options, or a combina-
tion of both. 
A total of 12 768 participants received 1.0 million restricted
shares, 6.5 million RSUs and 23.9 million tradable share options
under the Novartis Equity Plan “Select” for their performance in
2011, representing a participation rate of about 10% of all full-
time-equivalent associates worldwide. 
As of December 31, 2011, 94 million tradable share options
granted to associates were outstanding, covered by an equal num-
ber of shares and corresponding to 3.9% of the total number of out-
standing Novartis shares.
Approximately 5% of the total equity value awarded under the
Equity Plan “Select” was granted to the members of the Executive
Committee.
Long-Term Performance Plan
The Long-Term Performance Plan (LTPP) is an equity plan for key
executives designed to foster long-term commitment by aligning
the incentives of key executives to the performance of Novartis. The
LTPP is offered to selected executives, who are in key positions and
have a significant impact on the long-term success of Novartis. It is
capped at 200% of target. For members of the Executive Commit-
tee, LTPP represents between 20% and 45% of their total variable
compensation at target. The rewards are based on pre-determined
rolling three year global performance objectives focused on the
Novartis Economic Value Added (NVA) measured annually. The NVA
is calculated based on Group operating income adjusted for inter-
est, taxes and cost of capital charge. The performance realization
of a plan cycle is obtained right after the end of the third plan year
by adding together the annual NVA realizations of all plan years of
the plan cycle. The performance ratio for a plan cycle is obtained
by dividing the performance realization for the plan cycle with the
performance target for the plan cycle, expressing the result as a
percentage. The LTPP only allows a payout if the actual NVA
exceeds predetermined target thresholds.
To support the alignment of our Executive Committee members’
interests with those of the Group and our shareholders, the Long-
Term Performance Plan represents a substantial and increasing frac-
tion of Executive Committee members’ variable compensation tar-
gets relative to incentives based on performance during a single year.
On January 19, 2012, 138 key executives were awarded
464 230 shares under the Long-Term Performance Plan, based on
NVA achievement that exceeded our target performance for the per-
formance period 2009 to 2011.
LONG-TERM PERFORMANCE PLAN PARTICIPANTS HISTORY
Plan participants
Grant year
Performance
Award year
(number of key
= Target setting
period
= Payout in shares
executives)
2012
2012–2014
2015
139
2011
2011–2013
2014
139
2010
2010–2012
2013
142
2009
2009–2011
2012
138
2008
2008–2010
2011
117
VARIABLE COMPENSATION TARGET AND AWARD CALCULATION FORMULA
Annual incentive and Equity Plan “Select”
Under these plans, Novartis defines a target incentive as a percent
of base compensation for each participating associate at the begin-
ning of each performance period – traditionally the start of a calen-
dar year. Depending on the role and the level of responsibility of the
associates, target incentive percentages may reach up to 60% of

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ANNUAL INCENTIVE AND EQUITY PLAN “SELECT” CALCULATION FORMULA
Actual annual incentive or actual Equity Plan “Select” grant
=
×
×
×
Individual performance multiplier
Financial and
non-financial
objectives
Novartis
Values and
Behaviors
Business 
performance 
multiplier
Annual
base 
salary
Target 
incentive 
percentage
LONG-TERM PERFORMANCE PLAN PERIOD
Plan Year 2009
Plan Year 2010
Plan Year 2011
Plan period
Grant date = 
Target setting in RSUs
Award date = 
Payout in shares
LONG-TERM PERFORMANCE PLAN PAYOUT
=
×
Number of 
granted RSUs
Novartis Economic
Value Added
Perfomance factor
Long-Term 
Performance Plan
payout
base compensation for the annual incentive and 200% for the
Equity Plan “Select”.
The amount of the incentive under both the annual incentive
and the Equity Plan “Select” is determined on the basis of business
and individual performance. No awards are granted for perform-
ance ratings below a certain threshold. 
The Award Calculation Formula under both the annual incen-
tive and the Equity Plan “Select” is the following:
The business and the individual performance multipliers have thus
an equivalent weighting in the formula. The business performance
multiplier is based on the performance of the Group or business
area and may range from zero to 1.5.
The individual performance multiplier is based on achievement
of individually set financial and non-financial objectives as well as
meeting key behavioral standards, the Novartis Values and Behav-
iors. It may range from zero to 1.5. For the purpose of calculating
the individual performance multiplier, the individually set financial
and non-financial objectives and the Novartis Values and Behaviors
have an equivalent weighting. 
The business performance multiplier, combined with the indi-
vidual performance multiplier, is subject to a cap at 200% of the
target incentive.
This broad range of incentive percentages and multipliers
allows for meaningful differentiation on a “pay for performance”
basis. 
For those who have chosen to receive their annual incentive
under the ESOPs or LSSP plans, as well as for those receiving
awards under the Equity Plan “Select” the number of shares
awarded is determined by dividing the actual incentive amount by
the closing price of the shares on the grant date. In North America,
if associates choose to receive part or all of their grant under the
Equity Plan “Select” in tradable share options on American Deposi-
tary Shares (ADSs), the resulting number of tradable share options
is determined by dividing the respective incentive amount by a
value that equals 95% of the value of the options on ADSs as deter-
mined in accordance with International Financial Reporting Stan-
dards (IFRS). For associates in other countries, the divisor equals
90% of the IFRS value of options on shares.
Typically, the annual incentive is paid out in February following
the realization of the yearly objectives. 
The three-year vesting of the Equity Plan “Select” is contingent
on continued employment with Novartis. 
Long-Term Performance Plan
In the case of the LTPP, the performance objective (NVA) is deter-
mined over a three-year period commencing on January 1 of each
grant year. 
At the beginning of the performance period, plan participants
are allocated RSUs, which will be converted into Novartis shares
after the performance period. 
At the end of the three-year performance period, the Compensation
Committee adjusts the number of RSUs earned based on actual
performance. RSUs are converted into unrestricted Novartis shares
without an additional vesting period. In the United States, awards may
also be delivered in cash under the US deferred compensation plan.
Depending on the role and the level of responsibility of the associ-
ates, the target incentive percentages may reach up to 175% of
base compensation for LTPP. For outstanding NVA performance, 
the adjustment can go up to a maximum of 200% of the target incen-
tive. No incentive is awarded if actual NVA performance fails to meet
a predetermined threshold (or if the participant leaves Novartis dur-
ing the performance period for reasons other than retirement, dis-
ability or death).
SPECIAL SHARE AWARDS
Selected associates may exceptionally receive special awards of
restricted shares or RSUs. These Special Share Awards provide an
opportunity to reward outstanding achievements or exceptional
performance and aim at retaining key contributors. They are based

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Compensation of Executives and Other Associates
on a formal internal selection process, in which the individual per-
formance of each candidate is thoroughly assessed at several man-
agement levels. In addition, Special Share Awards may also be
granted to attract special expertise and new talents into the organ-
ization. These grants are consistent with the Novartis philosophy to
attract, retain and motivate best-in-class talents around the world. 
Restricted special awards generally have a five-year vesting period.
If an associate leaves Novartis for reasons other than retirement,
disability or death, unvested shares or RSUs are generally forfeited.
Worldwide 597 associates at different levels in the organization
were awarded a total of 1.5 million shares or RSUs in 2011.
SOURCE OF AWARDED SHARES
Novartis uses shares repurchased in the market to fulfill obligations to
deliver shares as required by the variable compensation plans and
special share awards, thus avoiding any dilution of shareholders.
Novartis does not have any approved conditional capital to obtain
shares for delivery of our share awards.
BENEFITS
The primary purpose of pension and healthcare plans is to estab-
lish a level of security for associates and their dependents with
respect to age, health, disability and death. The level of pension and
healthcare benefits provided to associates is country-specific and
influenced by local market practice and regulations, and is reviewed
regularly. 
The Group has a policy to change from defined-benefit pension
plans (DB) to defined contribution-pension plans (DC). All the major
plans have now been aligned with our benefits strategy with the
exception of the Alcon DBs, for which Novartis has established a
global timeline for their conversion into DCs. 
Novartis may provide other benefits in a specific country
according to local market practice and regulations, including
length-of service awards and perquisites. Associates who have been
transferred on an international assignment can also receive bene-
fits in line with Novartis policies.
EXECUTIVE COMPENSATION SUMMARY
Performance metrics
Compensation
Compensation 
Performance 
Method of
Number of 
element
plan
period
payments
Main drivers
At award
At vesting
participants
Base 
Base salary
–
Cash
Position, experience,
–
–
All 
compensation
sustained performance
associates
Variable compensation
Annual 
Cash or shares
12 months 1
Cash and/or
Financial measures such
Achievement of individual, 
–
15 508
incentive
(ESOP, ESOP UK, 
shares
as net sales, operating 
business and financial 
LSSP) 1
income, free cash flow, 
annual objectives or 
market share, innovation 
achievement of milestones 
and ongoing efforts to
in individual objectives 
optimize organizational
or long-term strategic 
effectiveness and 
plans, Novartis Values 
productivity
and Behaviors
Long-term 
Equity Plan  
from 3 to 
Restricted
Financial measures such
Achievement of individual, 
Share price
12 768
incentive
“Select”
10 years 2
shares
as net sales, operating 
business and financial 
or RSUs
income, free cash flow, 
annual objectives or 
market share, innovation 
achievement of milestones 
and ongoing efforts to
in individual objectives 
optimize organizational
or long-term strategic 
effectiveness and 
plans, Novartis Values 
productivity
and Behaviors
Long-Term  
3 years
Shares
Achievement of long-term 
–
Novartis 
138
Performance 
profit, measured through 
Value Added
Plan
Novartis Economic Value
Added (NVA) targets at 
Group level
Special 
5 years
Restricted 
Rewarding particular 
Selective assessment
Share price
597
Share Awards
shares 
achievements or 
or RSUs
exceptional performance
Benefits
Position, experience, age, 
–
–
sustained performance
1If the associate invests the annual incentive into a shares savings plan, the vesting/holding period will be three years (ESOP) or five years (LSSP).
2Three years for restricted share and/or RSUs. Ten years for tradable options.

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BENCHMARK GROUP COMPANIES 
Abbott Laboratories
Amgen
AstraZeneca
Bristol-Myers Squibb
Eli Lilly and Company
GlaxoSmithKline
Johnson & Johnson
Sanofi
Merck & Co.
Pfizer
Roche
COMPETITIVE POSITIONING
It is critical for Novartis to have competitive compensation plans at
a global level. According to Novartis compensation philosophy, an
associate who achieves his or her performance objectives is thus
generally awarded compensation comparable to the median level of
compensation provided by relevant benchmark companies. In case
of over- or under-performance, the actual total compensation deliv-
ered is adjusted accordingly and may significantly differ from the
benchmark median. To encourage and reward sustained superior
performance, total compensation may, in case of exceptional per-
formance, reach levels comparable to top-quartile levels of com-
pensation offered by the relevant benchmark companies.
Novartis participates in several compensation benchmarking
surveys that provide details on levels of salary, target and actual
annual incentives and long-term incentives, the relative mix of
short- and long-term incentives, and the mix of cash- and share-
based compensation. For Executive Committee positions and for
specific pharmaceutical positions, the benchmark group of indus-
try competitors for our 2011 benchmark survey consisted of the
following companies, which are all operating on a global level within
the healthcare industry and having relevant business models, sim-
ilar size, international needs, or similar talent skill sets:
Healthcare
Peers
Benchmark criteria
Novartis
Median
Revenue 1
50 624
40 249
Market Cap 1
133 731
74 145
Net income 1
9 969
5 070
Profit Margin
19.7%
12.6%
Employees
119 418
90 000
1In mio USD
Source: Equilar
For benchmarking other positions we include companies outside
our industry, with stature, size, scope and complexity that approxi-
mate our own to recognize the fact that competition for senior exec-
utive talent is not limited to the healthcare industry.
The geographic scope of the benchmark companies depends
on the nature of the positions. As a principle, global benchmarks are
considered for the most senior executive positions, while regional
and/or local benchmarks are applied in other situations. The com-
pensation benchmarking surveys, which analyze factors such as
recent market trends and best practices, are conducted by well-
established global compensation consultancy firms. These surveys
are checked and supplemented by input from the Compensation
Committee’s independent advisor. According to such surveys, pro-
jected 2012 merit salary increases for executives will be relatively
modest, but will mainly depend on the demand for talents.
Although target annual incentives and long-term incentives as a
percentage of salary are expected to be relatively flat versus the
previous year, the actual incentive or grants will be based on the
achieved performance.
SAFEGUARDS
We believe that incentivizing our associates encourages perform-
ance, loyalty and entrepreneurship, and creates sustainable value
that is in the interest of Novartis and our shareholders. However,
shareholders also expect that risks are appropriately managed. At
Novartis, appropriate objective setting combined with proper incen-
tive-plan design and rigorous safeguard measures allow our lead-
ers and associates to focus on long-term value creation. 
RISK MANAGEMENT
The goal of our compensation system is to encourage high perform-
ance and entrepreneurship, but not to reward inappropriate or
excessive risk taking or short-term profit maximization at the
expense of the long-term health of Novartis. The following charac-
teristics of our compensation system foster a culture of entrepre-
neurial risk management:
– Novartis Values and Behaviors: Compliance and ethical conduct
are integral factors considered in all regular performance reviews,
setting clear behavioral boundaries.
– People Performance Management Process: A rigorous People
Performance Management process is in place based on agreed-
upon objectives, values and behaviors reflecting compliance and
meritocracy. 
– Balanced Scorecard Approach to Performance-based Incentives:
The annual and long-term incentive compensation plans are not
overly focused on any single measure of performance. Instead,
financial objectives include net sales, operating income, free cash
flow as a percentage of sales, and Novartis Economic Value Added
(NVA). Non-financial objectives emphasize the achievement of
strategic and leadership objectives, and managing people, but
also innovation as well as process and productivity improvement.
Under the incentive plans, performance multipliers may not
exceed 200%.
– Balanced Mix of Compensation Elements: The target compensa-
tion mix is not overly weighted toward annual incentive awards
but represents a combination of cash and long-term share-based
compensation vesting over three years.

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Compensation of Executives and Other Associates
– Performance Period and Vesting Schedules: For long-term incen-
tives, performance period and vesting schedules overlap, reduc-
ing the motivation to maximize performance in any one period.
The equity awarded under the Equity Plan “Select” vests after a
period of three years. The Long-Term Performance Plan is an
equity plan based on a three-year performance period. 
– Clawback: We implemented “clawback” provisions in individual
employment contracts of all Executive Committee members as
well as in most incentive plans, and award letters to associates
(see – “Safeguards – Clawback”, on p.128).
– No Severance Payments or Change-of-Control Arrangements: No
employment contracts with Executive Committee members contain
unusually long notice periods, change-of-control clauses or sever-
ance payments. The CEO employment agreement can be termi-
nated upon a 12-month notice period.
– Share Ownership requirements: Members of the Executive Com-
mittee, as well as selected key executives are required to own a cer-
tain multiple of their annual base salary in Novartis shares or
share options (see – “Share Ownership Requirements” on p.128).
COMPENSATION GOVERNANCE
Legal Framework
The Swiss Code of Obligations as well as the Corporate Governance
Guidelines of the SIX Swiss Exchange require listed companies to
disclose certain information about the compensation of members
of the Board of Directors and Executive Committee members, their
equity participation in the Group as well as loans made to them.
This Annual Report fulfills that requirement. In addition, our Annual
Report is in line with the principles of the Swiss Code of Best Prac-
tice for Corporate Governance of the Swiss Business Federation
(economiesuisse).
Decision-making authorities
Authority for decisions related to compensation are governed by
the Articles of Incorporation, the Board Regulations and the Com-
pensation Committee Charter, which are published on the Novartis
website: 
www.novartis.com/corporate-governance. 
The 
main
responsibilities of the Compensation Committee are shown under
“Corporate Governance Report – Our Board of Directors – Role of
the Board of Directors and the Board Committees”.
The Compensation Committee serves as the supervisory and gov-
erning body for compensation policies and plans within Novartis and
has overall responsibility for determining, reviewing and proposing
compensation policies and plans for approval by the Board of
Directors in line with the Compensation Committee Charter. The
main discussion points and conclusions of each meeting of the Com-
pensation Committee are summarized in a brief report to the next
meeting of the full Board.
The Compensation Committee carefully analyzes and discusses
on an ongoing basis (but at least annually) the trends and develop-
ments in the field of compensation and corporate governance as
well as all compensation plans and levels with guidance from out-
side experts and consultants. The goal is to strengthen the interre-
lation between the compensation plans and the Group’s perform-
ance. It also reviews the compensation system to ensure that it does
not encourage inappropriate or excessive risk taking and instead
encourages behaviors that support sustainable value creation. 
The Compensation Committee is composed exclusively of mem-
bers of the Board of Directors who meet the independence criteria
set forth in our Board Regulations. Currently, the Compensation
Committee has the following five members: Marjorie M.T. Yang
(chair), William Brody, Srikant Datar, Ulrich Lehner and Enrico
Vanni. 
In 2011, the Compensation Committee held five meetings. 
COMPENSATION AUTHORIZATION LEVELS
Decision on
Recommendation
Authority
Compensation of Board 
members
Compensation Committee
Board of Directors
Compensation of the 
Compensation 
Chief Executive Officer
Chairman of the Board
Committee
Compensation of the 
other Executive Committee 
members and other 
Compensation 
selected key executives
Chief Executive Officer
Committee
Chairman of the Board 
Compensation 
Special Share Awards
or Chief Executive Officer
Committee
The General Meeting holds a consultative vote on the Compensation
System of Novartis. This vote takes place before every significant
change to the Compensation System, but at least every third Annual
General Meeting.
ROLE OF THE COMPENSATION COMMITTEE INDEPENDENT ADVISORS
The advisor to the Compensation Committee is independent of
management and does not perform any other consulting work for
Novartis. The key task of the advisor is to assist the Compensation
Committee in ensuring that the Novartis compensation policies and
plans are competitive, correspond to market practice, and are in
line with our compensation principles.
The Compensation Committee enters into a consulting agree-
ment with its independent advisor on an annual basis. In determin-
ing whether or not to renew the engagement with the advisor, the
Compensation Committee evaluates the quality of the consulting
service and the benefits of rotating advisors. In addition, the Com-
pensation Committee assesses on an annual basis the projected
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used Pearl Meyer & Partners LLC as its independent external com-
pensation advisor and decided that after several years of service a
new advisor should be hired. The Compensation Committee desig-
nated a new advisor, Frederic W. Cook & Co, Inc., in October 2011.
The Compensation Committee determined that the advisor is
free of any relationship that would impair professional judgment
and advice to the Compensation Committee, and has never been
hired for work by the management of Novartis.
CLAWBACK
Any incentive compensation paid to certain key executives, includ-
ing Executive Committee members, is subject to “clawback”. This
means that Novartis may choose not to pay future incentive com-
pensation or seek to recover incentive compensation where the
payout has been proven to conflict with internal management stan-
dards (including company policies and Novartis Values and Behav-
iors), accounting procedures or a violation of law.
SHARE OWNERSHIP REQUIREMENTS
In line with our share ownership principle, key executives are
required to own at least a certain multiple of their annual base
salary in Novartis shares or share options. The CEO is required to
own Novartis equity worth 5 times, the other Executive Committee
members 3 times, and other key executives, 1 to 2 times (position-
specific) their respective base compensation within three years of
hire or promotion. In the event of a substantial drop in the share
price, the Board of Directors may, at its discretion, extend that time
period.
CEO
5 x base salary
Executive Committee members
3 x base salary
Selected key executives
1 x or 2 x base salary
In determining equity amounts against the share ownership
requirement includes vested and unvested shares or ADSs acquired
under the Novartis compensation plans, as well as RSUs thereof,
with the exception of unvested matching RSUs from leveraged
share savings plans and unvested RSUs from the Long-Term Perfor-
mance Plan. In addition, it includes other shares as well as vested
options on Novartis shares or ADSs that are owned directly or indi-
rectly by “persons closely linked”1.
The Compensation Committee reviews compliance with the share
ownership guideline on an annual basis.
1“Persons closely linked” are (i) their spouse, (ii) their children below age 18, (iii) any legal entities
that they own or otherwise control, and (iv) any legal or natural person who is acting as their
fiduciary.
2011 COMPENSATION OF THE MEMBERS OF THE
EXECUTIVE COMMITTEE 
PERFORMANCE IN 2011
At its meeting on January 19, 2012, the Compensation Committee
decided on the amounts of variable compensation for 2011 for the
CEO and Executive Committee members by applying the principles
described previously in this Compensation Report. The specific com-
pensation decisions made for the CEO and Executive Committee
members reflect their achievements against the financial and non-
financial performance objectives established for them at the begin-
ning of the year. The achievements were assessed from both a quan-
titative and a qualitative perspective, with the Compensation
Committee using its judgment, where appropriate, in concert with
a review of metrics. In line with our compensation philosophy and
performance principles, the actual payout of the variable compen-
sation reflects the key individual achievements and the actual busi-
ness performance of the organization taking into account the vari-
ous following accomplishments and events, which occurred in
2011:
– Novartis management delivered against the critical goals of the
organization, including financial and non-financial targets, to sup-
port the long term health of Novartis. These targets were estab-
lished at the beginning of the year and were categorized under
four categories: Financial targets, Innovation and Growth, Organi-
zational Health, and Customer Satisfaction.
– The financial targets of net sales, free cash flow, and the long-
term, 3-year rolling NVA were met or exceeded. However, the tar-
get of operating income was not achieved as a result of the excep-
tional provisions made in the fourth quarter of 2011.
– In the area of Innovation and Growth, each division was given spe-
cific targets to enhance their respective pipelines with new prod-
ucts. These were measured by the number of new compounds
moving from research through proof of concept, submissions to
regulatory agencies for marketing authorization, and approvals.
These targets were met or exceeded in 2011, and included among
others, the marketing authorization of Gilenya the first oral treat-
ment for multiple sclerosis in the EU and Arcapta for chronic
obstructive lung disease in the US. As expected not all trials and
submissions were successful. The regulatory approvals of Ilaris for
the treatment of gouty arthritis and SOM230 for the treatment of
Cushing Syndrome were delayed while the regulatory submis-
sions INC424, NVA237, ACZ885 for various indications occurred
on time. The results of a long-term Tekturna/Rasilez study in
hypertensive patients with concomitant renal and cardiovascular
disease showed negative results, which led to the early termina-
tion of the study. Overall, the Pharmaceuticals Division gained
market share.

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2011 Compensation of the Members of the Executive Committee
– Importantly, the Alcon integration was planned and executed
according to plan, without disruption to the business. The ambi-
tious synergy and growth targets were exceeded. It should also be
mentioned that Sandoz performed at a very high level, exceeding
expectations significantly and the Vaccines and Diagnostics Divi-
sion not only achieved the fastest growth among its competitors,
but also gained a respectable market share with Menveo, a vaccine
to protect against certain types of bacterial meningitis. The per-
formance of OTC and Animal Health were on track. Finally, growth
was accelerated in key emerging markets, particularly in China.
– In the area of Organizational Health, specific objectives were set
in the area of productivity within manufacturing, procurement, IT
and the finance function. These productivity targets were met or
exceeded. Additionally, objectives to strengthen Quality Assurance
were established. Capital investment and operating plans were
developed and executed in key Novartis facilities to strengthen
QA. However, the warning letter from the FDA covering three San-
doz facilities in the U.S. and Canada indicates that additional work
will be required in this area. Additionally, compliance with quality
standards has to be upgraded in the Nebraska OTC plant. In the
area of associates’ behavior, the Compliance group was signifi-
cantly strengthened to manage adherence to the Novartis Code of
Conduct, including ethical business practices. Customer satisfac-
tion was measured by market share gains around the world.
Nearly all market share targets which were established at the
beginning of the year, were met or exceeded. Management also
successfully implemented the Corporate Citizenship strategy and
delivered among other programs over 100 million treatments of
Coartem against malaria to developing countries. An estimated
one million lives, mostly children, were saved since the launch of
this product. Novartis also continued successfully its Leprosy
eradication program with WHO by donating all necessary med-
ications for free. 
– The Board of Directors took note of the high retention rates of key
performers, the high quality continuous education programs and
the strength and good collaboration of the leadership team.
– Finally, Novartis was named the number one pharmaceutical
company in Fortune’s “Worlds most admired companies”, and
strong rankings in the Dow Jones Sustainability World Index
reflecting the overall good reputation of the company.
COMPENSATION IN 2011
The compensation table on the following page discloses the com-
pensation earned by the CEO and Executive Committee members
for performance in 2011. The following paragraphs describe the
principles underlying the data in the table.
ALIGNMENT OF REPORTING AND PERFORMANCE
The compensation table synchronizes the reporting of annual com-
pensation with the performance in the given year, i.e., all amounts
awarded for performance in 2011, including the future ESOP/LSSP
match, are disclosed in full.
DISCLOSURE STRUCTURE
The compensation table shows the compensation granted to the
CEO and each Executive Committee member for performance in
2011 for all compensation elements – base compensation, variable
compensation and benefits – as previously described.
The column “Future ESOP/LSSP match” reflects shares to be
awarded in the future if the Executive Committee member remains
with Novartis for at least three or five years, respectively. 
VALUATION PRINCIPLES
In order to allow a comparison with other companies, the Compen-
sation Committee decided to disclose shares, restricted shares,
RSUs and ADS at their market value on the date of grant. Market
value is the current quoted share price at which a director or an
associate is granted a share, a restricted share or a restricted stock
unit at grant date. The market value of share options is calculated
by using an option pricing valuation model as per grant date. 
As shares, RSUs and share options under the variable compen-
sation plans are generally granted with a vesting1 period, and asso-
ciates in Switzerland (including Executive Committee members)
may block2 shares received under any variable compensation plan
for up to 10 years, equity based compensation is also provided at
tax value in accordance with Novartis past disclosure practice.
According to the Swiss Federal Tax Administration and as the Com-
pensation Committee also firmly believes, such restrictions affect
the value of shares, RSUs and share options negatively. In its
“Kreisschreiben Nr. 5”, the Swiss Tax Administration provides for a
methodology pursuant to which unvested or blocked shares or
share options shall be valued with a discount for each year they are
unvested or blocked. In addition, for the valuation of share options,
the Swiss Tax Authorities apply – in a standing practice for Novartis
(since 1997) – an option valuation model based on Black-Scholes.
See also Note 27 to the Group’s consolidated financial state-
ments for information on executive officer and non-executive direc-
tor compensation in accordance with IFRS.
1Vesting refers to the waiting period under a share-based incentive plan that must expire before the
associate becomes irrevocably entitled to the shares, RSUs or share options involved. The associate
cannot sell or exercise unvested share, RSUs or share options. If an associate leaves Novartis prior
to the expiration of the vesting period for reasons other than retirement, disability or death, the asso-
ciate will generally forfeit rights to such shares, RSUs or share options.
2Blocking refers to the ability of associates in Switzerland to opt for an extended trading restriction
period of up to 10 years from the award date (including vesting). Novartis encourages associates to
block their shares because doing so aligns the associates’ interests with those of shareholders.

2 | G R O U P R E V I E W  
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114 | C O M P E N S AT I O N R E P O R T
138 | F I N A N C I A L R E P O R T
131
2011 Compensation of the Members of the Executive Committee
EXECUTIVE COMMITTEE MEMBER - EQUITY AWARDS FOR PERFORMANCE YEAR 2011 (NUMBER OF EQUITY INSTRUMENTS AND TAX VALUE)
Variable compensation
Short-term 
incentive plans
Long-term incentive plans
Equity Plan “Select”
Long-Term Performance Plan
Special share awards
Future ESOP/LSSP match
Shares
Shares
Shares
Shares
Options
Options
Shares
Shares
Shares
Shares
Shares
Shares
Currency
(Number)
(Tax value)2,3
(Number)
(Tax value)2,4
(Number)
(Tax value)2
(Number)
(Tax value)2,5
(Number)
(Tax value)2,6
(Number)
(Tax value)2,7
Joseph Jimenez 
(Chief Executive Officer)
CHF
19 484
789 131
113 654
5 172 099
0
0
83 958
4 550 524
0
0
19 484
789 131
Juergen Brokatzky-Geiger
CHF
11 366
460 340
22 731
1 034 429
0
0
10 745
582 379
0
0
11 366
460 340
Kevin Buehler 
(since April 8, 2011)
USD
18 496
806 207
46 566
2 280 588
0
0
22 506
1 312 788
0
0
18 496
806 207
David Epstein
USD
10 003
436 008
47 900
2 345 904
0
0
22 175
1 293 468
0
0
10 003
436 008
Mark C. Fishman
USD
16 309
710 871
66 193
3 241 804
0
0
23 107
1 347 831
0
0
16 309
710 871
Jeff George
CHF
6 747
307 038
26 984
1 227 972
0
0
8 181
443 410
20 000
702 424
3 374
153 542
George Gunn
CHF
0
0
20 388
927 805
0
0
17 166
930 397
0
0
0
0
Andrin Oswald
CHF
0
0
25 185
639 979
0
0
8 181
443 410
20 000
702 424
0
0
Jonathan Symonds
CHF
14 613
591 848
36 532
1 662 477
0
0
14 136
572 529
0
0
14 613
496 924
Thomas Werlen 
(until September 30, 2011) CHF
7 611
346 357
0
0
0
0
0
0
0
0
0
0
Naomi Kelman 
(as from March 2, 2011) 1
USD
0
0
9 001
440 824
0
0
1 401
81 720
88 000
4 004 689
0
0
Felix R. Ehrat 
(as from October 1, 2011) 1 CHF
2 406
97 447
4 812
218 982
0
0
1 414
57 269
0
0
2 406
81 818
Total 8
CHF
107 035
4 320 556
419 946 18 236 947
0
0
212 970 11 151 429
128 000
4 948 821
96 051
3 710 150
1The table reflects the compensation as Permanent Attendee to the Executive Committee from date of hiring until December 31, 2011.
2Values of shares and RSUs granted are discounted by 6% per year depending on the length of the combined vesting and blocking period. For example, the value of a share award subject to a three-
year vesting/blocking period calculated in accordance with the methodology described in the Kreisschreiben Nr. 5 equals 83.962% of its market value at the grant date. The value of a share award
with a combined vesting/blocking period of ten years equals 55.839% of its market value at the grant date. The closing share price on the grant date (January 19, 2012) was CHF 54.20 per Novartis
share and USD 58.33 per ADS. The values of share options granted are reported based on the valuation principles contained in a tax ruling from the Swiss tax authorities, reflecting the principles as
disclosed in the aforementioned Kreisschreiben Nr. 5. According to this methodology, tradable share options under the Equity Plan “Select” with a vesting period of three years have a value of CHF
0.40 per option at grant.
3These shares have a five-year vesting period under LSSP and a three-year vesting period under ESOP.
4Andrin Oswald has voluntarily blocked these RSUs for ten years in addition to the three-year vesting period.
5Jonathan Symonds and Felix R. Ehrat have voluntarily blocked these shares for five years.
6The special RSU awards granted to Jeff George and Andrin Oswald have a five-year vesting period. The special share award granted to Naomi Kelman has a staggered vesting of up to seven years.
7Jonathan Symonds and Felix R. Ehrat have voluntarily blocked these LSSP matching share units for eight years including the five-year vesting period.
8Amounts in USD for Kevin Buehler, David Epstein, Mark C. Fishman and Naomi Kelman were converted at a rate of CHF 1.00 = USD 1.130, which is the same average exchange rate used in the
Group’s consolidated financial statements.

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EXECUTIVE COMMITTEE ACTUAL COMPENSATION MIX IN 2011 – 
BASE AND VARIABLE COMPENSATION
15.4%
69.2%
15.4%
Base salary
Annual Incentive 
Long Term Incentive
excluding future
(Select, LTPP grants and
LSSP/ESOP match
Special Share Awards)
As the table below shows, most executive compensation is variable
and awarded in the form of restricted equity. This ensures align-
ment with the interests of Novartis and its shareholders.
EXECUTIVE COMMITTEE MEMBER ACTUAL COMPENSATION MIX IN 2011 –
BASE AND VARIABLE COMPENSATION 1
Variable
Base
Annual
Long Term
salary
Incentive2
Incentive3
Joseph Jimenez
13.3%
12.2%
74.4%
Juergen Brokatzky-Geiger
22.3%
19.7%
58.0%
Kevin Buehler
12.3%
26.0%
61.7%
David Epstein
15.5%
16.4%
68.0%
Mark C. Fishman
13.8%
13.5%
72.7%
Jeff George
17.0%
17.0%
66.0%
George Gunn
23.9%
18.7%
57.4%
Andrin Oswald
17.6%
16.4%
66.0%
Jonathan Symonds
20.1%
17.9%
62.0%
Naomi Kelman 
(as from March 2, 2011) 4
8.1%
4.3%
87.6%5
Felix R. Ehrat 
(as from October 1, 2011) 4
27.2%
20.3%
52.5%
Total 6
15.4%
15.4%
69.2%
1Excludes pension, other benefits and future ESOP/LSSP match.
2Excludes future ESOP/LSSP match.
3Long Term Incentive includes Select, LTPP grants and Special Share Awards.
4Permanent Attendee to the Executive Committee.
5Includes the special award of 88 000 shares granted to Naomi Kelman to compensate her loss of
equity from her former employer.
6Excludes Thomas Werlen who stepped down from the Executive Committee as per September
30, 2011.
SHARES AND SHARE OPTIONS OWNED BY MEMBERS 
OF THE EXECUTIVE COMMITTEE
The following tables show the total number of vested and unvested
Novartis shares (including share units but excluding unvested
matching share units from leveraged share savings plans and
unvested target units from the Long-Term Performance Plan) and
the total number of share options owned by Executive Committee
members as of January 19, 2012. 
As of January 19, 2012, none of the Executive Committee mem-
bers together with “persons closely linked” to them (see definition
under “Share Ownership – Ownership Guidelines”) owned 1% or
more of the outstanding shares of Novartis, either directly or
through share options.
As of December 31, 2011, all Executive Committee members
who have served at least three years on the Executive Committee
have met or exceeded their personal Novartis ownership require-
ments. 
SHARES OWNED BY EXECUTIVE COMMITTEE MEMBERS
Number of 
shares1
Joseph Jimenez
461 487
Juergen Brokatzky-Geiger
232 858
Kevin Buehler
(as from April 8, 2011)
445 2872
David Epstein
279 395
Mark C. Fishman
435 071
Jeff George
109 525
George Gunn
251 459
Andrin Oswald
135 713
Jonathan Symonds
144 829
Naomi Kelman 
(as from March 2, 2011) 3
97 906
Felix R. Ehrat 
(as from October 1, 2011) 3
9 132
Total 4
2 602 662
1Includes holdings of “persons closely linked” to members of the Executive Committee (see
definition under – Share and Share Options by Members of the Board of Directors).
2Excludes performance share units from former Alcon equity plans to vest after January 19,
2012.
3Permanent attendee to the Executive Committee.
4Excludes Thomas Werlen who stepped down from the Executive Committee as per September
30, 2011.

2 | G R O U P R E V I E W  
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6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T
138 | F I N A N C I A L R E P O R T
133
2011 Compensation of the Members of the Executive Committee
SHARE OPTIONS OWNED BY EXECUTIVE COMMITTEE MEMBERS
Number of share options 1
2012
2011
2010
2009
2008
Other
Total
Joseph Jimenez
552 076
157 266
709 342
Juergen Brokatzky-Geiger
75 705
109 016
146 436
331 157
Kevin Buehler
(as from April 8, 2011)
782 4852
782 485
David Epstein
267 777
267 777
Mark C. Fishman
184 870
587 149
772 019
Jeff George
141 396
114 979
256 375
George Gunn
94 371
94 371
Andrin Oswald
5 633
5 633
Jonathan Symonds
54 348
54 348
Naomi Kelman 
(as from March 2, 2011) 3
Felix R. Ehrat 
(as from October 1, 2011) 3
Total 4
–
141 396
–
627 781
451 152
2 053 178
3 273 507
1Share options disclosed for a specific year were granted in that year under the Novartis Equity Plan “Select.” The column “Other” refers to share options granted in 2007 or earlier, to share options
granted to these executives while they were not Executive Committee members, and to share options bought on the market by the Executive Committee members or “persons closely linked” to them
(see definition under – Share and Share Options Owned by Members of the Board of Directors).
2Consists of non tradable options and share settled appreciation rights resulting from conversion of Alcon equity into Novartis equity.
3Permanent Attendee to the Executive Committee.
4Excludes Thomas Werlen who stepped down from the Executive Committee as per September 30, 2011.
LOANS AND OTHER PAYMENTS
LOANS TO EXECUTIVE COMMITTEE MEMBERS
No loans were granted to current or former Executive Committee
members during 2011. No such loans were outstanding as of
December 31, 2011.
OTHER PAYMENTS TO EXECUTIVE COMMITTEE MEMBERS
During 2011, no payments (or waivers of claims) other than those
set out in the Executive Committee Member Compensation table
were made to current Executive Committee members or to “per-
sons closely linked” to them (see definition under “Compensation
of the Board of Directors – Shares and Share Options Owned by
Members of the Board of Directors”).
PAYMENTS TO FORMER EXECUTIVE COMMITTEE MEMBERS
During 2011, no payments (or waivers of claims) were made to for-
mer Executive Committee members or to “persons closely linked”
to them (see definition under “Compensation of the Board of Direc-
tors – Shares and Share Options Owned by Members of the Board
of Directors”), except for an amount of CHF 25 596, which was paid
to a former member of the Executive Committee as deferred com-
pensation.
NOTES 27 TO THE GROUP’S AUDITED CONSOLIDATED FINANCIAL
STATEMENTS AND 12 TO THE AUDITED FINANCIAL STATEMENTS OF
NOVARTIS AG
The compensation awarded to the members of the Board of Direc-
tors and the Executive Committee members is also presented in
our Financial Report in note 27 to the Group’s audited consolidated
financial statements and in note 12 to the audited financial state-
ments of Novartis AG.

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135
A gift for living
JOE CRISMAN: “I remember it very well. It was 1976. I was teaching 
in a small northern Wisconsin school and had some pain in my left 
eye. I went on to lose the center vision in that eye, then the center 
vision in my right eye, which rendered me nearly blind in a matter of 
weeks. I had 16 miles to drive to that small school where I taught. 
I loved teaching. The way I would get there without center vision in 
both eyes was, I had good peripheral vision, so I could see the tops of 
the pine trees along the highway.
“I went with Karen to eye doctors who established there might be 
something going on with my optic nerves and prescribed steroid 
injections. After about 10 of them, my right eye cleared up so I could 
see again. But then a neurologist in a clinic in Wisconsin ran me 
through a ringer of tests, including spinal taps. When he came into 
the room he said, ‘I have some bad news and I have worse news. 
The bad news is Elvis Presley died today.’ The worse news was I 
had MS. MS is, neurologically speaking, a kind of a plaque over the 
nerves that interrupts the messages from my brain to my muscles in 
terms of movement of my arms and legs. And basically that plaque 
on those neurons interrupts the messages, so they don’t get through 
to my muscles. The first reaction to such a diagnosis is denial. You 
want to believe these kinds of things aren’t really happening, but in 
the back of your mind, you know they are. It’s kind of hard to accept 
that you’re losing the ability to do things like walking when you were 
once a very avid water skier.
“Then from 1977 on, for 10 years, I’d been basically symptom-free 
when I began to feel numbness in my upper chest down to my waist. 
I underwent what ended up being 11 hours of what they call radical 
neuro-microsurgery to drain a cyst full of fluid on my spine. And for a 
time I had no more symptoms. Then into the 1990s I slowly degen-
erated in terms of walking. I went from one cane to two canes to a 
walker and then eventually into a motorized scooter.
 
“My wife Karen and I were married in 1973, on the day we were to 
graduate from college. She’s four months older than I am, so I was 
sort of a child groom. Karen taught school for 30 years, was principal 
of her school, and I never did want to stop teaching. It was a case 
HE A LT H C A R E PE R SPEC T I V E S: A G IF T FO R L I V IN G

136
N O VA RT I S  G R O U P A N N UA L  R E PO R T  2 0 11

137
of love-what-you’re-doing-and-doing-what-you-love. I taught history for 
more than 29 years and this is no brag, just fact: I had a real gift com-
municating with my students, in developing a love of learning in them. 
But I finally had to retire. It just got increasingly difficult to keep control 
of the classroom. One of the big issues is fatigue. I get tired quickly 
and this slows down everything. I can remember falling in the teachers’ 
lounge, the sound of my head hitting the tile. I was on the way out of 
the stall when I fell backwards, fracturing my skull. When I was in and 
out of consciousness, the priest was giving me the last rites.
“It’s hard even now to talk about that time without allowing myself a 
‘Why me?’ moment. But I don’t really want to dwell on the past or even 
the future and what it might include; I really want to stay and live in the 
present. I am and Karen is…we’re firm believers in trying to do every-
thing that we would normally do if I didn’t have MS, only now we have 
to do it a little differently. 
“My job since we moved down here to Florida is to offer assistance to 
guests at Disney World. I am a kind of greeter or guide. I’ve had people 
come up to me and ask me what happened. Was I in the war and got 
injured? And I tell them I have multiple sclerosis, though a lot of them 
don’t have a good handle on what it means. Still lots of times people 
will just walk past me when I greet them. They’re coming into the Ticket 
and Transportation Center where I work, and they don’t really see me. 
The person in the wheelchair disappears. There have been times when 
a tourist will ask me a question, then ask the very same question to a 
walking individual, who will then say the same thing I did. So yes, I get 
angry at what I see as a cultural bias, but try not to get antagonistic. I 
take some sort of solace in my belief that I can be a positive element 
in helping these people understand what it means to be a person in 
a wheelchair. People have to be aware that just because you are in 
a wheelchair doesn’t mean you’re soliciting their sympathy. What’s 
wanted is their understanding.” 
HE A LT H C A R E PE R SPEC T I V E S: A G IF T FO R L I V IN G

N OVA R T I S  G R O U P  A N N UA L  R E P O R T  2 0 1 1
138
FINANCIAL REPORT
CONTENTS
FINANCIAL REPORT
Financial Highlights 2011
139
Key Financial Developments
140
Operating and Financial Review
141
Summary of Key Financial Data
185
Equity Strategy and Share Information
187
Novartis Group Consolidated Financial Statements
190
including:
Report of Novartis Management on Internal Control 
over Financial Reporting
259
Report of the Statutory Auditor on the Consolidated
Financial Statements of Novartis AG
and Internal Control over Financial Reporting
260
Financial Statements of Novartis AG
262
including:
Board and Executive Compensation Disclosures
as Required by Swiss Law
269
Report of the Statutory Auditor 
on the Financial Statements of Novartis AG
281

2 | G R O U P R E V I E W  
16 | H E A LT H C A R E P O R T FO L I O  
6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T  
13 8 | F I N A N C I A L R E P O R T
139
Contents | Financial Highlights 2011
2011
2010
Change
USD millions
USD millions
%
Net sales
58 566
50 624
16
Operating income
10 998
11 526
– 5
Return on net sales (%)
18.8
22.8
Net income
9 245
9 969
– 7
Basic earnings per share (USD) 1
3.83
4.28
– 11
Core 2
Operating income
15 909
14 006
14
Core return on net sales (%)
27.2
27.7
Net income
13 490
12 029
12
Basic earnings per share (USD) 1
5.57
5.15
8
Change in net debt
– 301
– 18 314
Equity at year-end
65 940
69 769
– 5
Dividend (CHF) 3
2.25
2.20
2
NET SALES GROWTH BY SEGMENT 4
(in %)
CASH FLOWS FROM OPERATING ACTIVITIES AND FREE CASH FLOW
(in USD millions)
CORE OPERATING INCOME USD GROWTH
(in %) 2,4
CORE OPERATING
MARGIN (in %) 2
12011 average number of shares outstanding: 2 382.5 million (2010: 2 285.7 million)
2Core results for operating income, net income and earnings per share (EPS) eliminate the
impact of acquisition-related factors and other significant exceptional items. These adjustments
are explained in detail starting on page 179.
NET SALES GROWTH BY REGION
(in %)
FINANCIAL HIGHLIGHTS 2011
2011
2010
117.5
123.3
Liquid funds
Other current 
assets
Non-current assets
Financial debt
Other liabilities
Equity
TOTAL ASSETS
(in USD billions and %)
TOTAL EQUITY AND LIABILITIES
(in USD billions and %)
3Dividend payment for 2011: proposal to 2012 Annual General Meeting
4Restated to reflect new segment allocation introduced during 2011 as explained in detail on
page 159
5Basis for growth is full year 2010 on a pro forma basis as explained on page 184
Pharmaceuticals
4
7
Alcon 5
7
10
Sandoz
7
10
Vaccines and Diagnostics
– 34
– 32
Consumer Health
3
6
Group
12
16
Constant Currencies
US Dollars
United States
14
14
Europe
7
12
Asia/Africa/Australasia
15
25
Canada and Latin America
21
18
Group
12
16
Constant Currencies
US Dollars
Pharmaceuticals
5
Alcon 5
13
Sandoz
10
Vaccines and Diagnostics
– 87
Consumer Health
3
Group
14
30.9
35.1
20.3
6.8
18.9
27.2
Cash flows from
operating activities
14 309
14 067
Purchase of property, plant 
& equipment
– 2 167
– 1 678
Purchase of intangible, non-
current and financial assets
– 407
– 693
Proceeds from sales of 
non-current assets
768
650
Free cash flow
12 503
12 346
2011
2010
93.4
(80%)
19.0
(16%)
5.1
(4%)
96.6
(78%)
18.6
(15%)
8.1
(7%)
2011
2010
117.5
123.3
66.0
(56%)
31.3
(27%)
20.2
(17%)
69.8
(56%)
30.5
(25%)
23.0
(19%)

N OVA R T I S  G R O U P  A N N UA L  R E P O R T  2 0 1 1
140
KEY FINANCIAL DEVELOPMENTS IN 2011
NOVARTIS IN 2011
Innovation underpinned continued double-digit growth with a strong contribution from
recently launched products.
NET SALES 
Net sales rose 16% (+12% in constant currencies (cc)) to USD 58.6 billion on the
underlying business expansion and from the Alcon acquisition.
PHARMACEUTICALS1
Net sales were up 7% (+4% cc) to USD 32.5 billion with impressive volume growth
(9 percentage points) offsetting the impact of generics entries, product divestments and
pricing. Products launched since 2007 comprised 28% of net sales.
ALCON2
Alcon net sales of USD 10.0 billion rose 10% (+7% cc) on a pro forma basis, driven by
the Ophthalmic Pharmaceuticals and Surgical product categories, as well as strong
growth in emerging markets.
SANDOZ1
Net sales advanced 10% (+7% cc) to USD 9.5 billion, driven by strong growth in the US,
with enoxaparin reaching USD 1 billion in sales, as well as other key regions and differ-
entiated products, which now account for 47% of Sandoz global sales.
VACCINES AND DIAGNOSTICS
Net sales were USD 2.0 billion, down 32% (–34% cc) from 2010. Underlying net sales
(excluding A(H1N1) in 2010) achieved growth of 22% cc, driven by all franchises, with a
particularly strong contribution from the meningococcal disease franchise.
CONSUMER HEALTH1
Net sales were up 6% (+3% cc) to USD 4.6 billion. In OTC, net sales declined at the 
end of 2011 due to a temporary suspension of operations and voluntary product recall
at one of the US sites. Animal Health continued to grow ahead of the market in most
regions.
OPERATING INCOME 
Operating income was down 5% (+1% cc) to USD 11.0 billion, following net exceptional
charges of USD 1.9 billion. Core operating income grew 14% (+16% cc) to USD 15.9
billion, delivering strong operating leverage. Core operating income margin was 27.2%.
NET INCOME
Net income decreased 7% (–2% in cc) to USD 9.2 billion in line with the decline in
operating income. Core net income rose 12% (+15% cc) to USD 13.5 billion.
BASIC EARNINGS PER SHARE
Basic earnings per share (EPS) fell 11% (–5% cc) to USD 3.83 from USD 4.28 in 2010,
while core EPS rose 8% (11% in cc) to USD 5.57.
FREE CASH FLOW
Free cash flow reached USD 12.5 billion, up 1% over 2010.
DIVIDEND
Proposed dividend of CHF 2.25 per share for 2011 represents 15th consecutive annual
increase, up 2% from CHF 2.20 in 2010, a dividend yield of 4.2%.
1Restated to reflect new segment allocation introduced during 2011 as explained in detail on page 159
2Basis for growth is full year 2010 on a pro forma basis as explained in detail starting on page 184

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OPERATING AND FINANCIAL REVIEW 2011
This operating and financial review should be read together with
the Group’s consolidated financial statements in this Annual
Report, which have been prepared in accordance with International
Financial Reporting Standards (IFRS) as published by the Interna-
tional Accounting Standards Board.
OVERVIEW
Novartis provides healthcare solutions that address the evolving
needs of patients and societies worldwide. Our focused, diversified
portfolio of businesses is made up of six global operating divisions
and reports its results in five segments:
– Pharmaceuticals: Innovative patent-protected prescription medi-
cines
– Alcon: Surgical, ophthalmic pharmaceutical and vision care prod-
ucts
– Sandoz: Generic pharmaceuticals
– Vaccines and Diagnostics: Human vaccines and blood-testing
diagnostics
– Consumer Health: OTC (over-the-counter medicines) and Animal
Health
The Group established its newest and second largest division,
Alcon, after securing 100% ownership of Alcon, Inc., on April 8,
2011. The new division includes the CIBA Vision contact lens and
lens care business and selected ophthalmic medicines from the
Pharmaceuticals Division and is a world leader in eye care, offering
the widest spectrum of innovative surgical, pharmaceutical and
vision care products to address the world´s eye care needs.
Novartis has leadership positions in each of the five businesses,
giving us the capacity to address customer and patient needs
across segments of the healthcare marketplace. We believe that our
ability to innovate in all these segments will allow us to tailor our
portfolio in response to market opportunities and will enable
Novartis to continue as an industry leader.
Headquartered in Basel, Switzerland, the Novartis Group com-
panies employed approximately 124 000 full-time equivalent asso-
ciates as of December 31, 2011, with operations in more than 140
countries around the world.
FACTORS AFFECTING RESULTS OF OPERATIONS
A number of key factors influence the Group’s results of operations
and the development of our businesses.
The fundamentals of the healthcare industry remain robust due
to long-term demographic and socioeconomic trends worldwide,
which are increasing the demand for and use of medicines and
other healthcare products. Consistent investments in innovation
and advancing technologies are also supporting the development of
new medicines to better treat many diseases.
At the same time, other factors have created a business environ-
ment that has significant risks, such as the growing burden of
healthcare costs in many countries, which has led governments and
payors to focus on controlling spending ever more tightly, and more
stringent regulatory demands, which have made securing approvals
for new drugs increasingly costly and difficult and increased the
risk of disruptions in our supply chain.
We believe that Novartis is strategically well-positioned to oper-
ate successfully in this evolving landscape. We expect that our
broad, focused portfolio, our capacity to innovate resulting in a rich
pipeline of potential new medicines that address unmet medical
needs, and our established presence across regions should enable
us to adapt to the evolving healthcare marketplace.
TRANSFORMATIONAL CHANGES FUELING DEMAND
Long-term trends in the composition and behavior of the worldwide
population are fueling demand for and access to healthcare, while
scientific advances continue to open new frontiers in patient treat-
ment, creating major opportunities for improved care. These trends
are expected to sustain steady growth in the healthcare market
overall in the coming years and to drive accelerating growth in key
segments.
AGING GLOBAL POPULATION AND SHIFTING DEMOGRAPHICS
Scientific advances in treating diseases and increased access to
healthcare worldwide have enabled people across the globe to
enjoy longer and healthier lives. The rise in life expectancy is coin-
cident with a decline in birth rates, increasing the proportion of the
elderly around the world. Over the next decade, there is expected
to be a 75% increase in the number of people over the age of 60.
In the developed world, by 2040 there are predicted to be twice as
many people over the age of 60 as there will be under 15; in the
United States, the number of people over the age of 60 will more
than double by 2050. The proportion of the elderly is growing even
faster in the developing world. For example, according to the United
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ulation is projected to rise by more than 15% annually until 2040.
As the global population ages, there will continue to be an acceler-
ating need for treatments for the diseases and conditions that dis-
proportionately afflict the elderly.
One area where this unmet medical need is particularly evident
is eye care. The aging of the world’s population is linked to an
increase in eye diseases, with several hundred million people living
with blindness or serious vision impairment around the world. With
the addition of Alcon, we have the resources and expertise to help
meet these needs, with the goal of reducing preventable blindness
and treating diseases and disorders of the eye.
Another major trend in worldwide health is an increase in rates
of obesity. In fact, there are now more obese people in the world
than there are malnourished people, and the World Health Organi-
zation (WHO) currently ranks obesity as the world’s largest public
health problem. Global obesity rates have doubled since 1980; one
in three adults worldwide are overweight and one in nine are obese,
according to a 2011 study in the British medical journal The Lancet.
Once considered a problem only in wealthy countries, due to eco-
nomic growth and shifting nutritional habits, the prevalence of peo-
ple who are overweight or obese is significantly increasing in low-
and middle-income countries as well, according to the WHO. The
problem is only predicted to grow worse: by 2030, the majority of
the world’s population will be overweight or obese, according to a
study conducted by Tulane University in the United States. Obesity
and inactive lifestyles are important risk factors for diabetes, cardio-
vascular conditions and other serious diseases, including cancer.
The WHO estimates that globally 44% of the diabetes burden, 23%
of the incidence of ischemic heart disease and up to 41% of certain
cancer burdens are attributable to obesity.
Increased rates of obesity, as well as habits such as cigarette
smoking, have contributed to a worldwide rise in the prevalence of
chronic diseases – including cardiovascular disease, diabetes, glau-
coma and chronic respiratory diseases. Chronic diseases now
account for 60% of deaths around the world. Chronic obstructive
pulmonary disease (COPD) alone affects more than 200 million
people worldwide, and is projected to become the world’s third
leading cause of death by the end of this decade. Our Pharmaceu-
ticals and Sandoz Divisions offer several products to help address
the needs of patients with COPD and other chronic diseases, and we
will continue to make significant investments in new treatments to
address this growing health threat.
GLOBAL RISE IN HEALTHCARE SPENDING
Across the world, healthcare spending is increasing. Factors driving
this increase include aging populations, the rising incidence of chronic
diseases and technological and medical advances that make it pos-
sible to treat more diseases – and patients – than ever before. Health-
care spending among members of the Organization for Economic
Cooperation and Development (OECD) and emerging markets of
China, Russia, Brazil and India is expected to rise from USD 5.3 tril-
lion in 2010 to USD 7.9 trillion in 2020, an increase of approxi-
mately 50%, according to research from auditing and advisory firm
PricewaterhouseCoopers (PwC). The United States remain the
biggest spender by far, with expenditure on health as a percentage
of gross domestic product (GDP) expected to rise to approximately

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SCIENTIFIC ADVANCES OPENING NEW OPPORTUNITIES 
FOR TARGETED THERAPIES
Ongoing developments in technology and advances in scientific
understanding, particularly around the human genome, are laying
the foundation for the creation of new treatments for medical con-
ditions for which current treatment options are inadequate or non-
existent. Further, we are gaining a greater capability to identify the
specific biological factors, called “biomarkers,” that indicate whether
or not a given drug will be effective for a particular patient. It is esti-
mated that up to 95% of the variability in drug response may be
due to genetic differences. Effectively pairing treatments and genetic
biomarkers has tremendous potential both in terms of patient health
and healthcare savings.
The science of biomarkers is just one element of a new health-
care paradigm known as “personalized medicine.” By delivering the
right medicine to the right patient at the right time, this more tar-
geted approach has the potential to significantly improve the
response rates and outcomes of patients. Personalized medicine is
expected to be a major growth driver for the industry, with the mar-
ket expected to quadruple in size over the next five years, expand-
ing to approximately USD 160 billion.
At Novartis, our research and development strategy is based on
innovative science guided by patient needs. We employ state-of-
the-art technology in order to achieve an understanding of the
underlying mechanism of disease, and then use this understanding
as the basis for the development of targeted therapies, a number of
which have already been brought to market. Consistent with our
science-focused strategy, Novartis has established a Molecular
Diagnostics unit within our Pharmaceuticals Division to support our
efforts to develop and commercialize personalized medicines. Addi-
tionally, in the Alcon Division, we are combining Novartis research
operations with Alcon’s expertise in development to provide a new
innovation engine for the Group. Alcon scientists can now leverage
the resources and capabilities of the Novartis Institutes for BioMed-
ical Research, our global pharmaceutical research organization, to
accelerate product innovation for the eye. 
NEW TECHNOLOGIES CHANGING THE DELIVERY OF HEALTHCARE
New and innovative technologies have the potential to transform
the delivery of healthcare and the relationships between patients,
providers and payors. The spread of broadband networks coupled
with the ability to embed wireless sensors in an array of devices
and everyday materials is beginning to increase the use of telemed-
icine, or remote patient monitoring. Advances in imaging and diag-
nostic technologies are paving the way for new forms of preventive
medicine, while the growth of electronic medical records promises
to improve patient care and medical research.
Novartis is investigating new ways to use technology to improve
patient outcomes beyond traditional research and development. We
are actively exploring telehealth technology, which allows remote
monitoring of key health indicators and patient compliance. Such
technologies could both reduce healthcare costs and improve
patient outcomes by allowing healthcare professionals to assess
treatments and identify problems remotely and in real time.
We are also embracing new technologies and information chan-
nels to better engage with our stakeholders, from patients to physi-
cians to payors and retailers. For example, Novartis Vaccines and
Diagnostics developed VaxTrak, an iPhone application that allows
families to better track and plan their children’s vaccinations. The
application also uses GPS technology to locate nearby retail clinics
offering and administering flu vaccines.
INCREASINGLY CHALLENGING BUSINESS ENVIRONMENT
Medical and technological innovation, coupled with the increasing
demand for healthcare worldwide, offers healthcare companies
opportunities for growth and, more importantly, the chance to
improve patient outcomes. However, the operating environment for
healthcare companies has become increasingly challenging. The
ongoing effects of the global financial crisis, combined with rising
demands on healthcare systems, have led to a renewed focus on
cost containment by governments and payors across the globe.
Research and development of new products has been made more
complicated and costly due to high levels of regulatory and safety
scrutiny. In addition, the industry faces the continued expiration of
patents and the growing market prominence of generic products,
which, while offering an opportunity to our Sandoz Division, rep-
resents a significant challenge to our Pharmaceuticals and Alcon
Divisions.
GREATER PRESSURE TO CONTAIN HEALTHCARE SPENDING
The ongoing financial crisis and its resultant drag on economic
growth continue to impact the debt burden of many economies,
most notably in Europe, where Greece is facing possible default of
its sovereign debt obligations, and countries such as Spain and Italy
have had their sovereign debt obligations downgraded. With budg-
ets under pressure and a shaky global economy, stringent cost-con-
tainment measures have been implemented in countries around
the world.
Given the growth of overall healthcare costs as a percentage of
GDP in many countries, some governments and payors have intro-
duced price reductions and/or rebate increases for patented and
generic medicines, as well as other healthcare products and serv-
ices. Other initiatives to contain healthcare costs include mandatory
pricing systems, reference pricing initiatives, an increase in imports
of drugs from lower-cost countries to higher-cost countries, shift-
ing of the payment burden to patients through higher co-payments,
limiting physicians’ ability to choose among competing medi-
cines, mandatory substitution of generic drugs, and growing pres-
sure on physicians to reduce the prescribing of patented prescrip-
tion medicines.
These ongoing pressures affect all of our businesses that rely on
reimbursement, including Pharmaceuticals, Alcon, Sandoz, and
Vaccines and Diagnostics. To mitigate these pressures, which we
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health authorities and payors to develop innovative pricing models
that allow us to provide treatment options that result in better out-
comes for patients. For example, in the UK, Novartis offers dose-
capping arrangements for Lucentis for patients with wet age-related
macular degeneration, whereby up to 14 injections per patient and
per eye are paid by the UK National Health Service (NHS), with
Novartis reimbursing NHS for the cost of additional vials the patients
may need. Novartis offers similar dose-capping arrangements for
Lucentis in many other countries.
Where we have unique, often critical medications, Novartis is
committed to providing access for patients most in need through
access-to-medicines programs. These programs provide assistance
to those experiencing financial hardship or living in the developing
world who would otherwise not be able to receive treatment.
PATENT EXPIRATIONS, GENERIC COMPETITION PRESSURE THE INDUSTRY
The pharmaceutical industry faces an unprecedented number of
patent expirations in the coming years, a primary factor cited by
experts as limiting industry growth. For the industry as a whole,
the introduction of new products is not expected to generate the
same magnitude of industry sales as the products losing market
exclusivity.
The ability to successfully secure and defend intellectual prop-
erty rights is particularly relevant with regard to the Pharmaceuti-
cals and Alcon Divisions, as well as key products of our other divi-
sions. The loss of exclusivity for one or more important products –
due to patent expiration, generic challenges, competition from new
patented products, or changes in regulatory status – will have a
material negative impact on the Group’s results of operations.
Novartis takes legally permissible steps to defend its intellectual
property rights, including initiating patent infringement lawsuits
against generic drug manufacturers.
Some of our best-selling products have begun to face signifi-
cant competition due to the end of market exclusivity resulting from
the expiry of patent protection.
– The patent on valsartan, the active ingredient of Diovan/Co-Dio-
van/Diovan HCT (high blood pressure), expired in the major coun-
tries of the EU in November 2011, and generic competitors have
launched there. In addition, patent protection is scheduled to
expire in the US in September 2012 and in Japan in 2013. Val-
sartan is also used in the single-pill combination therapies Exforge
and Exforge HCT (high blood pressure). While market exclusivities
for Exforge/Exforge HCT will remain in the EU and Japan due to
regulatory exclusivities, there is a risk that generic manufacturers
may circumvent regulatory exclusivity and gain approval of a
combination valsartan-amlodipine product in Europe. In the US,
under a license agreement with a generics manufacturer, the
product is expected to face generic competition in the US begin-
ning in October 2014.
– The patent on Femara (cancer) expired in 2011 in the US and in
major European markets, and generic competitors have launched
in those markets.
– The patent on zoledronic acid, the active ingredient in Zometa
(cancer), as well as in Reclast/Aclasta (osteoporosis), will expire in
2013 in the US and in 2012 and 2013 in other major markets.
– The patent on Glivec/Gleevec (cancer) will expire in 2015 in the
US, in 2016 in the major EU countries and 2014 in Japan, in each
case including extensions.
We aim to replace revenue lost from such products with revenue
from our recently launched products (products launched since
2007 comprised 25% of our sales in 2011) and we believe that
these products have the potential for significant additional sales.
Nevertheless, the loss of sales from key products remains a major
challenge to our business.
INCREASING REGULATORY, SAFETY HURDLES
Our ability to continue to grow our business and replace sales lost
due to the end of market exclusivity in the mid- to long-term
depends upon the success of our research and development activ-
ities in identifying and developing breakthrough products that
address unmet needs, are accepted by regulators, patients and
physicians, and are reimbursed by payors. Developing new phar-
maceutical, biologic, medical device and vaccine products and
bringing them to market, however, is a costly, lengthy and uncertain
process. In an effort to ensure product safety, authorities are plac-
ing greater emphasis on the risk/benefit profile of healthcare prod-
ucts, with particular attention to the value-add and differentiation
of products. This focus has led to requests for more clinical trial
data, the inclusion of a significantly higher number of patients in
clinical trials and more detailed analysis of the trials. As a result, the
process of obtaining regulatory approvals for products has become
even more arduous.
The post-approval regulatory burden on healthcare companies
has also been growing. Increasingly, approved drugs have been
subject to requirements such as Risk Evaluation and Mitigation
Strategies (REMS), Risk Management Plans, comparative effective-
ness studies, Health Technology Assessments and requirements to
conduct post-approval Phase IV clinical trials to gather detailed
safety and other data on products. These requirements make the
maintenance of regulatory approvals and achievement of reim-
bursement for our products increasingly expensive and further
heighten the risk of recalls, product withdrawals, or loss of market
share. Going forward, we expect that there will be even greater reg-
ulatory attention to minimizing risk and maximizing benefit on the
level of the individual patient.
While Novartis continues to be one of the industry leaders in
approvals, similar to 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.
We have also had REMS and other such requirements imposed as
a condition of approval of our new drugs. These factors have
increased our costs and caused delays in obtaining approvals of
new products, and have created a risk that safe and effective prod-

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ucts will not be approved or will be removed from the market after
having been approved. For example, in late December, following the
seventh interim review of data from the ALTITUDE study with Tek-
turna/Rasilez (aliskiren), Novartis announced that the trial was
halted on the recommendation of the independent Data Monitoring
Committee (DMC) overseeing the study. The DMC concluded that
patients were unlikely to benefit from treatment on top of standard
anti-hypertensive medicines, and identified higher adverse events
in patients receiving Tekturna/Rasilez in addition to standard of
care as part of the trial. Following discussions with health authori-
ties, Novartis wrote to healthcare professionals worldwide recom-
mending that hypertensive patients with diabetes should not be
treated with Tekturna/Rasilez, or combination products containing
aliskiren, if they are also receiving an angiotensin-converting
enzyme (ACE) inhibitor or angiotensin receptor blocker (ARB). As
an additional precautionary measure, Novartis ceased promotion
of Tekturna/Rasilez-based products for use in combination with an
ACE inhibitor or ARB.
Novartis aims to counter such challenges through our focus on
innovation and our emphasis on understanding disease pathways,
which we believe will enable us to continue to bring differentiated
new medicines to the market that effectively address patients’
unmet medical needs. Alcon, for example, is the market leader in
ophthalmic surgical products, and its line of AcrySof intraocular
lenses has revolutionized cataract treatment, with over 40 million
lenses implanted worldwide. Similarly, in the development of Bexsero,
our vaccine candidate against the B serogroup of meningococcal
disease (MenB, the most common cause of bacterial meningitis),
Novartis Vaccines has pioneered a new approach called “reverse
vaccinology.” This approach involves decoding the genetic makeup
of MenB and selecting those proteins that are most likely to be
broadly-effective vaccine candidates. While Bexsero is still under
regulatory review, it could potentially provide a solution to a major
public health concern for which there is no effective routine vaccine.
RISK OF LIABILITY AND SUPPLY DISRUPTION FROM MANUFACTURING 
ISSUES
The manufacture of our products is heavily regulated by govern-
mental health authorities around the world, and such health author-
ities continue to intensify their scrutiny of manufacturers’ compli-
ance. If we or our third-party suppliers fail to comply with their
requirements, then we could be faced with product shortages or an
inability to supply product to patients, resulting in a loss of revenue
and potential third-party litigation. In addition, health authorities
have begun to impose significant penalties for failures to comply
with current Good Manufacturing Practices regulations (cGMP), and
have the power to delay the approval of new products to be manu-
factured at the impacted site.
Like our competitors, we have faced, and continue to face, sig-
nificant manufacturing issues. For example, in November 2011, we
received a Warning Letter from the FDA with respect to three of our
Sandoz facilities: Broomfield, Colorado; Wilson, North Carolina; and
Boucherville, Canada. The Warning Letter raised concerns regard-
ing compliance with FDA cGMP regulations at these facilities, and
stated that until the FDA confirms that the situation has been rec-
tified, it may recommend disapproval of any pending applications
or supplements listing Novartis affiliates as a drug manufacturer.
Novartis is collaborating with the FDA to promptly correct all con-
cerns raised in the Warning Letter, and to ensure that our products
are safe, effective and meet the highest quality standard for the
patients who rely on them. However, if we are unable to fully resolve
the issues raised in the Warning Letter, then we could be subject to
legal action without further notice. 
Additionally, in December 2011, Novartis Consumer Health vol-
untarily suspended operations at its US manufacturing facility in
Lincoln, Nebraska, and subsequently recalled certain products. As
of the date of this report, it is not possible to determine when the
plant will resume full operations. The Lincoln facility produces a
variety of products with annual sales value of less than 2% of
Novartis Group sales. Should we fail to complete the planned
improvements at the site in agreement with the FDA in a timely
manner, then we may suffer a significant loss in sales. While this
action was taken as a precautionary measure, it reinforced our com-
mitment to a single high quality standard for the entire Novartis
Group, and we are making the necessary investments to implement
this standard across the network. However, ultimately, there can be
no guarantee of the outcome of these matters. Nor can there be any
guarantee that we will not face similar issues in the future, or that
we will successfully resolve 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 par-
ticular, an increasing 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 pro-
duced from living plant or animal micro-organisms. As a result, the
production of biologic-based products that meet all regulatory
requirements is especially complex. Even slight deviations at any
point in the production process may lead to batch failures or recalls.
In addition, because the production process is based on living
micro-organisms, the process could be affected by contaminants,
which could impact those micro-organisms. As a result, the inher-
ent 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.
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
strict environmental controls. Any change in the environment may
impact production schedules and inadvertently affect supply until
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POTENTIAL LIABILITY ARISING FROM LEGAL PROCEEDINGS
In recent years, there has been a trend of increasing litigation
against the industries of which we are a part, especially in the
United States. A number of our subsidiaries are, and will likely con-
tinue to be, subject to various legal proceedings that arise from time
to time. As a result, we may become subject to substantial liabili-
ties that may not be covered by insurance. Litigation is inherently
unpredictable, and large verdicts can occur. As a consequence, we
may in the future incur judgments or enter into settlements of
claims that may have a material adverse effect on our results of
operations or cash flows.
In recent years, governments and regulatory authorities have
been stepping up their compliance and law enforcement activities
in key areas, including marketing practices, antitrust, trade sanc-
tions and corruption. Our businesses have been subject to signifi-
cant civil litigation as well as governmental investigations and infor-
mation requests by regulatory authorities.
For example, in 2010 our US affiliate Novartis Pharmaceuticals
Corporation (NPC) settled parallel civil and criminal investigations
by the US government into allegations of potential inappropriate
marketing and promotion of six Novartis drugs. As part of the
settlement, NPC agreed to plead guilty to one misdemeanor, and
to resolve civil charges against it, agreed to pay a total of USD
422.5 million and enter into a five-year Corporate Integrity Agreement.
At the same time, 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 prod-
uct. 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 mar-
ket a generic product even though patent infringement actions are
still pending. Should we elect to proceed in this manner and con-
duct a “launch at risk,” we could face substantial damages if the
final court decision is adverse to us.
Adverse judgments or settlements in any of these cases could
have a material adverse effect on our business, financial condition
and results of operations. See note 20 to our consolidated financial
statements for further information on legal proceedings. At the
same time, we have in place, and always seek to strengthen a sig-
nificant compliance with law program. As part of our broad commit-
ment to compliance, we are implementing a revised Code of Con-
duct, containing our fundamental principles and rules concerning
ethical business conduct.
THE GLOBAL ECONOMIC CRISIS THREATENS OUR RESULTS
Many of the world’s largest economies and financial institutions
continue to be impacted by the ongoing global economic and finan-
cial crisis, with some continuing to face financial difficulty, a decline
in asset prices, 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. Such uncertain eco-
nomic times may have a material adverse effect on our revenues,
results of operations, financial condition and ability to raise capital.
For example, the ongoing debt crisis 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. The debt crisis has also given
rise to concerns that some countries may not be able to pay us for
our products at all. This situation could deteriorate as a result of
potential developments in countries of key concern such as Greece,
which is facing possible default of its sovereign debt obligations, as
well as Spain and Italy, the sovereign debt obligations of which were
recently downgraded. 
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 negatively impact our business and cash flow.
Although we attempt to monitor these third parties’ financial con-
dition 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 sovereign risk from business interactions directly with
fiscally-challenged government payers.
In addition, the varying effects of difficult economic times on the
economies and currencies of different countries has impacted, and
may continue to unpredictably impact, the conversion of our oper-
ating results into US dollars, our reporting currency. This is partic-
ularly so given recent financial troubles in the US and in many
European economies, investor concerns about the future of the
Euro, and the flight of investor capital to the perceived safety of the
Swiss franc. 
NOVARTIS STRATEGIES FOR SUSTAINABLE GROWTH
The cornerstone of Novartis strategy is our diversified healthcare
portfolio across high-growth segments of the healthcare industry
and geographies. Novartis is the only healthcare company with
leading positions in pharmaceuticals, eye care, generics, vaccines
and diagnostics, over-the-counter medicines and animal health.
We believe that the diversity of our business and product port-
folio allows us to capture opportunities across the global health-
care market, while balancing our risk and exposure to macroeco-
nomic effects. We expect our broad portfolio will help us maintain
growth despite the loss of revenues due to patent expiration.
OUR PRIORITIES: INNOVATION, GROWTH AND PRODUCTIVITY
Novartis is committed to becoming the most successful and
respected healthcare company in the world. To achieve this, we

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base our operations on three strategic priorities: leading innovation
through new research methods and new collaborations with indus-
try stakeholders to better address customer and patient needs;
accelerating growth by responding to key market opportunities and
delivering new treatments quickly and efficiently to customers and
patients; and improving productivity by streamlining our organiza-
tion in order to improve profitability and free up resources for new
research and development investments. We believe that by focus-
ing on these principles we can enhance our capabilities in meeting
the world’s healthcare needs and continue to drive value for our
shareholders.
EXTENDING OUR LEAD IN INNOVATION
Our commitment to scientific innovation underpins all our strate-
gic principles. Sustaining innovation and R&D productivity across
our businesses requires substantial investment and commitment,
and we plan to continue to invest at the high end of the industry
average. In 2011, we invested more than 20% of Pharmaceuticals
Division sales. Our research approach, which focuses on under-
standing diseases and their molecular pathways, has fundamen-
tally changed how we do business. Researching these pathways
allows us to establish “proof of concept” via small clinical studies,
sometimes in rare diseases, early in the research and development
process. In some of those cases, regulatory approval may be
achieved relatively quickly because of the urgent unmet need of
patients with such rare diseases. While growth is supported by the
initial launch of the given compound in the targeted population, we
are sometimes also able to conduct parallel development into other
potential treatment applications, which may have much larger
patient populations.
For example, Afinitor, our kidney cancer treatment, received
approval from the FDA and EMA in 2011 for the treatment of
advanced pancreatic neuroendocrine tumors. The active ingredient
in Afinitor, everolimus, was also approved as Votubia in the EU for
the treatment of subependymal giant cell astrocytoma associated
with tuberous sclerosis complex for which surgery is not a treat-
ment option. Late-stage studies also showed that Afinitor, in com-
bination with exemestane, significantly lengthens the amount of
time women with advanced breast cancer live without the disease
progressing.
Our track record of bringing new medicines to the market con-
tinues to be among the best in the industry. In 2011, our Pharma-
ceuticals Division secured approval for 15 new products and impor-
tant indication extensions in the US, EU and Japan.
We believe that our focus on innovation will enable us to con-
tinue to produce breakthroughs that address unmet patient need
and further grow our business.
ACCELERATING GROWTH ACROSS OUR FIVE PLATFORMS
Novartis aims to drive growth in two key ways: via the introduction
of innovative new products as described above, and through expan-
sion of our business in fast-growing emerging markets.
Innovative products from across our portfolio are making a
major contribution to the Group’s overall growth, with recently
launched products growing 38% in 2011 versus the previous year,
now representing 25% of total sales. In the Pharmaceuticals Divi-
sion, recently launched products include: Gilenya, the first oral mul-
tiple sclerosis treatment; Lucentis, our treatment for wet age-related
macular degeneration, which is being expanded to new indications;
our kidney cancer treatment Afinitor, which has been granted addi-
tional indications; and Galvus, our oral medication for treatment of
type-2 diabetes. 
The addition of Alcon, our newest and second largest division,
brings more new products to our portfolio, such as advanced tech-
nology intraocular lenses used in cataract surgery. In Sandoz,
strong growth of biosimilars, the generic versions of biologic drugs,
and generic injectables, such as the blood-thinning medication
enoxaparin, are also helping to transform the growth prospects of
the Group. In Vaccines and Diagnostics, our meningococcal disease
franchise is also growing strongly, driven by the increase of Menveo
market share in the United States and the growth of our meningi-
tis C vaccine in emerging markets. 
Given the current cost pressures in the market for prescription
medicines, we believe there is ample scope to expand our Sandoz
Division, as well as our Consumer Health businesses. We have refo-
cused the portfolio of Consumer Health, which comprises OTC and
Animal Health, on core priority brands, a strategy that has enabled
Consumer Health to post 3% sales growth in constant currencies
in 2011.
The prosperity of the developing world is expected to increase
in the coming years, driving growth in our industry. It is estimated
that by 2030 emerging markets will account for about 60% of
global GDP. This economic growth is greatly expanding access to
healthcare in these geographies. Consistent with our long-term
growth strategy, we continue to build our presence in high-growth
markets around the world, particularly in our top six emerging mar-
kets, comprising Brazil, China, India, Russia, South Korea and
Turkey. Long-term investments in these areas are crucial to winning
market share and being well-positioned to capture the opportuni-
ties that expected growth in these markets will offer. 
Many of these emerging markets have little, if any, distinction
between pharmaceutical, OTC and generic products. Given the
Novartis Group’s portfolio, we believe that we have an advantage in
such markets, since we offer a broad spectrum of medicines to treat
a range of diseases. To take full advantage of the growth opportuni-
ties in emerging markets, we have launched many market-tailored
initiatives. In China, we plan to continue to expand our commercial
infrastructure and capabilities, while also pursuing targeted licens-
ing, acquisition and alliance opportunities. In Brazil, we are lever-
aging our broad portfolio in order to gain scale to compete with
consolidating retail channels and provide key accounts with the full
range of Novartis offerings. In India, we are leveraging the capabil-
ities of Pharmaceuticals, Sandoz, and Vaccines and Diagnostics to
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cial infrastructure. In Russia, we are building alliances with govern-
ment, regions and local companies and strengthening key account
management to expand our reach. 
As a result of such initiatives, in 2011 Novartis generated USD
5.8 billion, or approximately 10% of net sales, from the Group’s top
six emerging markets. However, combined net sales in the top six
emerging markets grew at the more rapid pace of 17% in constant
currencies in 2011, compared to 11% constant currency growth
achieved in the seven largest developed markets. Hence, emerging
markets are making increasingly significant contributions to our
results, a trend we expect to continue, as we plan to continue invest-
ing in these markets.
DRIVING PRODUCTIVITY
Novartis integrates efforts toward greater productivity and increased
efficiency into all our operations, constantly seeking ways to sim-
plify and streamline processes and to reduce costs to improve
margins. We are committed to freeing up resources that can be
devoted to customer and growth initiatives, research and develop-
ment of new offerings for patients with unmet needs, and share-
holder returns. There are four key areas where we target productiv-
ity improvements across our businesses: our manufacturing
footprint, Procurement, General & Administration expenses and
Marketing & Sales spend.
In 2010, we initiated a Group-wide program to review our man-
ufacturing footprint, which continued to progress in 2011. The pro-
gram has two aims: first, to optimize the network by creating Man-
ufacturing Centers of Excellence to best support the global
operations of the Group across divisions, and second, to optimize
the cost structure across divisions and enhance utilization rates at
strategic sites to 80 percent of capacity. To these ends, we announced
the exit or partial exit of 14 sites since the program started in 2010,
thereby reducing excess capacity and enabling the shift of strate-
gic production to technology competence centers.
Additional efficiencies are expected through Marketing & Sales
spend, as Novartis continues to reallocate resources geographically
and simplify prevailing processes. As a percentage of sales, Market-
ing & Sales spend has decreased from 26.3% in 2010 to 25.7% in
2011, down 3.5 percentage points since 2007.
In addition, we made Procurement a major source of savings by
leveraging our scale, implementing global category management
and creating country Centers of Excellence in key markets, which
generated annual savings in 2011 of approximately USD 1.3 billion.
Novartis also continuously looks for ways to simplify its struc-
tures, especially with regard to General & Administration expenses.
The streamlining of core processes across the Group and the imple-
mentation of core service centers for functions such as Human
Resources and Finance will further provide leverage and resources
for reinvestment. 
NOVARTIS BUSINESSES FACE OPPORTUNITIES AND CHALLENGES
Novartis believes that its portfolio of healthcare businesses gives us
a strong position to meet many of the needs of customers and
patients in today’s healthcare marketplace, which is expected to
grow 5.5% (CAGR) between 2011 and 2016. In the view of Novartis,
sustained growth in the healthcare industry requires the capacity
to adapt to changing and expanding markets worldwide, to collab-
orate with industry stakeholders, and to deliver new treatments
based on new medical advancements that improve patient health.
We believe that Novartis has both the scope and innovative capac-
ity to succeed in all these areas. For example, we have a highly com-
petitive and robust pipeline with more than 130 projects in clinical
development, including 66 new molecular entities. We have also
achieved a strong level of launch excellence, with recently launched
products growing 38% (excluding A(H1N1)) over the previous year.
Novartis maintains a leadership position in developing and
delivering prescription medicines (Pharmaceuticals, which repre-
sents 56% of net sales in 2011), innovative eye care products
(Alcon, 17%), complex, differentiated generics and biosimilars
(Sandoz, 16%), preventative vaccines and diagnostic tools (Vac-
cines and Diagnostics, 3%), and market-leading over-the-counter
offerings and medicines for animals (Consumer Health, 8%).
According to IMS, these sectors are expected to grow between 2%
per year (Pharmaceuticals) and 8% per year (Vaccines) from 2011
to 2016. Additionally, we have positioned ourselves to capture sig-
nificant marketplace opportunities across geographies, with 37%
of 2011 net sales in Europe, 33% in the US, 21% in Asia, Africa and
Australasia, and 9% in Canada and Latin America, helping to miti-
gate the impact of currency fluctuations. Consequently, Novartis is
not dependent for growth on any one product, region, or market.
Our growth is sustained by our strong position in diverse market
segments, with a focus on the areas of greatest customer and
patient need.
While Sandoz can benefit from government pressure on prices,
the healthcare landscape continues to offer growth opportunities
for patented pharmaceuticals as well. We believe that the Novartis
portfolio will allow us to continue to grow and to improve healthcare
outcomes for patients across treatment categories all over the world.
PHARMACEUTICALS: FILLING UNMET NEED THROUGH 
DIFFERENTIATED DRUGS
Novartis has developed innovative medicines for the treatment of
cancer, cardiovascular disease, and neurological conditions, among
others. Yet urgent patient needs remain, as many diseases and con-
ditions lack effective treatments or any treatment at all. This is why
we continue to focus our research on areas of high unmet medical
need and where the fundamental science is well understood. Our
dedicated Molecular Diagnostics unit seeks to improve the efficacy
of our medicines by identifying biomarkers in patient groups that
respond to the new medicines. This is intended to enable us to focus
our research on smaller, narrowly defined groups of patients. Such
patient segmentation is intended to assist us in accelerating the

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development of therapies that have the potential to be more targeted
and effective with better patient outcome and fewer side effects.
Furthering our commitment to individualized treatment, we
acquired United States-based oncology laboratory Genoptix, which
diagnoses bone, blood and lymph cancers and disorders for hema-
tologists and oncologists. The acquisition enhances the Group’s
tools and services that aim to improve health outcomes by advanc-
ing the ability to define and monitor individualized treatment pro-
grams. The business provides a strategic fit with our current port-
folio of companion diagnostic programs within the Novartis Molecular
Diagnostics unit.
Underpinning our Pharmaceuticals Division’s growth is our abil-
ity to rejuvenate our portfolio through innovative new products. This
is expected to allow us to sustain growth even in the face of factors
such as patent loss, increased generics competition and govern-
ment pricing caps. Although hypertension medication Diovan and
breast cancer treatment Femara lost patent protection in several
core markets in 2011, losses are expected to be offset in the years
ahead by sales growth from recently launched products, including
Lucentis, Tasigna, Galvus, Gilenya, Afinitor, Xolair and Onbrez
Breezhaler. In 2011, recently launched products (those launched
since 2007) accounted for 28% of net sales, compared to 22% in
2010. We expect these products, as well as new products antici-
pated to be launched over the next five years, to generate an
increasing proportion of our sales.
Our Pharmaceuticals pipeline is one of the most productive in
the industry – with higher success rates at every stage of develop-
ment, preclinical through registration, than our competitors – which
we expect to compensate for the anticipated loss of revenues from
patent expirations. For example, our investigational compound
INC424 has shown significant potential in treating patients with
myelofibrosis, a life-threatening blood cancer, in Phase III trials.
Another Phase III study showed that 45% of children with active
systemic juvenile idiopathic arthritis were able to substantially
reduce their use of steroids following treatment with ACZ885, and
were nearly three times less likely to suffer a new flare versus
placebo. We plan to continue to invest in R&D at the high end of the
industry average to sustain our industry-leading investment in R&D,
which we believe will allow us to discover and develop new targeted
therapies like these to better meet the needs of patients worldwide.
ALCON: THE WORLD LEADER IN EYE CARE
As the global population continues to age, healthcare demands in
eye care are expected to accelerate. For example, it is estimated
that by 2020, 60 million people will have open-angle glaucoma and
2.5 billion will be affected by myopia (nearsightedness) globally. As
a result, eye care has been one of the fastest growing therapeutic
areas in the healthcare industry.
Novartis has long held an established position in the eye care
segment through CIBA Vision and our Novartis Ophthalmics port-
folio. In 2011, we secured 100% ownership of Alcon, Inc., the
world’s largest eye care company, and merged it into Novartis. The
merger with Alcon gives us an even larger footprint in the attractive,
high-growth sector of eye care.
By combining our complementary businesses, Novartis and
Alcon are better able to address patient need and create value for
shareholders. The new Alcon Division now holds competitive posi-
tions in highly complementary product areas, spanning surgical
equipment and technology, prescription medicines, contact lenses
and lens care products. The world leader in ophthalmic surgery,
Alcon offers advanced surgical technology such as intraocular
lenses that simultaneously correct for presbyopia, which affects all
cataract patients, and astigmatism, which affects about one-third of
these patients.
We have also strengthened our innovation capabilities, with
Alcon scientists working alongside Novartis associates at NIBR to
discover expanded ophthalmic research targets and develop chem-
ical and biologic compounds for diseases of the eye, with a partic-
ular focus on diseases such as glaucoma and macular degeneration.
We believe the integration of Alcon into the broader Group will
also enable us to realize annual cost synergies of USD 350 million
by 2013.
SANDOZ: CREATING AFFORDABLE, EFFECTIVE ALTERNATIVES 
TO COMPLEX DRUGS
By 2016, patented pharmaceuticals with global annual sales total-
ing around USD 200 billion are expected to lose their patent pro-
tection and face potential competition from generic alternatives,
according to the research firm EvaluatePharma. In addition, gov-
ernments and healthcare providers worldwide are increasingly tran-
sitioning to generic medicines as an alternative to patented pre-
scription products in order to contain overall healthcare spending.
There is a particular demand for generic alternatives to com-
plex patented treatments, as these treatments are often among the
most costly. This demand has made the market for differentiated,
“difficult-to-make” generics one of the fastest growing and most
attractive segments of the generics industry. Sandoz has estab-
lished itself as a leader in developing differentiated products,
including inhalers, oncology injectables, patches, and biosimilars,
generic versions of biologic drugs. The significant technological
capabilities and expertise required make the development of such
treatments difficult for most companies. However, Sandoz has been
effective in leveraging the innovative and technological capabilities
and commercial scope of the entire Novartis Group in order to over-
come these hurdles. In 2011, Sandoz achieved blockbuster success
with generic enoxaparin based on a strong first-to-market launch in
2010, underscoring our leadership in differentiated products.
Sandoz has also had success in creating highly complex biosim-
ilars, achieving global sales of USD 261 million in 2011, an increase
of 37% in constant currencies over the previous year. Sandoz is also
the first and only company with more than one biosimilar on the
market in Europe and achieved the first-ever biosimilar approvals
in the US, Japan and Canada. With patents expected to expire over
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our leading position in biosimilars gives us an advantage within the
competitive generics industry. Moreover, our strong biosimilars
pipeline, with more than eight molecules in development and two
projects in Phase III as of the end of 2011, gives us an opportunity
to remain at the forefront of this key sector, driving continued
growth and making healthcare more affordable for patients.
We also plan to continue to expand our generics success in
emerging markets and accelerating growth in mature markets such
as the United States. With the full integration of Alcon into the
Novartis Group, the Sandoz US portfolio has been broadened with
the ophthalmic and optic products of Falcon Pharmaceuticals, Ltd.,
Alcon’s US generics business. The addition of this new portfolio has
made Sandoz the largest manufacturer and marketer of generic
ophthalmic and optic products in the US.
VACCINES AND DIAGNOSTICS: PREVENTING DISEASE
As global healthcare costs rise and chronic diseases become a
greater burden in emerging markets, the prevention of disease has
taken on new urgency. Governments and payors are increasingly
recognizing the essential roles of vaccines and blood screening in
prevention, and in generally maintaining worldwide health.
The vaccines market continues to expand, with expected growth
of approximately 8-10% annually for the next five years. We are
focused on developing safe and effective methods to better prevent
various forms of the flu as well as other major causes of human ill-
ness. Novartis Vaccines research is leading advances in the way vac-
cines are made so that we can bring patients novel offerings to
effectively prevent devastating infectious diseases. Our meningo-
coccal disease franchise is growing strongly, driven by the increase
of Menveo market share in the United States and the growth of our
meningitis C vaccine, Menjugate, in emerging markets. Menveo sales
achieved USD 142 million in 2011, and we continue to expand this
franchise. In June, the FDA accepted our application to expand the
Menveo indication to include infants and toddlers as young as two
months, supported by clinical data from more than 6 000 children
worldwide between the ages of 2 and 23 months. If approved, Men-
veo would be the first quadrivalent meningococcal conjugate vac-
cine to provide protection in the first year of life, when the majority
of infections occur. Meanwhile, our vaccine candidate against the B
serogroup of meningococcal disease, Bexsero, is nearing the com-
pletion of the regulatory review process in Europe, Canada and
other regions with high disease incidence. 
We have successfully incorporated cutting-edge technologies
into our Vaccines and Diagnostics research practices, including the
use of genomics and reverse vaccinology. These processes were
essential, for instance, in the development of our response to the
A(H1N1) pandemic flu in 2009, and in our development of Bexsero.
Work is ongoing on vaccine candidates in our earlier development
pipeline, including, for example, vaccines against Group B strepto-
coccus, staph aureaus and pseudomonas aeruginosa.
In 2011 we completed our acquisition of majority control of
Zhejiang Tianyuan, a Chinese vaccines manufacturer, facilitating
greater access to China as part of our strategy to strengthen our
presence in key emerging markets and provide vaccines for patients
with critical unmet needs.
CONSUMER HEALTH: OFFERING SELF-MEDICATION OPTIONS TO PATIENTS 
AND VETERINARY MEDICINES FOR ANIMALS
Accelerated healthcare spending is leading governments, payors
and other healthcare providers to seek ways to reduce overall
healthcare costs. In many cases, over-the-counter (OTC) medicines
represent a cheaper, effective alternative to prescription options. In
addition, wider availability of health information via the Internet,
which empowers patients to play a greater role in their own health-
care, can lead them to choose OTC offerings in treating or prevent-
ing illness. Our continued focus on priority brands within OTC deliv-
ered strong results, with several of those brands growing at a
double-digit rate over the prior year, offsetting the negative impact
of expired distribution contracts and divested brands. However, at
the end of 2011, OTC experienced net sales decline due to a tem-
porary suspension of operations and voluntary product recall at one
of the US manufacturing sites. We are focused on driving growth by
increasing the scale of business in top markets and expanding our
portfolio in core disease areas, such as gastrointestinal and pain
relief. OTC sales in the top six emerging markets also grew at a
double-digit rate in 2011, led by Russia, Brazil and China, where
the division launched Lamisil to compete in the growing anti-fungal
market. 
Another way we can maximize our return on investment in
research into new medicines is by leveraging that investment by
extending our work in Animal Health, potentially generating incre-
mental sales on the dollars invested in R&D. In many cases, our
Pharmaceuticals Division’s medicines, in adjusted doses and
dosage forms, have applications for pets and farm animals. In fact,
about a third of the Animal Health R&D portfolio consists of proj-
ects from the human health pipeline. We have been able to lever-
age synergies across R&D and manufacturing to make Animal
Health an important second stream of growth for our new and exist-
ing treatments. We continue to sustain Animal Health’s leading
position in specialty segments, with strong performance of the pig
therapeutic Denagard in the United States, China and Brazil. In
Europe, Milbemax remained the number one de-wormer for cats
and dogs, with the new chewy formulation accelerating growth. Key
emerging markets continue to contribute strong double-digit
growth to our Animal Health business globally.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our principal accounting policies are set out in note 1 to the Group’s
consolidated financial statements and are prepared in accordance
with International Financial Reporting Standards (IFRS) as issued
by the International Accounting Standards Board (IASB). Given the
uncertainties inherent in our business activities, we must make
certain estimates and assumptions that require difficult, subjective
and complex judgments. Because of uncertainties inherent in such
judgments, actual outcomes and results may differ from our assump-
tions and estimates which could materially affect the Group’s con-
solidated financial statements. Application of the following account-
ing policies requires certain assumptions and estimates that have
the potential for the most significant impact on our consolidated
financial statements.
REVENUE
We recognize product sales when there is persuasive evidence that
a sales arrangement exists, title and risk and rewards for the prod-
ucts are transferred to the customer, the price is determinable, and
collectability is reasonably assured. Where contracts contain cus-
tomer acceptance provisions we recognize sales upon the satisfac-
tion of acceptance criteria.
At the time of recognizing revenue, we also record estimates for
a variety of sales deductions, including rebates, discounts, refunds,
incentives and product returns. Sales deductions are reported as a
reduction of revenue.
DEDUCTIONS FROM REVENUES
As is typical in the pharmaceuticals industry, our gross sales are
subject to various deductions that are composed primarily of
rebates and discounts to retail customers, government agencies,
wholesalers, health insurance companies and managed healthcare
organizations. These deductions represent estimates of the related
obligations, requiring the use of judgment when estimating the
effect of these sales deductions on gross sales for a reporting
period. These adjustments are deducted from gross sales to arrive
at net sales.
The following summarizes the nature of some of these deduc-
tions and how the deduction is estimated. After recording these, net
sales represent our best estimate of the cash that we expect to ulti-
mately collect. The US market has the most complex arrangements
related to revenue deductions.
US SPECIFIC HEALTHCARE PLANS AND PROGRAM REBATES
– The US Medicaid Drug Rebate Program is administered by State
governments using State and Federal funds to provide assistance
to certain vulnerable and needy individuals and families. Calculat-
ing the rebates to be paid involves interpreting relevant regula-
tions, which are subject to challenge or change in interpretative
guidance by government authorities. Provisions for estimating
Medicaid rebates are calculated using a combination of histor-
ical experience, product and population growth, product price
increases and the mix of contracts and specific terms in the indi-
vidual State agreements. These provisions are adjusted based on
established processes and experiences from re-filing data with
individual States.
– The US Federal Medicare program, which funds healthcare bene-
fits to individuals age 65 or older, provides prescription drug ben-
efits under Part D of the program. This benefit is provided through
private prescription drug plans. Provisions for estimating
Medicare Part D rebates are calculated based on the terms of
individual plan agreements, product sales and population growth,
product price increases and the mix of contracts.
– We offer rebates to key managed healthcare plans to sustain and
increase market share for our products. These rebate programs
provide payors a rebate after they attain certain performance
parameters related to product purchases, formulary status or pre-
established market share milestones relative to competitors.
These rebates are estimated based on the terms of individual
agreements, historical experience and projected product growth
rates. We adjust provisions related to rebates periodically to
reflect actual experience.
– There is often a time lag of several months between us recording
the revenue deductions and our final accounting for the revenue
deductions.
NON-US SPECIFIC HEALTHCARE PLANS AND PROGRAM REBATES
– In certain countries, other than the US, we provide rebates to gov-
ernments and other entities. These rebates are often mandated by
laws or government regulations.
– In several countries we enter into innovative pay-for-performance
arrangements with certain healthcare providers, especially in the
UK, Germany and Australia. Under these agreements, we may be
required to make refunds to the healthcare providers or to provide
additional medicines free of charge if anticipated treatment out-
comes do not meet predefined targets. Potential refunds and the
delivery of additional medicines at no cost are estimated and
recorded as a deduction of revenue at the time the related rev-
enues are recorded. Estimates are based on historical experience
and clinical data. In cases where historical experience and clini-
cal data are not sufficient for a reliable estimation of the outcome,
revenue recognition would be deferred until such history would
be available. 
– There is often a time lag of several months between us recording
the revenue deductions and our final accounting for the revenue
deductions.
NON-HEALTHCARE PLANS AND PROGRAM REBATES, RETURNS 
AND OTHER DEDUCTIONS
– Charge-backs occur where our subsidiaries have arrangements
with indirect customers to sell products at prices that are lower
than the price charged to wholesalers. A chargeback represents
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indirect customer’s contract price. We account for vendor charge-
backs by reducing revenue by an amount equal to our estimate
of charge-backs attributable to a sale and they are generally set-
tled within one to three months of incurring the liability. Provi-
sions for estimated charge-backs are calculated using a combina-
tion of factors such as historical experience, product growth rates,
payments, level of inventory in the distribution channel, the terms
of individual agreements and our estimate of the claims process-
ing time lag.
– We offer rebates to purchasing organizations and other direct and
indirect customers to sustain and increase market share for our
products. Since rebates are contractually agreed upon, rebates
are estimated based on the terms of individual agreements, his-
torical experience, and projected product growth rates.
– When we sell a product providing a customer the right to return
a product, we record a provision for estimated sales returns based
on our sales returns policy and historical rates. Other factors con-
sidered include product recalls, expected marketplace changes
and the remaining shelf life of the product, and the entry of
generic products. In 2011, sales returns amounted to approxi-
mately 1% of gross product sales. Especially in the Vaccines and
Diagnostics Division, if there is no Novartis-specific historical
return rate experience available, sales are only recorded based on
evidence of product consumption or when the right of return has
expired.
– We enter into distribution service agreements with major whole-
salers, which provide a financial disincentive for wholesalers to
purchase product quantities exceeding current customer demand.
Where possible, we adjust shipping patterns for our products to
maintain wholesalers’ inventories level consistent with underly-
ing patient demand;
– We offer cash discounts to customers to encourage prompt pay-
ment. Cash discounts are accrued at the time of invoicing and
deducted from revenue.
– Following a decrease in the price of a product, we generally grant
customers a “shelf stock adjustment” for a customer’s existing
inventory for the involved product. Provisions for shelf stock
adjustments, which are primarily relevant within the Sandoz Divi-
sion, are determined at the time of the price decline or at the point
of sale if a price decline can be reasonably estimated based on
inventory levels of the relevant product;
– Other sales discounts, such as consumer coupons and co-pay dis-
count cards, are offered in some markets. These discounts are
recorded at the time of sale, or when the coupon is issued and are
estimated utilizing historical experience and the specific terms
for each program. If a discount for a probable future transaction
is offered as part of a sales transaction then an appropriate por-
tion of revenue is deferred to cover this estimated obligation.
– We adjust provisions for revenue deductions periodically to reflect
actual experience. To evaluate the adequacy of provision bal-
ances, we use internal and external estimates of the level of inven-
tory in the distribution channel, actual claims data received and
the time lag for processing rebate claims. Management also esti-
mates the level of inventory of the relevant product held by retail-
ers and in transit. External data sources include reports of whole-
salers and third-party market data purchased by Novartis.

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The following table shows the worldwide extent of our revenue deductions provisions and related payment experiences:
PROVISIONS FOR REVENUE DEDUCTIONS
Income statement charge
Effect of
Revenue
currency
Change in 
Revenue
deductions
translation 
provisions
deductions
provisions at
and business
Payments/
Adjustments
offset against
provisions at
January 1
combinations
utilizations
of prior years
Current year
gross trade
December 31
USD millions
USD millions
USD millions
USD millions
USD millions
receivables
USD millions
2011
US specific healthcare plans and program rebates
1 162
– 2 860
– 19
3 157
1 440
Non-US specific healthcare plans and program 
rebates
575
– 24
– 1 043
– 23
1 281
766
Non-healthcare plans and program related 
rebates, returns and other deductions
1 360
– 68
– 6 846
– 7
7 324
– 227
1 536
Total 2011
3 097
– 92
– 10 749
– 49
11 762
– 227
3 742
2010
US specific healthcare plans and program rebates
755
226
– 1 949
– 8
2 138
1 162
Non-US specific healthcare plans and program 
rebates
455
– 34
– 444
– 9
607
575
Non-healthcare plans and program related
rebates, returns and other deductions
884
163
– 5 779
– 32
6 056
68
1 360
Total 2010
2 094
355
– 8 172
– 49
8 801
68
3 097
The table below shows the gross to net sales reconciliation for our Pharmaceuticals division:
GROSS TO NET SALES RECONCILIATION
Income statement charge
Charged directly
Charged through
without being
revenue deduction
recorded in revenue 
provisions
deduction provisions 
Total
In % of
USD millions
USD millions
USD millions
gross sales
2011
Pharmaceuticals gross sales subject to deductions
40 004
100.0
US specific healthcare plans and program rebates
– 2 424
– 2 424
– 6.0
Non-US specific healthcare plans and program rebates
– 801
– 408
– 1 209
– 3.0
Non-healthcare plans and program related
rebates, returns and other deductions
– 1 631
– 2 232
– 3 863
– 9.7
Total Pharmaceuticals gross to net sales adjustments
– 4 856
– 2 640
– 7 496
– 18.7
Pharmaceuticals net sales 2011
32 508
81.3
2010
Pharmaceuticals gross sales subject to deductions
36 400
100.0
US specific healthcare plans and program rebates
– 2 029
– 2 029
– 5.6
Non-US specific healthcare plans and program rebates
– 298
– 263
– 561
– 1.5
Non-healthcare plans and program related
rebates, returns and other deductions
– 1 585
– 1 919
– 3 504
– 9.6
Total Pharmaceuticals gross to net sales adjustments
– 3 912
– 2 182
– 6 094
– 16.7
Pharmaceuticals net sales 2010
30 306
83.3

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ACQUISITION ACCOUNTING
The Group’s consolidated financial statements reflect an acquired
business from the date the acquisition has been completed. We
account for acquired businesses resulting in majority ownership
using the acquisition method of accounting, which requires the
acquired assets and assumed liabilities to be recorded as of the
acquisition date at their respective fair values. Any excess of the
purchase consideration over the estimated fair values of acquired
Group’s share of net identified assets is recorded as goodwill in the
balance sheet and denominated in the functional currency of the
related acquisition. Goodwill is allocated to an appropriate cash-
generating unit, which is defined as the smallest group of assets
that generates independent cash inflows that support the goodwill.
In-Process Research & Development (IPR&D) is valued as part
of the acquisition accounting. Payments for other separately
acquired assets in development, such as those related to initial and
milestone payments for licensed or acquired compounds, are cap-
italized as IPR&D intangible assets if they are deemed to enhance
our intellectual property. This occurs even if uncertainties continue
to exist as to whether the R&D projects will ultimately be success-
ful in producing a commercial product. Estimating the fair value
assigned to each class of acquired assets and assumed liabilities
is based on expectations and assumptions, from the perspective of
a market participant, that have been deemed reasonable by man-
agement.
Contingent considerations to former owners agreed in a busi-
ness combination, e.g., in the form of milestone payments upon the
achievement of certain development stages or sales targets as well
as royalties, are recognized as liabilities at fair value as of the acqui-
sition date. Any subsequent changes in amounts recorded as a lia-
bility are recognized in the consolidated income statement.
IMPAIRMENT OF LONG-LIVED INTANGIBLE AND TANGIBLE ASSETS
We review long-lived intangible and tangible assets for impairment
whenever events or changes in circumstance indicate that the
asset’s balance sheet carrying amount may not be recoverable.
An asset, as defined, is generally considered impaired when its
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Discount rates used in these scenarios are based on the Group’s
weighted average cost of capital as an approximation of the
weighted average cost of capital of a comparable market partici-
pant, which are adjusted for specific country and currency risks
associated with cash flow projections.
Due to the above factors, actual cash flows and values could vary
significantly from forecasted future cash flows and related values
derived using discounting techniques.
The recoverable amount of a cash-generating unit and related
goodwill is usually based on the higher of “fair value less costs of sale”
or on the “value in use” derived from applying discounted future cash
flows based on the key assumptions in the following table:
Vaccines and
Consumer
Pharmaceuticals
Alcon
Sandoz
Diagnostics
Health
%
%
%
%
%
Sales growth rate 
assumptions after 
forecast period
0.4
3
0 to 2
0.5
0 to 2
Discount rate (post-tax)
7
7
7
7
7
In 2011, intangible asset impairment charges of USD 627 million
were recorded. USD 552 million of these arose in the Pharmaceu-
ticals Division, principally due to the expected reduction in demand
for Tekturna/Rasilez (aliskiren) and discontinuation of PRT128
(elinogrel), SMC021 (oral calcitonin), PTK796 and AGO178 (agome-
latine) development programs. USD 75 million of impairment
charges arose in all other Divisions.
In 2010, Novartis recorded impairment charges totaling approx-
imately USD 1.0 billion. These related to impairment charges of
USD 356 million for Mycograb, USD 250 million for PTZ601, USD
228 million for albinterferon alfa-2b and USD 120 million for
ASA404 as Novartis decided to discontinue the related develop-
ment projects. Additionally, USD 40 million were recorded for vari-
ous other impairment charges in the Pharmaceuticals Division.
Novartis also recorded various impairment charges of USD 24 mil-
lion in Sandoz and Consumer Health.
Reversal of prior year impairment charges amounted to USD 8
million (2010: USD 107 million).
The amount of goodwill and other intangible assets on our con-
solidated balance sheet has increased significantly in recent years,
primarily due to acquisitions. Although no significant additional
impairments are currently anticipated, impairment testing could
lead to material impairment charges in the future. For more infor-
mation, see note 11 to the Group’s consolidated financial statements.
Additionally, impairment charges for property, plant and equip-
ment during 2011 amounted to USD 413 million (2010: USD 10
million) of which USD 403 million was in Pharmaceuticals primarily
related to the expected reduction in demand for Tekturna/Rasilez
and the discontinuation of the SMC021 development program.
INVESTMENTS IN ASSOCIATED COMPANIES
We use the equity method to account for investments in associated
companies (generally defined as investments in companies that
correspond to holdings of between 20% and 50% of a company’s
voting shares or over which we otherwise have significant influence).
Various estimates are used in applying the equity method, so
subsequent adjustments may be required once an associated com-
pany publishes financial results or makes public other information.
This applies in particular to our investment in Roche Holding AG.
We consider investments in associated companies for impair-
ment testing whenever a company’s quoted share price has fallen
to a fair value below our per-share carrying value. For unquoted
investments in associated companies, the latest available financial
information is used to assess whether impairment testing is neces-
sary. Where there is an indication that separately identified assets
of the associated company, other than implicit goodwill, might be
impaired an impairment test is performed. Any impairment charge
is recorded in the consolidated income statement under “Income
from associated companies”.
RETIREMENT AND OTHER POST-EMPLOYMENT BENEFIT PLANS
We sponsor pension and other post-employment benefit plans in
various forms that cover a significant portion of our current and for-
mer associates. For post-employment plans with defined benefit
obligations, we are required to make significant assumptions and
estimates about future events in calculating the expense and the
present value of the liability related to these plans. These include
assumptions about the discount rates we apply to estimate future
liabilities, expected returns on plan assets and rates of future com-
pensation increases. In addition, our actuarial consultants provide
our management with historical statistical information such as
withdrawal and mortality rates in connection with these estimates.
Assumptions and estimates used by the Group may differ mate-
rially from the actual results we experience due to changing mar-
ket and economic conditions, higher or lower withdrawal rates, or
longer/shorter life spans of participants among other factors. For
example, a decrease in the discount rate we apply in determining
the present value of the obligations of one-half of one percent would
have increased our year-end defined benefit obligation by approx-
imately USD 1.3 billion. If the 2011 discount rate had been one-
half of one percentage point lower than actually assumed, interest
expense would have decreased by approximately USD 60 million,
and if the same decrease was also assumed for the return on assets,
it would have decreased by approximately USD 100 million. We
record differences between assumed and actual income and
expense as “Actuarial gains/losses” in the consolidated statement
of comprehensive income. These differences could have a material
effect on our total equity. For more information on obligations
under retirement and other post-employment benefit plans and
underlying actuarial assumptions, see note 25 to the Group’s con-
solidated financial statements.

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DERIVATIVE FINANCIAL INSTRUMENTS AND RELATED CASH FLOW HEDGING
Derivative financial instruments are initially recognized in the bal-
ance sheet at fair value and subsequently re-measured to their cur-
rent fair value. Any gain or loss on the hedging instrument relating
to the effective portion of changes in the fair value of derivatives in
cash flow hedges are recognized in the consolidated statement of
comprehensive income. The gain or loss relating to the ineffective
portion is recognized immediately in the consolidated income
statement.
When a hedging instrument expires or is sold, or when a hedge
no longer meets the criteria for hedge accounting, any cumulative
gain or loss existing in the consolidated statement of comprehensive
income at that time is immediately recognized in the consolidated
income statement. Management assesses the probability of the
forecasted transaction occurring when determining whether the
impact of a cash flow hedge can be deferred in the consolidated
statement of comprehensive income. Amounts are only deferred when
management judges the forecasted transaction to be probable.
EQUITY-BASED COMPENSATION
The fair value of Novartis shares, restricted shares, restricted share
units (RSU) and American Depositary Shares (ADS) and related
options granted to associates as compensation is recognized as an
expense over the related vesting or service period adjusted to
reflect actual and expected vesting levels. The charge for equity-
based compensation is included in the personnel expenses which
are allocated to functional costs and credited to consolidated equity
for equity-settled amounts or to other current liabilities for cash-
settled amounts. An option’s fair value at grant date is calculated
using the trinomial valuation method. Accurately measuring the
value of share options is difficult and requires an estimate of fac-
tors used in the valuation model. These key factors involve uncer-
tain future events, such as expected dividend yield and expected
share price volatility. Expected volatilities are based on those implied
tha1tewc [(gJ 0omvricted sh)1(ar)108t Tf 1.6671J -0.015 Tw P4(ansa asty of thuositcompen)1compeeg if Tc nvi4(ansan-0.0alucompenmts)J 0ompd (the e)9

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activities. If additional payments are made to the originator com-
pany to continue to perform R&D activities, an evaluation is made
as to the nature of the payments. Such additional payments will be
expensed if such additional payments are deemed to be compen-
sation for subcontracted R&D services not resulting in an additional
transfer of intellectual property rights to Novartis. By contrast, such
additional payments will be capitalized if these additional pay-
ments are deemed to be compensation for the transfer to Novartis
of additional intellectual property developed at the risk of the orig-
inator company. Subsequent internal R&D costs in relation to
IPR&D and other assets are expensed since the technical feasibil-
ity of the internal R&D activity can only be demonstrated by the
receipt of marketing approval for a related product from a regula-
tory authority in a major market.
Costs for post-approval studies performed to support the con-
tinued registration of a marketed product are recognized as mar-
keting expenses. Costs for activities that are required by regulatory
authorities as a condition for obtaining marketing approval are
charged as development expenses as they are incurred, in cases
where it is anticipated that the related product will be sold over a
longer period than the activities required to be performed to obtain
the marketing approval. In the rare cases where costs related to the
conditional approval need to be incurred over a period beyond that
of the anticipated product sales, then the expected costs of these
activities will be expensed over the shorter period of the anticipated
product sales.
IPR&D assets are amortized in the consolidated income state-
ment over their useful life once the related project has been suc-
cessfully developed and regulatory approval for a product launch
has been obtained. Other acquired technologies are amortized over
their estimated useful lives.
TAXES
We prepare and file our tax returns based on an interpretation of tax
laws and regulations and record estimates based on these judg-
ments and interpretations. Our tax returns are subject to examina-
tion by the competent taxing authorities, which may result in an
assessment being made requiring payments of additional tax, inter-
est or penalties. Inherent uncertainties exist in our estimates of our
tax positions. We believe that our estimated amounts for current
and deferred tax assets or liabilities, including any amounts related
to any uncertain tax positions, are appropriate based on currently
known facts and circumstances.
NEW ACCOUNTING PRONOUNCEMENTS
Based on a Novartis analysis, the following new or amended IFRS
standards will be of significance to the Group, but have not yet been
adopted.
In 2009, 2010 and 2011, sections of IFRS 9 Financial Instru-
ments were issued. This standard will ultimately substantially
change the classification and measurement of financial instru-
ments, hedging requirements, impairments of financial instruments
and the recognition of certain fair value changes in the consolidated
financial statements. Currently, only new requirements on the clas-
sification and measurement for financial assets and financial liabil-
ities have been issued. The mandatory effective date for require-
ments issued as part of IFRS 9 will be on or after January 1, 2015.
Early application of the requirements is permitted.
In 2011, IAS 19 revised on Employee Benefits was issued, for
adoption by January 1, 2013. The principal impact for Novartis will
be that the concepts of expected return on assets and interest
expense on the defined benefit obligation as separate components
of defined benefit cost will be replaced by a concept that interest
will be calculated on the net of the defined benefit obligation and
funded post-employment obligation assets using an interest rate
reflecting market yields of high quality corporate bonds in a deep
market. If this concept had been adopted by Novartis in 2011, it is
estimated that operating income would have been lower by approx-
imately USD 260 million. As required by the standard, Novartis will
retrospectively adopt the standard on January 1, 2013.
Two other new standards were also issued in 2011, IFRS 10 Con-
solidated Financial Statements and IFRS 11 Joint Arrangements
which are potentially important for Novartis. Under IFRS 10,
Novartis will need to consolidate an investee based on control, i.e.
when it is exposed, or has rights, to variable returns from its involve-
ment with the investee and has the ability to affect those returns
through its power over the investee. IFRS 11 will require that
Novartis classifies joint arrangements as either joint operations,
where assets, liabilities, revenues and expenses are accounted for
proportionally in accordance with the agreement, or as joint ven-
tures, which are accounted for under the equity method. These new
standards become effective on January 1, 2013.
The following IFRSs and amendments are not yet effective and
are not early adopted by the Group.
– IFRS 12, Disclosures of interests in other entities, effective for
annual periods beginning on or after January 1, 2013
– IFRS 13, Fair value measurement, effective for annual periods
beginning on or after January 1, 2013
– Amendment to IAS 1, Presentation of items of other comprehensive
income, effective for annual periods beginning on or after July 1,
2012
Although Novartis is still completing its evaluation of these new
standards, apart from where indicated, Novartis does not currently
consider that the other new standards will have a significant impact
on the Group’s consolidated financial statements.

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FACTORS AFFECTING COMPARABILITY OF YEAR-ON-
YEAR RESULTS OF OPERATIONS
RECENT ACQUISITIONS AND DIVESTMENTS
The comparability of the year-on-year results of our operations for
the total Group can be significantly affected by acquisitions and
divestments. For more detail how these actions have affected our
results, see “Significant Transactions” below.
SIGNIFICANT TRANSACTIONS
ALCON MAJORITY CONTROL IN 2010; FULL OWNERSHIP 
AND MERGER IN 2011
On August 25, 2010 Novartis completed the acquisition of a further
52% interest in Alcon, Inc. (Alcon) following the January 4, 2010
announcement that Novartis had exercised its call option to acquire
Nestlé’s remaining 52% Alcon interest for approximately USD 28.3
billion or USD 180 per share. This increased the interest in Alcon
to a 77% controlling interest as Novartis had already acquired an
initial 25% Alcon interest from Nestlé for USD 10.4 billion or USD
143 per share in July 2008. The overall purchase price for the 77%
interest in Alcon of USD 38.7 billion included certain adjustments
for Alcon dividends and interest due. 
On December 14, 2010 Novartis entered into a definitive agree-
ment to merge Alcon into Novartis in consideration for Novartis
shares and a Contingent Value Amount. The acquisition of the
remaining outstanding non-controlling interests in Alcon were sep-
arate transactions following the previous acquisition of majority
ownership in Alcon by Novartis on August 25, 2010. On April 8,
2011 a Novartis Extraordinary General Meeting approved the
merger with Alcon, Inc. creating the Alcon Division which became
the fifth reported segment in Novartis’ strategically diversified
healthcare portfolio. The Extraordinary General Meeting also
authorized the issuance of 108 million new shares.
Alcon shareholders received 2.9228 Novartis shares (which
included a dividend adjustment) and USD 8.20 in cash for each
share of Alcon, resulting in a total consideration of USD 168.00 per
share.
Following the change in majority control of Alcon on August 25,
2010, it was required for Novartis to reassess the fair value of the
initial 25% non-controlling interest in Alcon it acquired from Nestlé
in 2008. As the estimated fair value of the initial non-controlling
interest exceeded the recorded book value of the initial non-control-
ling interest, Novartis recorded a revaluation gain. After adjusting
for accumulated losses recorded in the Group’s consolidated
statement of comprehensive income since the initial 25% interest
in Alcon was acquired in July 2008, a net amount of USD 335 mil-
lion was recorded as a gain under “Income from Associated Com-
panies”.
After the acquisition of majority ownership in Alcon, Inc. on
August 25, 2010, Alcon contributed net sales of USD 2.4 billion and
operating income of USD 323 million to the consolidated income
statement in 2010.
During 2011, prior to the merger of Alcon, Inc. into Novartis AG
on April 8, 4.8% of the non-controlling interests in Alcon, Inc. were
acquired for USD 2.4 billion.
Completion of the acquisition of the outstanding 18.6% interest
in Alcon on April 8, 2011 and subsequent merger, resulted in the
issuance of Novartis shares with a fair value of USD 9.2 billion and
a contingent value payment of USD 0.5 billion.
The final purchase price allocation was completed in 2011 and
resulted in a fair value of net identifiable assets of USD 27.0 billion
and goodwill of USD 18.0 billion. Also, the excess of the value
exchanged for these 2011 transactions over the recorded value of
the non-controlling interest together with merger related transac-
tion costs resulted in a reduction in equity of USD 5.7 billion.
The accounting for these transactions is explained in more
detail in note 1, 2 and 24 to the Group’s consolidated financial
statements.
Pharmaceuticals – Acquisition of Genoptix, Inc.
On March 7, 2011 Novartis completed the acquisition of Genoptix,
Inc., a specialized laboratory providing personalized diagnostic
services to community-based hematologists and oncologists.
Genoptix employed approximately 500 people and became part of
the Novartis Molecular Diagnostics unit within the Pharmaceuticals
Division.
The acquisition in cash of 100% of the shares of Genoptix
totaled USD 458 million, excluding the USD 24 million of cash
acquired. The final purchase price allocation resulted in net identi-
fied assets of USD 237 million and goodwill of USD 221 million.
Results of operations since the acquisition date were not material.
Vaccines and Diagnostics – Acquisition of Zhejiang Tianyuan
On March 22, 2011 Novartis completed the acquisition in cash of
an 85% stake in the Chinese vaccines company, Zhejiang Tianyuan
Bio-Pharmaceutical Co. Ltd. The acquisition provides Novartis with
an expanded presence in the Chinese vaccines market and is
expected to facilitate the introduction of additional Novartis vac-
cines into China. The total amount paid for the 85% interest was
USD 194 million, excluding USD 39 million of cash acquired. The
final purchase price allocation resulted in net identified assets of
USD 131 million and goodwill of USD 82 million. Non-controlling
interests have increased by USD 19 million from this transaction.
Results of operations since the acquisition date were not material.
Pharmaceuticals – Divestment of Elidel®
On May 11, 2011 Novartis completed the divestment of Elidel®
Cream 1% to Meda Pharma Sarl and Novartis received an upfront
payment of USD 420 million and recognized a gain of USD 324 mil-
lion in “Other Income”.

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SEGMENT REPORTING
The businesses of Novartis are divided on a worldwide basis into
five reporting segments (Pharmaceuticals, Alcon, Sandoz, Vaccines
and Diagnostics and Consumer Health) and Corporate activities.
Following the acquisition of all of Alcon, Inc., and merger into
Novartis AG on April 8, 2011 a new segment allocation was intro-
duced. As a result, the Alcon Division includes CIBA Vision and cer-
tain Pharmaceuticals Division ophthalmology products. Falcon, the
US generics business of Alcon, Inc. was transferred to the Sandoz
Division. Certain residual operational costs incurred by the now dis-
banded Consumer Health Divisional headquarters were transferred
to Corporate and Corporate R&D was transferred to the Pharmaceu-
ticals Division. All segment results for 2010 and 2011 are presented
using this new allocation. Except for Consumer Health, these seg-
ments reflect the Group’s internal management structure. These
segments are managed separately because they each manufacture,
distribute and sell distinct products which require differing market-
ing strategies. In the case of Consumer Health, the segment com-
prises two divisions which are also managed separately, however,
neither of these two divisions is material enough to the Group to be
separately disclosed as a segment.
Inter-segmental sales are made at amounts considered to
approximate arm’s-length transactions. Currently, we principally
evaluate segment performance and allocate resources based on
operating income, cash flow and cash flow return on invested cap-
ital (CFROI).
The following shows an overview of the impact of the restate-
ment on the segmentation structure. Unless otherwise stated this
has been used for all years presented in this Annual Report.
Segment
Newly included
Newly excluded
Pharmaceuticals
Corporate R&D
Certain ophthalmic 
products
Alcon
CIBA Vision, 
Falcon
certain ophthalmic 
products
Sandoz
Falcon
Consumer Health
CIBA Vision; disbanded
Consumer Health
divisional management
costs
Corporate
Disbanded 
Corporate R&D
Consumer Health 
divisional 
management costs
A summary of the above restatements on 2010 sales, operating
income and core operating income is as follows:
Core
Operating 
operating
Segment (USD m)
Net sales
income
income
Pharmaceuticals
– 252
– 327
– 323
Alcon
2 020
473
498
Sandoz
74
49
57
Consumer Health
– 1 842
– 375
– 408
Corporate
180
176
Total
0
0
0
PHARMACEUTICALS
Pharmaceuticals researches, develops, manufactures, distributes,
and sells patented prescription medicines in the following thera-
peutic areas: Cardiovascular and Metabolism; Oncology; Neuro-
science and Ophthalmics; Respiratory; Integrated Hospital Care;
and additional products. Pharmaceuticals is organized into global
business franchises responsible for the development and market-
ing of various products as well as a business unit, called Novartis
Oncology, responsible for the global development and marketing of
oncology products. The Novartis Oncology Business Unit is not
required to be disclosed separately as a segment since it shares
common long-term economic perspectives, customers, research,
development, production, distribution and regulatory factors with
the rest of the division.
Pharmaceuticals is the largest contributor among the segments,
accounting in 2011 for USD 32.5 billion, or 56%, of net sales and
for USD 8.3 billion, or 71%, of operating income (excluding Corpo-
rate Income & Expense, net).
ALCON
Alcon discovers, develops, manufactures, distributes and sells eye
care products. Alcon is the global leader in eye care with product
offerings in Surgical, Ophthalmic Pharmaceuticals and Vision Care.
In Surgical, Alcon develops, manufactures, distributes and sells oph-
thalmic surgical equipment, instruments, disposable products and
intraocular lenses. In Ophthalmic Pharmaceuticals, Alcon discovers,
develops, manufactures, distributes and sells medicines to treat
chronic and acute diseases of the eye, as well as over-the-counter
medicines for the eye. In Vision Care, Alcon develops, manufactures,
distributes and sells contact lenses and lens care products.
In 2011, Alcon accounted for USD 10.0 billion, or 17%, of Group
net sales, and for USD 1.5 billion, or 13%, of Group operating
income (excluding Corporate income and expense, net).
In addition to the restated segmentation structure, the Alcon
segment is also discussed on a pro forma basis. This is necessary
since the restated 2010 segmentation only includes the consoli-
dated results of Alcon, Inc. from the date of acquisition of majority
control on August 25, 2010. In order to provide a meaningful
description of the results of this segment in 2011 compared to

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2010, the pro forma results of Alcon, Inc. from January 1, 2010 to
August 25, 2010 have been included. The pro forma results of the
Alcon segment therefore have been prepared assuming that the
acquisition of Alcon, Inc. had occurred as of January 1, 2010 and
that the purchase price allocation had been performed as of this
date. As a result, the pro forma results include the full year charge
for additional amortization of the acquired intangible assets and
the impact of other revaluations of assets and liabilities. Exceptional
items included in the results for 2010 resulting from the change of
control on August 25, 2010 such as change of control and other
exceptional costs as well as the impact of revaluing the inventory
and charging this to the post August 25, 2010 consolidated income
statement have also been excluded. Also excluded is the impact of
any divestments in 2010 and 2011 required by regulators to approve
the merger.
The additional impact on the 2010 and 2011 restated Alcon
segment results from incorporating the pro forma adjustments can
be summarized as follows:
Core
Operating 
operating
(USD m)
Net sales
income
income
2010
Alcon restated
4 446
796
1 350
Pro forma adjustments
4 585
385
1 745
Alcon pro forma
9 031
1 181
3 095
2011
Alcon restated
9 958
1 472
3 492
Pro forma adjustments
– 9
– 11
– 2
Alcon pro forma
9 949
1 461
3 490
SANDOZ
Sandoz is a leading global generic pharmaceuticals company that
develops, manufactures, distributes and sells prescription medicines,
as well as pharmaceutical and biotechnological active substances,
which are not protected by valid and enforceable third-party
patents. Sandoz has activities in Retail Generics, Anti-Infectives,
Biopharmaceuticals and Oncology Injectables. In Retail Generics,
Sandoz develops, manufactures and markets active ingredients and
finished dosage forms of pharmaceuticals, as well as supplying
active ingredients to third parties. In Anti-Infectives, Sandoz devel-
ops and manufactures active pharmaceutical ingredients and inter-
mediates – mainly antibiotics – for internal use by Retail Generics
and for sale to third-party customers. In Biopharmaceuticals,
Sandoz develops manufactures and markets protein- or other
biotechnology-based products (known as biosimilars or follow-on
biologics) and sells biotech manufacturing services to other com-
panies. In Oncology Injectables, Sandoz develops, manufactures
and markets cytotoxic products for the hospital market.
In 2011, Sandoz accounted for USD 9.5 billion, or 16%, of net
sales and for USD 1.4 billion, or 12% of operating income (exclud-
ing Corporate Income & Expense, net).
VACCINES AND DIAGNOSTICS
Vaccines and Diagnostics researches, develops, manufactures, dis-
tributes and sells preventive vaccines and diagnostic tools. Novartis
Vaccines is a leading global developer and manufacturer of human
vaccines.
Novartis Diagnostics is a blood testing and molecular diagnos-
tics business dedicated to preventing the spread of infectious dis-
eases through novel blood-screening tools that protect the world’s
blood supply.
In 2011, Vaccines and Diagnostics accounted for USD 2.0 billion,
or 3%, of net sales and an operating loss of USD 249 million, or 2%,
of operating income (excluding Corporate Income & Expense, net).
CONSUMER HEALTH
Consumer Health now consists of two divisions: OTC (over-the-
counter medicines) and Animal Health. Each has its own research,
development, manufacturing, distribution and selling capabilities.
However, neither is material enough to the Group to be separately
disclosed as a segment. OTC offers readily available consumer med-
icine and Animal Health provides veterinary products for farm and
companion animals.
In 2011, Consumer Health accounted for USD 4.6 billion, or 8%,
of net sales and for USD 727 million, or 6% of operating income
(excluding Corporate Income & Expense, net).
CORPORATE
Income and expenses relating to Corporate include the costs of our
headquarters and corporate coordination functions in major coun-
tries. In addition, Corporate includes certain items of income and
expense that are not attributable to specific divisions, including
global IT infrastructure remediation.
EFFECTS OF CURRENCY FLUCTUATIONS
We transact our business in many currencies other than the US dol-
lar, our reporting currency.
The following provides an overview of net sales and expenses for
2011 and 2010 for currencies most important to the Group:
2011
2010
Currency
%
%
US dollar (USD)
Net sales
36
36
Operating expenses
38
36
Euro (EUR)
Net sales
27
28
Operating expenses
25
26
Swiss franc (CHF)
Net sales
2
2
Operating expenses
14
13
Japanese yen (JPY)
Net sales
9
8
Operating expenses
4
4
Other currencies
Net sales
26
26
Operating expenses
19
21

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We prepare our consolidated financial statements in US dollars. As
a result, fluctuations in the exchange rates between the US dollar
and other currencies can have a significant effect on both the
Group’s results of operations as well as on the reported value of our
assets, liabilities, revenue and expenses as measured in US dollars.
This in turn may significantly affect reported earnings (both posi-
tively and negatively) and the comparability of period-to-period
results of operations.
For purposes of our consolidated balance sheets, we translate
assets and liabilities denominated in other currencies into US dollars
at the prevailing market exchange rates as of the relevant balance
sheet date. As a result, even if the amounts or values of these items
remain unchanged in the respective local currency, changes in
exchange rates have an impact on the amounts or values of these
items in our consolidated financial statements. For purposes of the
Group’s consolidated income and cash flow statements, revenue,
expense and cash flow items in local currencies are translated into
US dollars at average exchange rates prevailing during the relevant
period.
We seek to manage currency exposure by engaging in hedg-
ing transactions where management deems appropriate. For
2011, we entered into various contracts that change in value with
movements in foreign exchange rates in order to preserve the
value of assets, commitments and expected transactions. We also
use forward contracts and foreign currency options to hedge
expected net revenues in foreign currencies. For more informa-
tion on how these transactions affect our consolidated financial
statements and on how foreign exchange rate exposure is man-
aged, see notes 1, 5 and 16 to the Group’s consolidated financial
statements.
The average value of the US dollar in 2011 decreased against the EUR, CHF and JPY. The following table sets forth the foreign exchange
rates of the US dollar against these currencies, used for foreign currency translation when preparing the Group’s consolidated financial
statements:
Average for year
Year end
USD per unit
2011
2010
Change in %
2011
2010
Change in %
EUR
1.392
1.327
5%
1.294
1.324
– 2%
CHF
1.130
0.961
18%
1.064
1.063
0%
JPY (100)
1.255
1.141
10%
1.289
1.227
5%
The following table provides a summary of the currency impact on key Group figures due to their conversion into USD, the Group’s report-
ing currency, of the financial data from entities reporting in non-US dollars. Constant currency (cc) calculations apply the exchange rates
of the prior year to the current year financial data for entities reporting in non-US dollars.
CURRENCY IMPACT ON KEY FIGURES
Change in
Percentage
Change in
Percentage
constant
Change in
point currency
constant
Change in point currency
currencies %
USD %
impact
currencies %
USD %
impact
2011
2011
2011
2010
2010
2010
Net sales
12
16
4
14
14
–
Operating income
1
– 5
– 6
17
15
– 2
Net income
– 2
– 7
– 5
20
18
– 2
Core operating income
16
14
– 2
24
22
– 2
Core net income
15
12
– 3
18
17
– 1
For additional information on the effects of currency fluctuations, see note 16 to the Group’s consolidated financial statements.

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RESULTS OF OPERATIONS
KEY FIGURES 
Change in
Year ended
Year ended
Change
constant
Dec 31, 2011
Dec 31, 2010
in USD currencies
USD millions
USD millions
%
%
Net sales
58 566
50 624
16
12
Other revenues
809
937
– 14
– 15
Cost of Goods Sold
– 18 983
– 14 488
31
25
Gross profit
40 392
37 073
9
7
Marketing & Sales
– 15 079
– 13 316
13
9
Research & Development
– 9 583
– 9 070
6
– 2
General & Administration
– 2 970
– 2 481
20
12
Other income
1 354
1 234
10
– 4
Other expense
– 3 116
– 1 914
63
48
Operating income
10 998
11 526
– 5
1
Income from associated companies
528
804
– 34
– 34
Interest expense
– 751
– 692
9
5
Other financial income and expense
– 2
64
– 103
– 140
Income before taxes
10 773
11 702
– 8
– 2
Taxes
– 1 528
– 1 733
– 12
– 6
Group net income
9 245
9 969
– 7
– 2
Attributable to:
Shareholders of Novartis AG
9 113
9 794
– 7
– 1
Non-controlling interests
132
175
– 25
– 25
Basic earnings per share
3.83
4.28
– 11
– 5
CORE KEY FIGURES
Change in
Year ended
Year ended
Change
constant
Dec 31, 2011
Dec 31, 2010
in USD currencies
USD millions
USD millions
%
%
Core gross profit
43 839
38 517
14
11
Marketing & Sales
– 15 077
– 13 315
13
9
Research & Development
– 9 239
– 8 080
14
7
General & Administration
– 2 957
– 2 477
19
11
Other income
443
485
– 9
– 43
Other expense
– 1 100
– 1 124
– 2
– 19
Core operating income
15 909
14 006
14
16
Core net income
13 490
12 029
12
15
Core basic earnings per share
5.57
5.15
8
11
The Group’s core results – including core operating income, core
net income and core earnings per share – exclude the amortization
of intangible assets, impairment charges, expenses relating to the
integration of acquisitions as well as other items that are, or are
expected to accumulate within the year to be, over a USD 25 mil-
lion threshold that management deems exceptional.
A detailed summary of the reconciliation of reported to core
results is provided starting on page 179. 
OVERVIEW – RESULTS OF OPERATIONS
Net sales rose 16% (+12% cc) to USD 58.6 billion in 2011, with a
positive currency impact of 4% arising from the weakness of the US
dollar against most major currencies during much of 2011.
Recently launched products sales grew 38% (in USD, excluding the
A(H1N1) pandemic flu vaccine) over 2010 to USD 14.4 billion.
These products contributed 25% of Group net sales, up from 19%
in 2010. 
Operating income was down 5% (+1% cc) to USD 11.0 billion.
The weakness of the US dollar, combined with the strong Swiss
franc, resulted in a negative currency impact of 6 percentage points.
Cost of Goods Sold rose by 31% (25% cc) to USD 19.0 billion in
2011, increasing by 3.8 percentage points to 32.4% of net sales.
This led to a reduction in the gross margin by 4.2% to 69.0%. Mar-
keting & Sales rose 13% (9% cc) to USD 15.1 billion, improving 0.6
percentage points to 25.7% of net sales, as productivity improve-
ments and changes in the portfolio mix were partly offset by invest-
ments in new launch products. Research & Development expenses
increased by 6% (–2% cc) in 2011 to USD 9.6 billion. This included
USD 341 million in impairments of intangible assets. General &
Administration expenses increased 20% (12% cc) to USD 3.0 bil-
lion. Other income was up 10% (–4% cc) to USD 1.4 billion and
largely consists of gains from product disposals, legal settlements
and certain items of net periodic pension cost. Other expense was
up 63% (48% cc) to USD 3.1 billion and includes impairment of
financial assets as well as property plant and equipment, litigation
settlement costs, restructuring and related charges and acquisition
related integration expenses. 
Core operating income, which excludes exceptional items and
amortization of intangible assets, was up 14% (16% cc) to USD
15.9 billion. Core operating income margin in constant currencies
increased by 1.1 percentage points. However, this improvement was
more than offset by a negative currency impact of 1.6 percentage
points, resulting in a net decrease in core operating income margin
of 0.5 percentage points to 27.2% of net sales. Total net exceptional
income and expense adjusted in core results in the various line
items in 2011 amounted to USD 1.9 billion expense compared to
USD 1.3 billion in the prior year. It comprised charges of USD 2.9
billion (2010: USD 2.1 billion) partly offset by exceptional income
of USD 1.0 billion (2010: USD 732 million). Exceptional charges
included: Tekturna/Rasilez (USD 903 million); USD 348 million
related to the discontinuation of the PRT128 (elinogrel), SMC021
(oral calcitonin), AGO178 (agomelatine), and PTK796 (omadacy-

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cline) development programs; a charge of USD 115 million related
to the temporary suspension of production at one of our US Con-
sumer Health sites; other intangible asset impairment charges of
USD 71 million principally relating to development projects; finan-
cial asset impairment charges of USD 192 million; integration
charges of USD 250 million (mainly for Alcon); and restructuring
and related costs of USD 492 million. Exceptional income includes
divestment proceeds (USD 480 million) and a USD 106 million
reduction of a contingent consideration obligation in Sandoz. In
2011, amortization of intangible assets amounted to USD 3.0 bil-
lion compared to USD 1.1 billion in 2010 as a result of a full year
of incorporating Alcon.
Net income decreased 7% (–2% cc) to USD 9.2 billion, more
than the decline in operating income as a result of lower associated
company income, higher financing costs following the Alcon acqui-
sition, partly offset by a lower tax rate (14.2% compared to 14.8%).
EPS declined 11% (–5% cc), more than the decline in net income,
mainly as a result of the increase in issued shares following the
Alcon merger, partially offset by a lower impact from non-control-
ling minority interests. 
Core net income grew 12% (+15% cc) to USD 13.5 billion
broadly in line with core operating income. Core EPS was up by 8%
(+11% cc): a lower rate than net income as a result of a higher
number of outstanding shares in 2011. 
The average number of shares outstanding in 2011 rose 4% to
2 382 million from 2 286 million in the year ago, while a total of
2 407 million shares were outstanding at December 31, 2011.
Free cash flow reached USD 12.5 billion (2010: USD 12.3 bil-
lion), an increase of 1% over the previous year. Free cash flow in
2010 included substantial cash flows from sales of A(H1N1)
amounting to USD 1.8 billion.
NET SALES
Change in
Year ended
Year ended
Change
constant
Dec 31, 2011
Dec 31, 20101
in USD
currencies
USD millions
USD millions
%
%
Pharmaceuticals
32 508
30 306
7
4
Alcon
9 958
4 446
124
118
Sandoz
9 473
8 592
10
7
Vaccines and Diagnostics
1 996
2 918
– 32
– 34
Consumer Health
4 631
4 362
6
3
Net sales
58 566
50 624
16
12
1Restated to reflect new segment allocation introduced during 2011 as explained in detail on
page 159
Pharmaceuticals net sales grew 7% (+4% cc) to USD 32.5 billion,
and Alcon net sales of USD 10.0 billion rose 10% (+7% cc) on a pro
forma basis. Sandoz net sales also grew 10% (+7% cc) to USD 9.5
billion. Vaccines and Diagnostics net sales were down 32% (–34%
cc) to USD 2.0 billion, mainly due to USD 1.3 billion of A(H1N1)
pandemic flu vaccine sales in 2010. Net sales of the two Consumer
Health businesses together grew 6% (+3% cc) to USD 4.6 billion.
PHARMACEUTICALS
Net sales expanded 7% (+4% cc) to USD 32.5 billion in 2011 driven
by 9 percentage points of increased volume, partly offset by a neg-
ative pricing impact of 1 percentage point and the combined
impact of generic entries and product divestments of an additional
4 percentage points. Recently launched products contributed USD
9.2 billion of net sales, growing 35% in constant currencies over
the previous year. These products now represent 28% of division
sales compared to 22% in 2010.
Europe remained the largest region (USD 11.6 billion, +2% cc)
for Pharmaceuticals, particularly benefiting from recently launched
products, which generated 35% of net sales, more than offsetting
health care cost-containment measures and generic erosion. The
US (USD 10.0 billion, 0% cc) contributed 31% of net sales for the
division. Japan’s performance (USD 3.9 billion, +7% cc) improved
versus the prior year due to new launches. Latin America and
Canada (USD 3.0 billion, +10% cc) achieved strong growth rates.
The top six emerging markets (USD 3.2 billion, +7% cc) were led by
double-digit growth from China and India.

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TOP 20 PHARMACEUTICALS DIVISION PRODUCT NET SALES – 2011
% change
Rest of
% change
% change
United States
in constant
world
in constant
Total
% change
in constant
Brands
USD millions
currencies
USD millions
currencies
USD millions
in USD
currencies
Diovan/Co–Diovan
Hypertension
2 333
– 7
3 332
– 11
5 665
– 6
– 9
Gleevec/Glivec
Chronic myeloid leukemia
1 459
14
3 200
2
4 659
9
5
Lucentis
Age-related macular degeneration
2 050
26
2 050
34
26
Zometa
Cancer complications
642
– 11
845
0
1 487
– 2
– 5
Sandostatin
Acromegaly
574
12
869
7
1 443
12
9
Exforge
Hypertension
325
14
884
36
1 209
34
30
Exelon/Exelon Patch
Alzheimer’s disease
375
– 1
692
7
1 067
6
4
Femara
Breast cancer
219
– 66
692
– 11
911
– 34
– 37
Neoral/Sandimmun
Transplantation
71
– 13
832
– 1
903
4
– 2
Exjade
Iron chelator
259
– 2
591
13
850
12
8
Top ten products total
6 257
– 7
13 987
3
20 244
3
0
Voltaren (excl. OTC)
Inflammation/pain
4
0
790
1
794
0
2
Tasigna
Chronic myeloid leukemia
255
90
461
66
716
79
74
Galvus
Diabetes
677
66
677
73
66
Comtan/Stalevo
Parkinson’s disease
214
– 7
400
3
614
2
– 1
Reclast/Aclasta
Osteoporosis
386
– 2
227
18
613
6
5
Tekturna/Rasilez
Hypertension
216
4
341
41
557
27
24
Ritalin/Focalin
Attention Deficit/Hyperactive Disorder
398
17
152
14
550
19
17
Myfortic
Transplantation
200
23
318
11
518
17
15
Gilenya
Relapsing Multiple Sclerosis
383
nm
111
nm
494
nm
nm
Xolair
Asthma
15
– 38
463
35
478
30
29
Top 20 products total
8 328
2
17 927
8
26 255
9
6
Rest of portfolio
1 645
– 9
4 608
– 1
6 253
0
– 4
Total Division sales
9 973
0
22 535
6
32 508
7
4
nm - not meaningful
PHARMACEUTICALS DIVISION PRODUCT HIGHLIGHTS – 
SELECTED LEADING PRODUCTS
Net sales growth data below refer to 2011 worldwide performance.
Growth rates are not provided for some recently launched products
since they are not meaningful.
Cardiovascular and Metabolism
Diovan Group (–6% to USD 5.7 billion, –9% cc) worldwide sales
declined due to loss of exclusivity in the EU. Diovan Group remains
the top-selling anti-hypertensive medication worldwide, with 13.27%
of the global hypertension market.
Exforge Group (+34% to USD 1.2 billion, +30% cc), showed strong
worldwide growth fueled by continued prescription demand in the
EU, US and other key regions, as well as ongoing Exforge HCT
launches in Europe, Asia and Latin America. Exforge, a single-pill
combination of Diovan and the calcium channel blocker amlodipine,
has delivered excellent growth globally and is now available in over
80 countries. Exforge HCT, Exforge with a diuretic (hydrochloroth-
iazide) in a single pill, is now available for patients in over 40 coun-
tries with additional launches expected in 2012.
Tekturna/Rasilez (+27% to USD 557 million, +24% cc), the first in
a class of medicines known as direct renin inhibitors to treat high
blood pressure, has been growing consistently since its launch in
2007. However, in late December, following the seventh interim
review of data from the ALTITUDE study with Tekturna/Rasilez,
Novartis announced that the trial was halted on the recommenda-
tion of the independent Data Monitoring Committee (DMC) over-
seeing the study. The DMC concluded that patients were unlikely to
benefit from treatment on top of standard anti-hypertensive medi-
cines, and identified higher adverse events in patients receiving
Tekturna/Rasilez in addition to standard of care as part of the trial.
Novartis has written to healthcare professionals worldwide recom-
mending that hypertensive patients with diabetes should not be
treated with Tekturna/Rasilez, or combination products containing
aliskiren (the active ingredient in Tekturna/Rasilez), if they are also
receiving an angiotensin-converting enzyme (ACE) inhibitor or
angiotensin receptor blocker (ARB). As an additional precaution-
ary measure, Novartis has ceased promotion of Tekturna/Rasilez-
based products for use in combination with an ACE inhibitor or ARB.

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In 2011, single-pill combinations Rasilamlo, a dual combination of
aliskiren and amlodipine, and Rasitrio, a triple combination of aliskiren,
amlodipine and hydrochlorothiazide, were approved in the EU.
These single-pill combinations were also launched in the US in
2011 under the brand names Tekamlo and Amturnide, respectively.
Galvus/Eucreas (+73% to USD 677 million, +66% cc), which
includes oral treatments with vildagliptin for type 2 diabetes, has
shown strong growth in Japan and many European, Latin American
and Asian Pacific markets since launch in 2007. The single-pill
combination Eucreas/GalvusMet
(vildagliptin and metformin)
accounted for the majority of sales, with the expanded use of Galvus
in elderly patients over 75 years old in the EU also fueling growth
in 2011. Additional EU approvals for use in moderate or severe
renally impaired type 2 diabetes patients are expected to drive
growth in 2012. Vildagliptin is now approved in more than 90 coun-
tries with an additional launch expected in China in 2012.
Oncology
Gleevec/Glivec (+9% to USD 4.7 billion, +5% cc), a targeted ther-
apy for some forms of chronic myeloid leukemia (CML) and gas-
trointestinal stromal tumors (GIST), maintained solid growth based
on its leadership position in treating these cancers. New clinical
data showing significant survival benefits for adult patients with
resected KIT+ GIST who received adjuvant (post-surgery) treatment
with Gleevec/Glivec (imatinib) for three years compared to one year
following surgery served as the basis for worldwide regulatory fil-
ings to update the label. Gleevec/Glivec was approved in 2008 for
use in certain adjuvant (post-surgery) KIT+ GIST patients and is now
approved in more than 60 countries for this indication.
Tasigna (+79% to USD 716 million, +74% cc), has shown rapid
growth as a next-generation targeted therapy for newly diagnosed
Ph+ CML patients following approvals in more than 50 markets
globally including the US, EU, Japan and Switzerland, with addi-
tional submissions pending worldwide. Tasigna market share con-
tinues to rise in Ph+ CML in the second-line indication with
approvals in over 95 countries.
Zometa (–2% to USD 1.5 billion, –5% cc) is an intravenous bispho-
sphonate therapy for patients with certain types of cancer that has
spread to the bones. Zoledronic acid, the active ingredient in
Zometa (4 mg), is also available under the trade names Reclast/
Aclasta (5 mg) for use in non-oncology indications with different
dosing. Zometa is facing new competition from denosumab, a prod-
uct of Amgen.
Femara (–34% to USD 911 million, –37% cc), a treatment for early
stage and advanced breast cancer in postmenopausal women,
experienced a decline in sales due to multiple generic entries in the
US, Europe and other key markets.
Sandostatin (+12% to USD 1.4 billion, +9% cc) benefited from the
increasing use of Sandostatin LAR in treating symptoms of patients
with neuroendocrine tumors as well as approvals in 25 countries for
the delay of tumor progression in patients with midgut carcinoid
tumors. It is currently under review in more than 20 additional
countries for this indication.
Exjade (+12% to USD 850 million, +8% cc) continued to expand
with strong growth based on new patients and expanded access
led by Asia and Europe. Exjade is currently approved in more than
100 countries as the only once-daily oral therapy for transfusional
iron overload. Filings for a potential new indication in the treatment
of non-transfusion-dependent thalassemia were submitted in the
US and EU.
Afinitor/Votubia (+82% to USD 443 million, +77% cc) is an oral
inhibitor of the mTOR pathway used across multiple diseases.
Afinitor continues to achieve strong growth in key markets as the
only approved treatment for patients with advanced renal cell car-
cinoma following VEGF-targeted therapy. Afinitor expanded its
indications with approvals in the US, EU and Japan for the treat-
ment of advanced pancreatic neuroendocrine tumors. Everolimus,
the active ingredient in Afinitor, is also approved in the US as
Afinitor and in the EU as Votubia for the treatment of subependymal
giant cell astryocytomas associated with tuberous sclerosis com-
plex (TSC). A Phase III study of everolimus in patients with non-
cancerous kidney tumors, or angiomyolipomas, associated with
TSC formed the basis of regulatory filings currently underway for
this potential indication. In addition, results of another Phase III
study, which showed Afinitor plus exemestane met the primary end-
point of progression-free survival versus exemestane alone in post-
menopausal women with ER+HER2- advanced breast cancer, are
supporting worldwide regulatory filings for this potential indica-
tion. Everolimus is also available under the trade names Zortress/
Certican for use in other non-oncology indications and is exclusively
licensed to Abbott and sublicensed to Boston Scientific for use in
drug-eluting stents.
Neuroscience and Ophthalmics
Lucentis (+34% to USD 2.0 billion, +26% cc) is a biotechnology eye
therapy now approved in more than 100 countries for the treat-
ment of wet age-related macular degeneration, and in more than
50 countries for the treatment of visual impairment due to diabetic
macular edema. Lucentis was approved in June 2011 in Europe for
visual impairment due to macular edema secondary to branch- and
central-retinal vein occlusion, and is now approved for this indica-
tion in more than 50 countries, including China. Genentech/Roche
holds the US rights to this medicine.

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Exelon/Exelon Patch (+6% to USD 1.1 billion, +4% cc) is a therapy
for mild to moderate forms of Alzheimer’s disease dementia as well
as dementia linked with Parkinson’s disease. The majority of sales
are for Exelon Patch, the novel skin patch launched in 2007 which
is now available in more than 80 countries worldwide for Alzheimer’s
disease dementia, including more than 20 countries where it is also
approved for dementia associated with Parkinson’s disease.
Extavia (+24% to USD 154 million, +19% cc), available in the US
and more than 35 other countries for relapsing forms of multiple
sclerosis (MS), marked the entry of Novartis into the field of MS.
Extavia is the Novartis-patented version of Betaferon®/Betaseron®.
Gilenya (USD 494 million) is approved in more than 55 countries
and showed continued rapid growth as a once-daily, oral disease-
modifying treatment for relapsing remitting and/or relapsing forms
of MS in adult patients. Gilenya was approved in the EU in March
2011 as a disease modifying therapy in patients with highly active
relapsing-remitting multiple sclerosis (RRMS) despite treatment
with beta interferon, or in patients with rapidly evolving severe
RRMS. Novartis also received approval for Gilenya in September
2011 in Japan for the prevention of relapse and delay of progres-
sion of physical disability in adults with MS. It is licensed from
Mitsubishi Tanabe Pharma Corporation.
Respiratory
Xolair (+30% to USD 478 million, +29% cc, ex-US), a biotechnol-
ogy drug approved for severe persistent allergic asthma in Europe
and moderate to severe persistent allergic asthma in the US, gained
blockbuster status when annual global sales (including US sales
recorded by Genentech/Roche) reached USD 1 billion in November
2011. Xolair is now approved in 90 countries and has shown strong
growth during 2011 in Europe, major Latin American markets and
Japan. A Phase III trial is progressing to support registration in
China. Launches are continuing across Europe for Xolair Liquid, a
new formulation in pre-filled syringes that enables easier adminis-
tration than the original lyophilized formulation. Phase III studies
are also being conducted in an additional potential indication,
chronic idiopathic urticaria. Novartis co-promotes Xolair with
Genentech/Roche in the US and shares a portion of operating
income, but does not record any US sales. Novartis has the sole
rights to market Xolair outside the US.
Onbrez Breezhaler/Arcapta Neohaler (USD 103 million) has shown
strong sales growth since its approval in the EU in November 2009
as a once-daily long-acting beta2-agonist (LABA) for the mainte-
nance bronchodilator treatment of airflow obstruction in adult
patients with chronic obstructive pulmonary disease (COPD).

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ate the benefit risk profile in refractory gouty arthritis patients.
Novartis is currently working with the FDA to determine next steps
for ACZ885 in gouty arthritis. Novartis is also pursuing other dis-
eases in which IL-1ß may play a prominent role, such as systemic
juvenile idiopathic arthritis, secondary prevention of cardiovascular
events and diabetes. Select subsets of patients with these diseases
would be eligible for treatment with Ilaris, if approved.
Neoral/Sandimmun (+4% to USD 903 million, –2% cc), for organ
transplantation and autoimmune diseases, has experienced only
modestly declining sales despite ongoing generic competition in
recent years due to its pharmacokinetic profile, reliability and use
in treating a life-threatening condition.
Myfortic (+17% to USD 518 million, +15% cc), a transplantation
medicine, is approved in more than 90 countries for the prevention
of acute rejection of kidney allografts and is indicated in combina-
tion with cyclosporine and corticosteroids. Myfortic was first
approved in the US in 2004 and in the EU in 2003.
Other
Reclast/Aclasta (+6% to USD 613 million, +5% cc), a once-yearly
infusion therapy for osteoporosis, continues to expand on increas-
ing patient access to infusion centers and a broad range of use in
patients with various types of this debilitating bone disease.
Approvals have been received in over 100 countries for up to six
indications, including the treatment of osteoporosis in men and
postmenopausal women. Six year data from a pivotal fracture trial
reinforced the long-term efficacy and safety profile of Reclast/Aclasta.
Zoledronic acid, the active ingredient in Reclast/Aclasta, is also
available in a number of countries in a different dosage for use in
oncology indications under the trade name Zometa.
Voltaren (0% at USD 794 million, +2% cc, excluding OTC sales), a
treatment for various inflammation and pain conditions, no longer
has patent protection in key markets around the world, but has con-
tinued to generate growth in regions such as Latin America, the
Middle East, Africa and Asia based on long-term trust in the brand.
Ritalin/Focalin (+19% to USD 550 million, +17% cc), for treatment
of Attention Deficit/Hyperactivity Disorder (ADHD), has benefited
from the use of long-acting Ritalin LA and Focalin XR patent-pro-
tected formulations that involve methylphenidate, the active ingre-
dient in Ritalin faces generic competition in many countries.
ALCON
Net sales in 2011 of Alcon increased by 124% to USD 10.0 billion
on a restated basis. Since however the 2010 base only includes the
net sales of Alcon, Inc. from August 25, 2010, as indicated above, a
comparison on a 2010 pro forma basis is more meaningful.
Net sales of USD 10.0 billion rose 10% (+7% cc) on a pro forma
basis, driven by strong global Ophthalmic Pharmaceuticals prod-
uct growth of 12% (+10% cc), Surgical products growth of 11%
(+8% cc), and by the top six emerging markets, which grew 26%
(+22% cc) over 2010. 
Alcon division pro forma net sales by product category:
Year ended
Year ended
Change
Constant

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OPHTHALMIC PHARMACEUTICALS
Global net sales of Ophthalmic Pharmaceuticals products increased
12% (+10% cc) to USD 3.9 billion in 2011. Glaucoma product sales
rose 13% (+10% cc), with growth driven by non-US combination
products DuoTrav and Azarga, with a combined growth of 41%
(+34% cc). Infection/inflammation product sales advanced 15%
(+14% cc) led by strong growth of Nevanac ophthalmic suspension,
as well as solid performance of Durezol ophthalmic suspension.
Allergy, otic, and nasal products showed solid growth, led by the
Patanol/Pataday franchise. Dry eye products Systane and Systane
Balance were the key contributors to growth in that product segment.
VISION CARE
Global net sales of Vision Care products rose 5% (+1% cc) in 2011
to USD 2.4 billion. Contact lens growth was driven by the continued
strong performance of Air Optix, which leads the marketplace in the
multifocal segment and achieved 18% (cc) growth over the previ-
ous year, and by strong Dailies growth in the US. Sales of contact
lenses were impacted by the discontinuation of the Specialty con-
tact lens business as well as slower market growth in European
countries. Contact lens solutions sales were led by strong growth of
the Clear Care hydrogen peroxide solution, offset by weakness in
the category for multi-purpose product sales. 
SANDOZ
Sandoz achieved strong sales growth in 2011 (+10% to USD 9.5 bil-
lion, +7% cc) versus prior year driven by significant growth in US
retail generics and biosimilars (+22% cc), with sales of over USD
1 billion for enoxaparin. Strong performances in Canada (+13% cc),
Western Europe (+13% cc), Latin America (+12% cc), Asia (+12%
cc) and Central and Eastern Europe (+6% cc) also contributed to
growth in 2011. Germany retail generics and biosimilars declined
(–13% cc) in a market that is estimated to have contracted 17% in
net terms due to the impact of statutory health insurance tenders
and new lower reference prices. Biosimilars grew 37% in constant
currencies to USD 261 million globally. Sales volume expanded 
14 percentage points due to new product launches, and Falcon
(transferred from Alcon) contributed 2 additional percentage points
of growth, more than compensating price erosion of 9 percentage
points.
VACCINES AND DIAGNOSTICS
Net sales declined 32% to USD 2.0 billion in 2011 (–34% cc) com-
pared to USD 2.9 billion in 2010. The primary driver of the net sales
variance against the prior year was USD 1.3 billion of A(H1N1) pan-
demic flu vaccine sales in 2010 not repeated in 2011.
Excluding the impact of A(H1N1) pandemic flu vaccines sales in
2010, net sales growth was 22% in constant currencies, driven by
growth across all strategic franchises, with a particularly strong con-
tribution from our meningococcal disease franchise.
The growth of our meningococcal disease franchise was under-
pinned by Menveo, which continues to gain market share both in the
US and worldwide, with net sales of USD 142 million in 2011.
CONSUMER HEALTH
Consumer Health (comprising OTC and Animal Health) delivered
combined 2011 net sales of USD 4.6 billion producing growth of
6% (+3% cc).
OTC delivered low-single-digit growth driven by emerging mar-
kets and priority brands. In nine out of the top ten countries for OTC,
volume growth outpaced the market. Cough and cold brands,
including Theraflu, grew strongly behind sustained investment and
a stronger season in several markets compared to 2010. Voltaren
continued to grow through the use of innovative commercial mod-
els and a focus on marketing fundamentals, while Prevacid24HR
benefitted from normalized stock movements compared to 2010.
In the US, Excedrin sales declined in the fourth quarter due to the
temporary suspension of operations and voluntary product recall at
OTC’s Lincoln, Nebraska, USA site. Expired distribution contracts
and divested brands also negatively impacted net sales growth ver-
sus the prior year. 
Animal Health contributed mid-single-digit net sales growth
over the previous year, driven by Germany, Japan, Australia and
emerging markets. CliK and Vetrazin retained their leadership posi-
tions in the sheep market in Australia and the UK. Milbemax deliv-
ered double-digit growth as the number one cat and dog de-
wormer in Europe, while Onsior gained market share across key
European markets and Japan. In the swine business, Denagard con-
tinued to drive strong double-digit growth led by the US. Total US
sales were flat despite the negative impact of a competitor entry in
the heartworm and flea categories.
OPERATING INCOME BY SEGMENTS
Change in
Year ended
Year ended
Change
constant
Dec 31, 2011
% of
Dec 31, 20101
% of
in USD currencies
USD millions
net sales
USD millions
net sales
%
%
Pharmaceuticals
8 296
25.5
8 471
28.0
– 2
4
Alcon
1 472
14.8
796
17.9
85
67
Sandoz
1 422
15.0
1 321
15.4
8
10
Vaccines and 
Diagnostics
– 249
– 12.5
612
21.0
– 141
– 131
Consumer Health
727
15.7
778
17.8
– 7
4
Corporate 
income & 
expenses, net
– 670
– 452
Operating income
10 998
18.8
11 526
22.8
– 5
1
1Restated to reflect new segment allocation introduced during 2011 as explained in detail on
page 159

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CORE OPERATING INCOME BY SEGMENTS
Change in
Year ended
Year ended
Change
constant
Dec 31, 2011
% of
Dec 31, 20101
% of
in USD currencies
USD millions
net sales
USD millions
net sales
%
%
Pharmaceuticals
10 040
30.9
9 586
31.6
5
8
Alcon
3 492
35.1
1 350
30.4
159
146
Sandoz
1 921
20.3
1 742
20.3
10
11
Vaccines and 
Diagnostics
135
6.8
1 066
36.5
– 87
– 85
Consumer Health
873
18.9
845
19.4
3
12
Corporate 
income & 
expenses, net
– 552
– 583
Core operating 
income
15 909
27.2
14 006
27.7
14
16
1Restated to reflect new segment allocation introduced during 2011 as explained in detail on
page 159
PHARMACEUTICALS
Operating income decreased 2% (+4% cc) in 2011 to USD 8.3 bil-
lion. Exceptional items including amortization amounted to a net
USD 1.7 billion expense compared to USD 1.1 billion expense in
2010. Exceptional items include Tekturna/Rasilez charges of USD
903 million, restructuring charges of USD 420 million and other
intangible asset impairments of USD 302 million (mainly AGO178,
PTK796, PRT128 and SMC021). These were partly offset by higher
prior-year impairment charges, and divestment income from Elidel®
(USD 324 million) and from ophthalmic pharmaceutical products
related to the Alcon acquisition (USD 81 million).
Core operating income in 2011 grew 5% (+8% cc) to USD 10.0
billion. In constant currencies, core operating income margin
increased by 1.4 percentage points due to continuing productivity
efforts. However, this improvement was more than offset by a neg-
ative currency impact of 2.1 percentage points, resulting in a net
decrease in core operating income margin of 0.7 percentage points
to 30.9% of net sales. The underlying gross margin decreased by
0.6 percentage points (cc) mainly driven by increased royalties.
Functional costs – which include General & Administration, Market-
ing & Sales and R&D expenses – improved by 2.0 percentage
points, driven by productivity gains in Marketing & Sales and R&D
despite significant investments in new product launches. Other
Income & Expense, net, remained flat in constant currencies.
ALCON
In 2011, Alcon operating income increased 85% to USD 1.5 billion
on a restated basis. Since however the 2010 base only includes
Alcon, Inc. from August 25, 2010, as indicated above, a comparison
on a 2010 pro forma basis is more meaningful.
Operating income in 2011 of USD 1.5 billion rose 24% (+14%
cc) on a pro forma basis. Operating income was impacted by the
inclusion of exceptional income from a litigation settlement (USD
183 million), amortization of intangible assets (USD 1.9 billion),
integration costs (USD 221 million), and the impact of manufactur-
ing optimization (USD 57 million).  
Core operating income in 2011 of USD 3.5 billion increased by
13% (+9% cc) on a pro forma basis. Core operating income mar-
gin in constant currencies increased by 0.7 percentage points on a
pro forma basis. In addition, there was a positive currency impact
of 0.1 percentage points, resulting in a net increase in core operat-
ing income margin of 0.8 percentage points to 35.1% of net sales.
SANDOZ
Operating income grew 8% (+10% cc) over the prior year to USD
1.4 billion. The operating income margin improved by 0.5 percent-
age points in constant currencies, more than offset by a negative
currency impact of 0.9 percentage points, resulting in a net
decrease of 0.4 percentage points to 15.0% of net sales. The con-
stant currency margin improvement was the result of productivity
improvements, the addition of the Falcon business and income
from reduction of a contingent consideration obligation, partly off-
set by charges and provisions for legal cases in the US (USD 204
million) as well as price erosion.
In 2011, core operating income rose 10% (+11% cc) to USD
1.9 billion, as declining prices were more than offset by additional
sales volume, new product launches and productivity improvements
in all areas. Core operating income margin in constant currencies
increased by 0.8 percentage points to 21.2% of net sales. Currency
had a negative impact, resulting in a 20.3% core operating income
margin.
VACCINES AND DIAGNOSTICS
Operating loss was USD 249 million for 2011 compared to an oper-
ating income of USD 612 million in 2010, due in large part to the
operating income associated with A(H1N1) pandemic flu vaccine
sales from the prior year not repeated in 2011.  
Excluding the impact of A(H1N1), profitability improved, despite
continued investment in our pipeline and meningococcal disease
franchise, driven by solid underlying sales growth. 2011 included
impairments of USD 143 million related to financial and intangible
assets compared to USD 98 million in 2010; 2010 also included
charges related to a legal settlement of USD 45 million and restruc-
turing charges of USD 52 million.
Core operating income for the year was USD 135 million com-
pared to USD 1.1 billion for 2010. Excluding the impact of A(H1N1),
core operating income also improved over 2010.
CONSUMER HEALTH
Operating income for 2011 decreased 7% to USD 727 million (but
increased 4% cc), with operating income margin in constant cur-
rencies increasing by 0.2 percentage points, more than offset by a
negative currency impact of 2.3 percentage points, resulting in an
operating income margin of 15.7% of net sales. 
Core operating income in 2011 increased by 3% (+12% cc) to
USD 873 million. Core operating income excludes the USD 115 mil-

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lion exceptional charge related to the product recall. Core operat-
ing income margin in constant currencies increased by 1.8 percent-
age points. This result demonstrates strong operating leverage with
core operating income growing significantly ahead of net sales. USD
73 million of the product recall exceptional charge relates to sales
returns. As no corresponding adjustment was made at the net sales
level, it had a beneficial impact of 0.4 percentage points on the core
operating income margin. Currency negatively impacted core oper-
ating income margin by 2.3 percentage points, resulting in a net
core operating income margin decrease of 0.5 percentage points to
18.9% of net sales. 
Gross margin improved slightly by 0.1 percentage points (cc)
driven by productivity gains that were partially offset by product
mix. Marketing & Sales expenses decreased by 0.7 percentage
points (cc) versus prior year driven by efficiency improvements in
OTC partially offset by increased investment in the Animal Health
business. R&D expenses decreased by 0.1 percentage points (cc)
from productivity measures that more then offset continued invest-
ment in innovation. General & Administrative expenses decreased
by 0.2 percentage points (cc) due to strong cost control. Other
Income and Expense, net, improved by 0.3 percentage points (cc)
largely driven by income from smaller product divestments.
CORPORATE INCOME & EXPENSE, NET
Corporate income & expense, net, includes the costs of Group head-
quarters. These net expenses of USD 670 million in 2011 were 48%
higher than in 2010 primarily due to an exceptional pension cur-
tailment gain of USD 265 million in the prior year.
NON-OPERATING INCOME AND EXPENSE
Change in
Year ended
Year ended
Change
constant
Dec 31, 2011
Dec 31, 2010
in USD currencies
USD millions
USD millions
%
%
Operating income
10 998
11 526
– 5
1
Income from associated 
companies
528
804
– 34
– 34
Interest expense
– 751
– 692
9
5
Other financial income
and expense
– 2
64
– 103
– 140
Income before taxes
10 773
11 702
– 8
– 2
Taxes
– 1 528
– 1 733
– 12
– 6
Group net income
9 245
9 969
– 7
– 2
Attributable to:
Shareholders of Novartis AG
9 113
9 794
– 7
– 1
Non-controlling interests
132
175
– 25
– 25
Basic EPS (USD)
3.83
4.28
– 11
– 5
CORE NON-OPERATING INCOME AND EXPENSE
Change in
Year ended
Year ended
Change
constant
Dec 31, 2011
Dec 31, 2010
in USD currencies
USD millions
USD millions
%
%
Core operating income
15 909
14 006
14
16
Income from associated 
companies
779
1 041
– 25
– 28
Interest expense
– 751
– 692
9
5
Other financial income
and expense
– 2
64
– 103
– 140
Core income before taxes
15 935
14 419
11
13
Taxes
– 2 445
– 2 390
2
5
Core net income
13 490
12 029
12
15
Attributable to:
Shareholders of Novartis AG
13 273
11 767
13
16
Non-controlling interests
217
262
– 17
– 17
Core basic EPS (USD)
5.57
5.15
8
11
INCOME FROM ASSOCIATED COMPANIES
Associated companies are accounted for using the equity method
generally when Novartis holds between 20% and 50% of the voting
shares of these companies, or where Novartis has otherwise signif-
icant influence over them. Income from associated companies is
mainly derived from the Group’s investments in Roche Holding AG
and, prior to August 25, 2010, Alcon.
The income from associated companies fell from USD 804 mil-
lion in 2010 to USD 528 million in 2011, as since August 25, 2010
Alcon, Inc. is fully consolidated and no longer accounted for as an
associated company.
The following is a summary of the individual components
included in the income from associated companies:
2011
2010
USD millions
USD millions
Share of estimated Roche reported net income
702
648
Restructuring impact 
(2011 includes USD 41 million from 2010;
2010 includes USD 43 million from 2009)
– 41
– 132
Amortization of intangible assets
– 162
– 136
Net income effect from Roche
499
380
Share of Alcon net income
385
Catch-up for actual Alcon previous year net income
2
Revaluation of initial 25% interest to 
fair value
378
Recycling of losses accumulated in comprehensive 
income from July 7, 2008 to August 25, 2010
– 43
Amortization of intangible assets
– 289
Net income effect from Alcon (in 2010 up to 
August 25, 2010)
433
Net income from other associated companies
29
– 9
Income from associated companies
528
804

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The Group’s 33.3% interest in Roche’s voting shares, which repre-
sents a 6.3% interest in Roche’s total equity, generated income of
USD 499 million in 2011, up from USD 380 million in 2010. The
2011 contribution reflects an estimated USD 702 million share of
Roche’s net income in 2011. This contribution, however, was
reduced by USD 162 million for the amortization of intangible
assets arising from the allocation of the purchase price paid by
Novartis for this investment to Roche’s intangible assets and an
exceptional charge of USD 41 million taken in 2011 as part of
Roche’s restructuring charges.
The 2010 result from Alcon includes the net income up to
August 25, 2010 of USD 385 million and a positive prior-year
adjustment of USD 2 million which were reduced by USD 289 mil-
lion for the amortization of intangible assets.
Adjusting for the exceptional items in both years, core income
from associated companies decreased 25% to USD 779 million.
A survey of analyst estimates is used to estimate the Group’s
share of net income in Roche. Any differences between these esti-
mates and actual results will be adjusted in the 2012 consolidated
financial statements.
INTEREST EXPENSE AND OTHER FINANCIAL INCOME/EXPENSE
In 2011, interest expense increased by 9% from USD 692 million
to USD 751 million. Other financial income/expense was a net
expense of USD 2 million, down from a net income of USD 64 mil-
lion in the prior year mainly due to lower earnings from investments
as a result of the decreased average liquidity. The currency result
remained stable.
TAXES
Tax expenses in 2011 were USD 1.5 billion, a 12% (6% cc) decrease
from 2010. The tax rate (taxes as a percentage of income before
taxes) decreased to 14.2% in 2011 from 14.8% in 2010 mainly due
to the favorable impact of the Alcon, Inc. merger and as a result the
ability to undertake a related tax structure reorganization. For the
same reason the core tax rate (taxes as percentage of core income
before taxes) decreased to 15.3% in 2011 from 16.6% in 2010. The
effective tax rate is different to the expected tax rate due to various
adjustments made to the IFRS results to arrive at taxable income.
For further information on the main elements contributing to the
difference, see the core tables in the Appendix starting on page 179
and note 6 to the Group’s consolidated financial statements.
CONDENSED CONSOLIDATED BALANCE SHEETS
Dec 31, 2011
Dec 31, 2010
Change
USD millions
USD millions
USD millions
Assets
Property, plant & equipment
15 627
15 840
– 213
Goodwill
29 943
29 692
251
Intangible assets other than goodwill
31 969
35 231
– 3 262
Financial and other non-current assets
15 873
15 870
3
Total non-current assets
93 412
96 633
– 3 221
Inventories
5 930
6 093
– 163
Trade receivables
10 323
9 873
450
Other current assets
2 756
2 585
171
Cash, short-term deposits 
and marketable securities
5 075
8 134
– 3 059
Total current assets
24 084
26 685
– 2 601
Total assets
117 496
123 318
– 5 822
Equity and liabilities
Total equity
65 940
69 769
– 3 829
Financial debts
13 855
14 360
– 505
Other non-current liabilities
14 553
14 531
22
Total non-current liabilities
28 408
28 891
– 483
Trade payables
4 989
4 788
201
Financial debts and derivatives
6 374
8 627
– 2 253
Other current liabilities
11 785
11 243
542
Total current liabilities
23 148
24 658
– 1 510
Total liabilities
51 556
53 549
– 1 993
Total equity and liabilities
117 496
123 318
– 5 822
BALANCE SHEET
The total assets at December 31, 2011 amounted to USD 117.5 bil-
lion and were USD 5.8 billion lower than the level at the beginning
of the year. Total non-current assets amounted to USD 93.4 billion
compared to USD 96.6 billion at the beginning of the year, and
included goodwill and intangible assets, which decreased to USD
61.9 billion from USD 64.9 billion at the beginning of the year. Cur-
rent assets also decreased to USD 24.1 billion from USD 26.7 bil-
lion mainly due to a reduction in marketable securities, which fell
by USD 3.1 billion as a result of the transaction with Alcon minor-
ity shareholders and a decrease in inventories of USD 0.2 billion
while trade receivables increased by USD 0.5 billion.
Trade receivable balances include sales to government-sup-
ported healthcare systems. We continue to monitor sovereign debt
issues and economic conditions in Greece, Italy, Spain, Portugal
and other countries in Europe and evaluate accounts receivable in
these countries for potential collection risks. Deteriorating credit
and economic conditions and other factors in these countries have
resulted in, and may continue to result in an increase in the aver-
age length of time that it takes to collect these accounts receivable
and may require us to re-evaluate the collectability of these receiv-
ables in future periods.

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The following table provides an overview of our aging analysis
as of December 31, 2011 and 2010:
2011
2010
USD millions
USD millions
Not overdue
8 967
8 684
Past due for not more than one month
498
366
Past due for more than one month 
but less than three months
295
320
Past due for more than three months 
but less than six months
249
217
Past due for more than six months 
but less than one year
228
208
Past due for more than one year
305
299
Provisions for doubtful trade receivables
– 219
– 221
Total trade receivables, net
10 323
9 873
Financial debt including derivatives decreased by USD 2.8 billion to
USD 20.2 billion at December 31, 2011 despite the funding of
acquisitions and share repurchases. The long-term financial debt of
USD 13.8 billion comprises bonds and Euro Medium Term Notes
totaling USD 12.7 billion and other long-term financial loans of USD
1.1 billion. The short-term financial debt of USD 6.4 billion com-
prises commercial paper of USD 2.2 billion and other short-term
borrowings totaling USD 4.2 billion.
The Group’s equity fell by USD 3.8 billion to USD 65.9 billion at
December 31, 2011 compared to December 31, 2010. Total com-
prehensive income amounted to USD 7.3 billion, principally due to
net income for 2011 (USD 9.2 billion), offset by net actuarial losses
from defined benefit plans (USD 1.4 billion) and negative currency
translation movements (USD 0.6 billion). This was more than offset
by dividends (USD 5.4 billion), the net effect of the purchase of
treasury shares (USD 3.5 billion) coupled with the acquisition of the
remaining USD 2.9 billion non-controlling interest in Alcon, Inc. and
an increase from equity-based compensation (USD 0.8 billion).
The acquisition of the remaining interests in Alcon, Inc. was
achieved in two key steps. Prior to April 8, 2011, 4.8% of Alcon, Inc.
was acquired which resulted in a reduction of consolidated equity
by USD 2.4 billion. On April 8, 2011, the remaining outstanding
non-controlling interests were acquired by an exchange of Novartis
shares with a value of USD 9.2 billion plus a contingent value pay-
ment of USD 0.5 billion. Including acquisition related costs charged
to equity of USD 0.1 billion, this resulted in total consolidated equity
reductions of USD 12.2 billion which more than offset the amount
of USD 6.5 billion non-controlling interests Novartis obtained
through this transaction, leading to a net reduction in consolidated
equity of USD 5.7 billion. Non-controlling interests in total reduced
by USD 6.6 billion, mainly due to the transactions described above.
The Group’s debt/equity ratio improved to 0.31:1 at December
31, 2011, compared to 0.33:1 at the end of 2010 mainly as the
reduction in equity was more than offset by a reduction in short
term financial debts.
LIQUIDITY, CASH FLOW AND CAPITAL RESOURCES
The following table sets forth certain information about the Group’s
cash flow and net debt.
2011
2010
Change
USD millions
USD millions
USD millions
Cash flows from operating activities
14 309
14 067
242
Cash flows used in investing activities
– 792
– 15 756
14 964
Cash flows used in / from financing
activities
– 15 024
4 116
– 19 140
Currency translation effect on cash
and cash equivalents
– 103
– 2
– 101
Net change in cash and cash 
equivalents
– 1 610
2 425
– 4 035
Change in marketable securities
– 1 449
– 11 740
10 291
Change in current and non-current 
financial debts
2 758
– 8 999
11 757
Change in net (debt) / liquidity
– 301
– 18 314
18 013
Net (debt) / liquidity at January 1
– 14 853
3 461
– 18 314
Net debt at December 31
– 15 154
– 14 853
– 301
Net debt consists of:
2011
2010
Change
USD millions
USD millions
USD millions
Current financial debts and derivative 
financial instruments
– 6 374
– 8 627
2 253
Non-current financial debts
– 13 855
– 14 360
505
Total financial debt
– 20 229
– 22 987
2 758
Less liquidity:
Cash and cash equivalents
3 709
5 319
– 1 610
Marketable securities and derivative 
financial instruments
1 366
2 815
– 1 449
Total liquidity
5 075
8 134
– 3 059
Net debt at December 31
– 15 154
– 14 853
– 301
In 2011 the cash flow from operating activities was USD 14.3 billion,
a 2% increase from USD 14.1 billion in 2010 which included USD 1.8
billion of cash collections for A (H1N1) pandemic flu vaccines.
The strong increase in operating income after adjustments for
non-cash items was partially mitigated by working capital require-
ments to fund business expansion.
Cash outflows for investing activities were USD 0.8 billion com-
pared to USD 15.8 billion in the prior year period. Outflows for
investments in property, plant and equipment (USD 2.2 billion) and
intangible and financial assets (USD 0.4 billion) as well as acquisi-
tion of businesses (USD 0.6 billion), mainly Genoptix Inc., were
partly compensated by net inflows from the sale of marketable
securities (USD 1.6 billion) and proceeds from the sales of various
assets (USD 0.8 billion, mainly Elidel® marketing rights).
In 2010, outflows for investments in property, plant and equip-
ment (USD 1.7 billion) and in intangible and financial assets (USD
0.7 billion) as well as acquisition of businesses (USD 26.7 billion),
mainly Alcon, were partially funded by the sale of marketable secu-

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rities, net (USD 12.6 billion) and proceeds from the sales of various
assets (USD 0.7 billion).
Net cash used for financing activities was USD 15.0 billion in
2011. It was comprised of outflows of USD 5.4 billion for the dividend
payment, of a net USD 3.5 billion for treasury share repurchases, USD
3.2 billion for the acquisition of the Alcon non-controlling interests
and net USD 2.8 billion for the repayment of financial debts and USD
0.1 billion other financing items. In 2010 the financing activities
resulted in a net cash inflow of USD 4.1 billion on account of addi-
tional debt raised for the increased Alcon investment.
Overall liquidity of USD 5.1 billion consists of USD 3.7 billion of
cash and cash equivalents and of USD 1.4 billion marketable secu-
rities and derivative financial instruments. It decreased by USD 3.0
billion from the prior year level of USD 8.1 billion which included
cash and cash equivalents of USD 5.3 billion and marketable secu-
rities and financial derivatives of USD 2.8 billion.
The total financial debt was USD 20.2 billion, down by USD 2.8
billion. Group net debt increased to USD 15.2 billion at the end of
2011 from USD 14.9 billion at the end of 2010. This represents a
net increase of USD 0.3 billion since December 31, 2010. The peak
Novartis net debt amount of USD 22.7 billion was reached at the
beginning of the second quarter of 2011. This has been repaid to
the extent of USD 7.5 billion by the year end. The long-term credit
rating for the company continues to be double-A (Moody’s Aa2;
Standard & Poor’s AA-; Fitch AA).
Net debt/liquidity constitutes a non-IFRS financial measure,
which means that it should not be interpreted as a measure deter-
mined under IFRS. Net debt/liquidity is presented as additional
information as it is a useful indicator of the Group’s ability to meet
financial commitments and to invest in new strategic opportunities,
including strengthening its balance sheet.
We continuously track our liquidity position and asset/liability
profile. This involves modeling cash flow maturity profiles based on
both historical experiences and contractual expectations to project
our liquidity requirements. We seek to preserve prudent liquidity
and funding capabilities.
We are not aware of significant demands to change our level of
liquidity needed to support normal business activity. We intend to
use part of our free cash flow to reduce our financial debt. We make
use of various borrowing facilities provided by several financial
institutions. We also successfully issued various bonds in 2010 and
2011. In addition, we raised funds through our commercial paper
program. We have no commitments from repurchase or securities
lending transactions. The principal reason for the increase in aver-
age current financial debt in 2011 compared to 2010 is the
increase in commercial paper during 2011, which was used for gen-
eral corporate purposes of the Novartis Group, as well as for financ-
ing purposes in connection with the acquisition of the remaining
Alcon, Inc. non-controlling interests in 2011.
An overview of the movements in our current financial debt and related interest rates is set forth below:
Average 
Average
Average 
Maximum
interest rate
balance
interest rate
balance
December 31
at year end during the year during the year during the year
USD millions
%1
USD millions
%1
USD millions2
2011
Interest bearing accounts of associates
1 357
1.36
1 463
1.25
1 626
Other bank and financial debt
2 053
3.38
3 784
1.83
7 749
Commercial paper
2 156
0.55
5 597
0.21
8 673
Current portion of non-current financial debt
778
na
479
na
911
Fair value of derivative financial instruments
30
na
97
na
184
Total current financial debt
6 374
11 420
19 143
2010
Interest bearing accounts of associates
1 321
1.15
1 239
1.23
1 321
Other bank and financial debt
2 195
2.37
2 297
2.26
2 692
Commercial paper
4 969
0.20
3 603
0.28
8 719
Current portion of non-current financial debt
98
na
47
na
98
Fair value of derivative financial instruments
44
na
106
na
201
Total current financial debt
8 627
7 292
12 631
12010 interest is calculated based on the average balances for a quarter and 2011 interest is calculated based on the average balances for a month
2For 2010 maximum amount at end of any quarter in each category and for 2011 maximum amount at end of any month in each category
na – not applicable or available
Interest bearing accounts of associates relate to employee deposits in CHF from the compensation of associates employed by Swiss enti-
ties (actual interest rate: 1.25%). Other bank and financial debt refer to usual lending and overdraft facilities.

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The maturity schedule of our net debt is as follows:
Due later than 
Due later than
Due later than 
Due or due 
one month 
three months 
one year 
within 
but less than 
but less than 
but less than 
Due after 
one month 
three months
one year
five years
five years 
Total
December 31, 2011
USD millions
USD millions
USD millions
USD millions
USD millions
USD millions
Current assets
Marketable securities
36
638
562
1 236
Derivative financial instruments and accrued interest 
on derivative financial instruments
61
15
54
130
Cash and cash equivalents
3 709
3 709
Total current financial assets
3 770
15
90
638
562
5 075
Non-current liabilities
Financial debts
9 874
3 981
13 855
Total non-current financial debt
9 874
3 981
13 855
Current liabilities
Financial debts
4 039
1 100
1 205
6 344
Derivative financial instruments
7
7
16
30
Total current financial debt
4 046
1 107
1 221
6 374
Net debt
– 276
– 1 092
– 1 131
– 9 236
– 3 419
– 15 154
Due later than 
Due later than
Due later than 
Due or due 
one month 
three months 
one year 
within 
but less than 
but less than 
but less than 
Due after 
one month 
three months
one year
five years
five years 
Total
December 31, 2010
USD millions
USD millions
USD millions
USD millions
USD millions
USD millions
Current assets
Marketable securities
1
593
1 441
722
2 757
Derivative financial instruments and accrued interest 
on derivative financial instruments
14
33
11
58
Cash and cash equivalents
5 319
5 319
Total current assets
5 334
33
604
1 441
722
8 134
Non-current liabilities
Financial debts
8 399
5 961
14 360
Total non-current liabilities
8 399
5 961
14 360
Current liabilities
Financial debts
5 480
2 093
1 010
8 583
Derivative financial instruments
23
5
16
44
Total current liabilities
5 503
2 098
1 026
8 627
Net debt
– 169
– 2 065
– 422
– 6 958
– 5 239
– 14 853

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The following table provides a breakdown of liquid funds and finan-
cial debt by currency:
LIQUID FUNDS AND FINANCIAL DEBT BY CURRENCY
(as of December 31)
Liquid
Liquid
Financial
Financial
funds in %
funds in %
debt in %
debt in %
2011
2010
2011
2010
USD
60
82
56
64
EUR
2
3
13
13
CHF
33
11
15
13
JPY
14
8
Other
5
4
2
2
100
100
100
100
FREE CASH FLOW
Novartis defines free cash flow as cash flow from operating activi-
ties less purchase or sale of property, plant & equipment, intangi-
ble, non-current and financial assets. Cash effects realized in con-
nection with the acquisition or divestment of subsidiaries, associated
companies and non-controlling interests are excluded from free
cash flow. The following is a summary of the Group’s free cash flow:
2011
2010
Change
USD millions
USD millions
USD millions
Cash flows from operating activities
14 309
14 067
242
Purchase of property, plant & 
equipment
– 2 167
– 1 678
– 489
Purchase of intangible assets
– 220
– 554
334
Purchase of financial assets
– 139
– 124
– 15
Purchase of non-current non-financial 
assets
– 48
– 15
– 33
Proceeds from sales of property, 
plant & equipment
61
36
25
Proceeds from sales of intangible assets
643
545
98
Proceeds from sales of financial assets
59
66
– 7
Proceeds from sales of non-current
non-financial assets
5
3
2
Group free cash flow
12 503
12 346
157
Free cash flow for 2011 was USD 12.5 billion, which represents an
increase of 1% or USD 0.2 billion compared to the prior-year. Main
contributors were Pharmaceuticals with USD 10.8 billion followed
by Alcon with USD 3.5 billion while other divisions contributed in
total USD 2.1 billion. Corporate had a free cash outflow of USD 3.9
billion mainly on account of interest and tax payments.
Free cash flow of USD 12.5 billion was deployed for dividend
payments of USD 5.4 billion and share repurchases of USD 5.9 bil-
lion (including USD 2.4 billion repurchased indirectly via Alcon, Inc.
to reduce the dilutive impact of the subsequent merger of Alcon,
Inc. into Novartis AG). In total, dividends and share repurchases uti-
lized 90% of the Group’s 2011 free cash flow.
Free cash flow is presented as additional information because
Novartis considers it is a useful indicator of the Group’s ability to
operate without relying on additional borrowing or the use of exist-
ing cash. Free cash flow is a measure of the net cash generated that
is available for debt repayment and investment in strategic oppor-
tunities. The Group uses free cash flow as a performance measure
when making internal comparisons of the results of divisions. Free
cash flow constitutes a non-IFRS financial measure, which means
that it should not be interpreted as a measure determined under
IFRS. Free cash flow is not intended to be a substitute measure for
cash flow from operating activities (as determined under IFRS).

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CONTRACTUAL OBLIGATIONS
The following table summarizes the Group’s contractual obligations and other commercial commitments as well as the effect these obli-
gations and commitments are expected to have on the Group’s liquidity and cash flow in future periods:
Payments due by period
Less than
After
Total
1 year
2–3 years
4–5 years
5 years
USD millions
USD millions
USD millions
USD millions
USD millions
Non-current financial debt
14 633
778
4 818
5 056
3 981
Operating leases
3 036
355
445
233
2 003
Unfunded pensions and other post-retirement obligations
1 808
85
173
186
1 364
Research & Development
– Unconditional commitments
343
105
126
81
31
– Potential milestone commitments
2 653
282
665
560
1 146
Purchase commitments
– Property, plant & equipment
583
493
75
13
2
Total contractual cash obligations
23 056
2 098
6 302
6 129
8 527
The Group intends to fund the R&D and purchase commitments with internally generated resources.
SUMMARY OF EQUITY MOVEMENTS
Issued share capital and reserves
Number of shares (in millions)
attributable to Novartis AG shareholders
2011
2010
Change
2011
2010
Change
USD millions
USD millions
USD millions
Balance at beginning of year
2 289
2 274
15
63 196
57 387
5 809
Shares issued in connection with the merger with Alcon
108
108
6 009
6 009
Treasury shares exchanged in connection with the merger with Alcon
57
57
3 154
3 154
Excess of the purchase price for acquiring non-controlling interest 
compared to the recorded amounts and other impacts of change 
of ownership in consolidated entities
– 5 664
– 170
– 5 494
Share buy-backs:
Shares acquired to be held in Group Treasury
– 21
– 21
– 1 131
– 18
– 1 113
Shares acquired to be cancelled
– 39
– 39
– 2 360
– 2 360
Other treasury shares movements
13
15
– 2
837
959
– 122
Dividends
– 5 368
– 4 486
– 882
Net income of the year attributable to shareholders of Novartis AG
9 113
9 794
– 681
Other comprehensive income attributable to shareholders of Novartis AG
– 1 942
– 270
– 1 672
Balance at end of year
2 407
2 289
118
65 844
63 196
2 648

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A total of 165 million Novartis shares with a fair value of USD 9.2
billion were exchanged on April 8, 2011 to obtain the outstanding
non-controlling interest in Alcon, Inc. These shares consisted of
108 million newly issued shares and 57 million treasury shares.
In 2011 a total of 60 million shares, net were purchased for USD
3.5 billion. Out of these, 39 million shares were acquired under the
2nd line of the SIX Swiss Exchange repurchase program with the
intention to be cancelled and 21 million shares were repurchased
on the 1st trading line of the SIX Swiss Exchange with the intention
of being retained in Group Treasury. 13 million shares were trans-
ferred to associates as part of the equity-settled compensation or
sold (2010: 15 million shares) resulting in a total net reduction of
9.2 million treasury shares (2010: 15.1 million shares).
EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND
AMORTIZATION
The Group defines the non-IFRS measure of earnings before inter-
est, tax, depreciation and amortization (EBITDA) as operating
income excluding depreciation of property, plant & equipment
(including any related impairment charges), amortization of intan-
gible assets (including any related impairment charges), income
from associated companies, interest expense, other financial
income/expense, other expense and taxes.
2011
2010
Change
USD millions
USD millions
USD millions
Operating income
10 998
11 526
– 528
Depreciation of property, plant & 
equipment
1 728
1 363
365
Amortization of intangible assets
3 028
1 135
1 893
Impairments of property, plant & 
equipment and intangible assets
1 032
921
111
Group EBITDA
16 786
14 945
1 841
The following table provides an overview of EBITDA by segment:
2011
% of 
20101
% of 
USD millions
net sales
USD millions
net sales
Pharmaceuticals
10 544
32.4
10 540
34.8
Alcon
3 731
37.5
988
22.2
Sandoz
2 134
22.5
1 910
22.2
Vaccines and Diagnostics
107
5.4
985
33.8
Consumer Health
852
18.4
891
20.4
Corporate and other
– 582
– 369
Group EBITDA
16 786
28.7
14 945
29.5
1Restated to reflect new segment allocation introduced during 2011 as explained in detail on
page 159
As indicated above, EBITDA is an additional non-IFRS measure.
Compared to our definition of “Core” which is also a non-IFRS
measure, EBITDA only adjusts for the impact of the significant non-
cash items contained in operating income relating to depreciation,
amortization and impairment charges but does not take into
account any other exceptional items.
ENTERPRISE VALUE
Enterprise value is a non-IFRS measure representing the total
amount that shareholders and debt holders have invested in
Novartis, less the Group’s liquidity.
Dec 31, 2011
Dec 31, 2010
Change
USD millions
USD millions
USD millions
Market capitalization
137 511
133 731
3 780
Non-controlling interests
96
6 573
– 6 477
Financial debts
20 229
22 987
– 2 758
Liquidity
– 5 075
– 8 134
3 059
Enterprise value
152 761
155 157
– 2 396
Enterprise value/EBITDA
9
10

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NOVARTIS ECONOMIC VALUE ADDED
Novartis utilizes its own definition for measuring Novartis Economic
Value Added (NVA), a non-IFRS measure, which is utilized for deter-
mining payouts under the Long-Term Performance Plan. The fol-
lowing table shows NVA for 2011 and 2010 utilizing the Novartis
definition.
Year ended
Year ended
Change
Dec 31, 2011
Dec 31, 2010
in USD
USD millions
USD millions
%
Operating income
10 998
11 526
– 5
Income from associated companies
528
804
– 34
Operating interest
– 284
– 324
– 12
Operating tax
– 2 296
– 2 169
6
Capital charge
– 7 397
– 5 495
35
Novartis Economic Value Added
1 549
4 342
– 64
Operating interest is the internal charge on average working capi-
tal based on the short-term borrowing rates of the entity owning
them.
Operating tax is the internal tax charge for each entity applying
the applicable tax rate to the profit before tax of each entity unad-
justed for tax-disallowed items or tax loss carryforwards.
The capital charge is the notional interest charge on the Group’s
average non-current assets based on an internally calculated weighted
average cost of capital for the Group.
NET NOVARTIS ADDED VALUE
Net Novartis Added Value (NNAV) is a non-IFRS measure, which
describes, among other items, the percentage of Group sales used
either directly or individually for payments to suppliers, associates,
public authorities, financial institutions or our shareholders.
A total of 46% of the 2011 revenue from net sales was used to
purchase goods and services from suppliers. Of the total of USD
26.6 billion of NNAV, 56% was paid either directly or indirectly to
associates, 14% was retained in the business for future expansion
and 9% was paid to public authorities and financial institutions.
Income attributed to non-controlling interests and dividends paid
to shareholders of Novartis AG represented 21% of the NNAV.
ORIGIN OF NET NOVARTIS ADDED VALUE
2011
2011
2010
USD millions
% of net sales
% of net sales
Net sales
58 566
100
100
Other revenues, change in inventory 
and own manufactured items
763
1.3
– 0.1
59 329
101.3
99.9
Services bought from third parties:
Material costs and other operating 
expenses
– 26 756
– 45.7
– 44.0
Gross added value
32 573
55.6
55.9
Depreciation, amortization and 
impairments
– 5 980
– 10.2
– 7.1
Financial income
– 2
0.0
0.1
Net Novartis Added Value
26 591
45.4
48.9
INTERNAL CONTROL OVER FINANCIAL REPORTING
The Group’s management has assessed the effectiveness of inter-
nal control over financial reporting. The Group’s independent statu-
tory auditor also issued an opinion on the effectiveness of internal
control over financial reporting concluding that the Group main-
tained, in all material respects, effective internal control over finan-
cial reporting as of December 31, 2011.

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APPENDIX
CORE RESULTS AS DEFINED BY NOVARTIS
The Group’s core results – including core operating income, core
net income and core earnings per share – exclude the amortization
of intangible assets, impairment charges, expenses relating to the
integration of acquisitions as well as other items that are, or are
expected to accumulate within the year to be, over a USD 25 mil-
lion threshold that management deems exceptional.
Novartis believes that investor understanding of the Group’s
performance is enhanced by disclosing core measures of perform-
ance because, since they exclude these exceptional items which can
vary significantly from year to year, the core measures enable bet-
ter comparison across years. For this same reason, Novartis uses
these core measures in addition to IFRS and other measures as
important factors in assessing the Group’s performance.
The following are examples of how these core measures are utilized:
– In addition to monthly reports containing financial information
prepared under IFRS, senior management receives a monthly
analysis incorporating these core measures.
– Annual budgets are prepared for both IFRS and core measures.
Despite the use of these measures by management in setting goals
and measuring the Group’s performance, these are non-IFRS
measures that have no standardized meaning prescribed by IFRS.
As a result, such measures have limits in their usefulness to
investors.
Because of their non-standardized definitions, the core meas-
ures (unlike IFRS measures) may not be comparable to the calcu-
lation of similar measures of other companies. These core meas-
ures are presented solely to permit investors to more fully
understand how the Group’s management assesses underlying per-
formance. These core measures are not, and should not be viewed
as, a substitute for IFRS measures.
As an internal measure of Group performance, these core meas-
ures have limitations, and the performance management process is
not solely restricted to these metrics. A limitation of the core meas-
ures is that they provide a view of the Group’s operations without
including all events during a period, such as the effects of an acqui-
sition or amortization of purchased intangible assets.

N OVA R T I S  G R O U P  A N N UA L  R E P O R T  2 0 1 1
180
2011 AND 2010 RECONCILIATION OF IFRS RESULTS TO CORE RESULTS – GROUP
Acquisition-
related
divestment
gains,
Amortization
restructuring 
of intangible
and integration
Exceptional 
IFRS results
assets1
Impairments2
charges3
items4
Core results
2011
USD millions
USD millions
USD millions
USD millions
USD millions
USD millions
Gross profit
40 392
2 918
278
5
246
43 839
Operating income
10 998
3 028
1 224
148
511
15 909
Income before taxes
10 773
3 238
1 224
148
552
15 935
Taxes
– 1 528
– 2 4455
Net income
9 245
13 490
Basic earnings per share (USD) 6
3.83
5.57
The following are adjustments to arrive at Core Gross Profit
Net sales
58 566
117
58 683
Cost of Goods Sold
– 18 983
2 918
278
5
129
– 15 653
The following are adjustments to arrive at Core Operating Income
Marketing & Sales
– 15 079
2
– 15 077
Research & Development
– 9 583
93
341
– 90
– 9 239
General & Administration
– 2 970
13
– 2 957
Other income
1 354
– 3
– 102
– 806
443
Other expense
– 3 116
4
608
245
1 159
– 1 100
The following are adjustments to arrive at Core Income before taxes
Income from associated companies
528
210
41
779
1Amortization of intangible assets: Cost of Goods Sold includes recurring amortization of acquired rights to in-market products and other production-related intangible assets; Research &
Development includes the recurring amortization of acquired rights for technology platforms; General & Administration includes the recurring amortization of intangible assets; Other expense
includes amortization of intangible assets; Income from associated companies includes the recurring amortization of the purchase price allocation related to intangible assets included in the Novartis

N OVA R T I S  G R O U P  A N N UA L  R E P O R T  2 0 1 1
182
2011 AND 2010¹ RECONCILIATION OF SEGMENT OPERATING INCOME TO CORE OPERATING INCOME
Pharmaceuticals
Alcon
2011
2010
2011
20102
USD millions
USD millions
USD millions
USD millions
Operating income
8 296
8 471
1 472
796
Amortization of intangible assets
423
457
1 928
65
Impairments
Intangible assets
552
796
20
Property, plant & equipment - manufacturing sites 3
12
5
Other property, plant & equipment
391
– 4
Financial assets
30
41
4
Total impairment charges
985
833
29
Acquisition-related items
- Gains
– 81
– 21
- Expenses
233
489
Total acquisition related items, net
– 81
212
489
Exceptional items
Exceptional divestment gains
– 334
– 425
Swiss restructuring expenses 3
249
Restructuring expenses - non-Swiss manufacturing sites 3
90
11
52
Other restructuring expenses
81
100
Legal-related items
- Income
– 100
– 42
– 229
- Expense
80
181
45
Swiss pension curtailment gain
Other exceptional income
– 17
Other exceptional expense
351
Total exceptional items
417
– 175
– 149
Total adjustments
1 744
1 115
2 020
554
Core operating income
10 040
9 586
3 492
1 350
Core return on net sales
30.9%
31.6%
35.1%
30.4%
1Restated to reflect new segment allocation introduced during 2011 as explained in detail on page 159
2Consolidated results of Alcon, Inc., only included for the period from acquiring control on August 25, 2010 to December 31, 2010. Ophthalmic activities transferred from Pharmaceuticals
and CIBA Vision transferred from Consumer Health included for the full year.
3Related to the Group-wide rationalization of manufacturing sites (Swiss portion amounts to approximately USD 100 million)

183
Operating and Financial Review
2 | G R O U P R E V I E W  
2 0 | H E A LT H C A R E P O R T FO L I O  
6 4 | C O R P O R AT E C I T I Z E N S H I P  
9 0 | C O R P O R AT E G OV E R N A N C E  
118 | C O M P E N S AT I O N R E P O R T  
142 | F I N A N C I A L R E P O R T
Sandoz
Vaccines and Diagnostics
Consumer Health
Corporate
Total
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
USD millions
USD millions
USD millions
USD millions
USD millions
USD millions
USD millions
USD millions
USD millions
USD millions
1 422
1 321
– 249
612
727
778
– 670
– 452
10 998
11 526
383
293
231
259
59
61
4
3 028
1 135
25
11
8
14
6
619
813
14
17
14
1
2
2
396
– 4
135
98
23
19
192
158
26
11
145
112
16
6
23
19
1 224
981
– 102
12
5
12
99
250
600
12
5
12
99
148
600
– 44
– 378
– 425
5
254
3
3
38
4
152
49
– 11
49
– 1
69
149
– 329
– 42
204
56
45
329
282
– 265
– 265
– 106
– 85
– 208
107
164
16
622
16
90
105
3
83
71
79
– 249
511
– 236
499
421
384
454
146
67
118
– 131
4 911
2 480
1 921
1 742
135
1 066
873
845
– 552
– 583
15 909
14 006
20.3%
20.3%
6.8%
36.5%
18.9%
19.4%
27.2%
27.7%

N OVA R T I S  G R O U P  A N N UA L  R E P O R T  2 0 1 1
184
ALCON SEGMENT RECONCILIATION FROM 2010 RESTATED 
TO PRO FORMA DATA
On August 25, 2010 Novartis acquired a majority interest in Alcon,
Inc. and its results have been included in the consolidated IFRS
results of the Novartis Group and the Alcon segment since then
(see note 2 to our consolidated financial statements for further
information).
Novartis believes that the presentation of pro forma information
will assist investors in their understanding of the combined com-
panies’ operating performance by setting a base for comparison
with the 2011 consolidated results of Alcon. Without these pro
forma results, the Alcon 2010 restated results through August 25,
2010 would consist only of the results from CIBA Vision and those
Pharmaceuticals ophthalmics products which were transferred to
Alcon. As a result, it is considered that a comparison between the
2011 Alcon results and the 2010 restated results would not be
meaningful.
Therefore Novartis prepared pro forma information assuming
the Alcon acquisition was completed on January 1, 2010. The pro
forma information does not purport to present what the actual
results of operations would have been had the transaction actually
occurred on the date indicated. 
The pro forma information includes the full 2010 consolidated
income statement data for Alcon, Inc. from January 1, 2010 and
adjusts for the impact of divestments required by regulators to
approve the Alcon acquisition as well as for exceptional costs
related to the acquisition of majority ownership of Alcon.
Consolidated results 
of Alcon, Inc., 
2010 
from Jan. 1, 2010 
2010
(in USD millions)
Restated
to Aug. 25, 20101
Pro forma
Net sales to third parties
4 446
4 585
9 031
Sales to other segments
14
14
Net sales of segments
4 460
4 585
9 045
Other revenues
34
5
39
Cost of Goods Sold
– 1 760
– 2 442
– 4 202
Gross profit
2 734
2 148
4 882
Marketing & Sales
– 1 299
– 1 060
– 2 359
Research & Development
– 352
– 478
– 830
General & Administration
– 255
– 255
– 510
Other income
7
7
Other expense
– 39
30
– 9
Operating income
796
385
1 181
as % of net sales
17.9%
8.4%
13.1%
Core adjustments
Cost of Goods Sold
519
1 379
1 898
Research & Development
1
3
4
General & Administration
4
8
12
Other expense
30
– 30
Core Operating income
1 350
1 745
3 095
as % of net sales
30.4%
38.1%
34.3%
1This assumes that the acquisition of Alcon, Inc. had occured on January 1, 2010. It therefore
also reflects USD 1.4 billion of additional amortization of intangible assets arising from the
purchase price allocation and excludes USD 145 million of change of control and acquisition
related costs.

185
Summary of Financial Data
2 | G R O U P R E V I E W  
2 0 | H E A LT H C A R E P O R T FO L I O  
6 4 | C O R P O R AT E C I T I Z E N S H I P  
9 0 | C O R P O R AT E G OV E R N A N C E  
118 | C O M P E N S AT I O N R E P O R T  
142 | F I N A N C I A L R E P O R T
SUMMARY OF QUARTERLY FINANCIAL DATA FOR 2011 AND 2010
USD millions unless indicated otherwise
Q1
Q2
Q3
Q4
2011
Q1
Q2
Q3
Q4
2010
Net sales
14 027
14 915
14 843
14 781
58 566
12 131
11 716
12 578
14 199
50 624
Other revenues
195
208
191
215
809
225
205
242
265
937
Cost of Goods Sold
– 4 458
– 4 619
– 4 788
– 5 118
– 18 983
– 3 096
– 3 206
– 3 662
– 4 524
– 14 488
Gross profit
9 764
10 504
10 246
9 878
40 392
9 260
8 715
9 158
9 940
37 073
Marketing & Sales
– 3 524
– 3 904
– 3 652
– 3 999
– 15 079
– 3 014
– 3 145
– 3 167
– 3 990
– 13 316
Research & Development
– 2 188
– 2 397
– 2 475
– 2 523
– 9 583
– 2 037
– 1 893
– 2 548
– 2 592
– 9 070
General & Administration
– 694
– 738
– 734
– 804
– 2 970
– 570
– 543
– 574
– 794
– 2 481
Other income
549
502
213
90
1 354
180
389
97
568
1 234
Other expense
– 499
– 645
– 647
– 1 325
– 3 116
– 308
– 562
– 379
– 665
– 1 914
Operating income
3 408
3 322
2 951
1 317
10 998
3 511
2 961
2 587
2 467
11 526
Income from associated companies
117
130
151
130
528
103
158
368
175
804
Interest expense
– 189
– 190
– 198
– 174
– 751
– 133
– 175
– 188
– 196
– 692
Other financial income and expense
22
– 16
4
– 12
– 2
49
14
27
– 26
64
Income before taxes
3 358
3 246
2 908
1 261
10 773
3 530
2 958
2 794
2 420
11 702
Taxes
– 537
– 520
– 420
– 51
– 1 528
– 582
– 521
– 475
– 155
– 1 733
Group net income
2 821
2 726
2 488
1 210
9 245
2 948
2 437
2 319
2 265
9 969
Attributable to:
Shareholders of Novartis AG
2 770
2 704
2 464
1 175
9 113
2 933
2 417
2 275
2 169
9 794
Non-controlling interests
51
22
24
35
132
15
20
44
96
175
Basic earnings per share (USD)
1.21
1.13
1.02
0.49
3.83
1.29
1.06
0.99
0.95
4.28
Net sales by segment 1
Pharmaceuticals
7 698
8 338
8 159
8 313
32 508
7 227
7 609
7 500
7 970
30 306
Alcon
2 416
2 625
2 492
2 425
9 958
507
516
1 138
2 285
4 446
Sandoz
2 373
2 466
2 340
2 294
9 473
2 001
1 973
2 198
2 420
8 592
Vaccines and Diagnostics
371
299
655
671
1 996
1 361
564
632
361
2 918
Consumer Health
1 169
1 187
1 197
1 078
4 631
1 035
1 054
1 110
1 163
4 362
Group net sales
14 027
14 915
14 843
14 781
58 566
12 131
11 716
12 578
14 199
50 624
Operating income by segment 1
Pharmaceuticals
2 461
2 791
2 219
825
8 296
2 245
2 260
1 765
2 201
8 471
Alcon
524
371
341
236
1 472
147
108
233
308
796
Sandoz
412
283
333
394
1 422
310
289
430
292
1 321
Vaccines and Diagnostics
– 101
– 214
24
42
– 249
839
– 42
68
– 253
612
Consumer Health
265
225
210
27
727
157
221
276
124
778
Corporate income & expense, net
– 153
– 134
– 176
– 207
– 670
– 229
83
– 227
– 259
– 632
Group operating income
3 408
3 322
2 951
1 317
10 998
3 511
2 961
2 587
2 467
11 526
Core operating income
4 012
4 235
4 112
3 550
15 909
3 865
3 276
3 699
3 166
14 006
Core net income
3 376
3 564
3 539
3 011
13 490
3 309
2 771
3 146
2 803
12 029
Core basic earnings per share
1.41
1.48
1.45
1.23
5.57
1.45
1.20
1.36
1.14
5.15
1Restated to reflect new segment allocation introduced during 2011 as explained in detail on page 159

N OVA R T I S  G R O U P  A N N UA L  R E P O R T  2 0 1 1
186
SUMMARY OF GROUP FINANCIAL DATA 2007–2011
USD millions unless indicated otherwise
2011
20101
20091
20082
20072
Net sales to third parties from continuing operations
58 566
50 624
44 267
41 459
38 072
Change relative to preceding year
%
15.7
14.4
6.8
8.9
10.7
Pharmaceuticals net sales
32 508
30 306
28 287
26 331
24 025
Change relative to preceding year
%
7.3
7.1
7.4
9.6
6.4
Alcon net sales
9 958
4 446
1 965
1 688
1 531
Change relative to preceding year
%
nm
nm
16.4
10.3
7.6
Sandoz net sales
9 473
8 592
7 493
7 557
7 169
Change relative to preceding year
%
10.3
14.7
– 0.8
5.4
20.3
Vaccines and Diagnostics net sales
1 996
2 918
2 424
1 759
1 452
Change relative to preceding year
%
– 31.6
20.4
37.8
21.1
n.m.
Consumer Health net sales from continuing operations
4 631
4 362
4 098
4 124
3 895
Change relative to preceding year
%
6.2
6.4
– 0.6
5.9
12.0
Net sales from discontinued operations 3
1 728
Operating income from continuing operations
10 998
11 526
11 526
8 964
6 781
Change relative to preceding year
%
– 4.6
15.5
28.6
32.2
– 11.3
As a % of net sales
%
18.8
22.8
26.0
21.6
17.8
As a % of average equity
%
16.2
18.1
21.4
18.0
15.0
As a % of average net operating assets
%
13.3
16.6
21.8
19.1
16.7
Operating income from discontinued operations 3
70
6 152
Net income from continuing operations
9 245
9 969
8 454
8 163
6 540
Change relative to preceding year
%
– 7.3
17.9
3.6
24.8
– 4.2
As a % of net sales
%
15.8
19.7
19.1
19.7
17.2
Net income from discontinued operations 3
70
5 428
Total Group net income
9 245
9 969
8 454
8 233
11 968
As a % of average equity
%
13.6
15.7
15.7
16.5
26.4
Dividends of Novartis AG 4
5 762
5 368
4 486
3 941
3 345
As % of net income from continuing operations 5
%
63.2
54.8
53.4
48.5
51.3
Cash flows from operating activities 6
14 309
14 067
12 191
9 769
9 210
Change relative to preceding year
%
1.7
15.4
24.8
6.1
10.9
As a % of net sales
%
24.4
27.8
27.5
23.6
24.2
Free cash flow 6
12 503
12 346
9 446
7 646
6 359
Change relative to preceding year
%
1.3
30.7
23.5
20.2
4.3
As a % of net sales
%
21.3
24.4
21.3
18.4
16.7
Purchase of property, plant & equipment 6
2 167
1 678
1 887
2 106
2 549
Change relative to preceding year
%
29.1
– 11.1
– 10.4
– 17.4
43.3
As a % of net sales
%
3.7
3.3
4.3
5.1
6.7
Depreciation of property, plant & equipment 6
1 728
1 363
1 241
1 205
1 130
As a % of net sales
%
3.0
2.7
2.8
2.9
3.0
Core Research & Development 6
9 239
8 080
7 287
6 776
6 186
As a % of net sales
%
15.8
16.0
16.5
16.3
16.2
Core Pharmaceuticals Division Research & Development
6 860
6 344
5 909
5 335
4 914
As a % of Pharmaceuticals Division net sales
%
21.1
20.9
20.9
20.3
20.5
Total assets
117 496
123 318
95 505
78 299
75 452
Liquidity
5 075
8 134
17 449
6 117
13 201
Equity
65 940
69 769
57 462
50 437
49 396
Debt/equity ratio
0.31:1
0.33:1
0.24:1
0.15:1
0.12:1
Current ratio
1.04:1
1.08:1
1.7:1
1.3:1
1.6:1
Net operating assets 6
81 094
84 622
54 001
51 684
41 989
Change relative to preceding year
%
– 4.2

187
Equity Strategy and Share Information
2 | G R O U P R E V I E W  
2 0 | H E A LT H C A R E P O R T FO L I O  
6 4 | C O R P O R AT E C I T I Z E N S H I P  
9 0 | C O R P O R AT E G OV E R N A N C E  
118 | C O M P E N S AT I O N R E P O R T  
142 | F I N A N C I A L R E P O R T
EQUITY STRATEGY AND SHARE INFORMATION
NOVARTIS SHARE DEVELOPMENTS IN 2011
– Swiss-listed Novartis shares fall 2% to CHF 53.70
– American Depositary Shares (ADS) fall 3% to USD 57.17
Novartis shares finished at CHF 53.70, a decrease of 2% from the
2010 year-end closing price of CHF 54.95. The Novartis American
Depositary Shares (ADS) decreased by 3% to USD 57.17 from USD
58.95 in 2010. The Swiss Market Index (SMI) in comparison fell at
a 7.8% pace in 2011, whereas the world pharmaceutical index
(MSCI) grew by 9.0% in the year. Over a longer-term period,
Novartis has consistently delivered a solid performance, providing
a 8.7% compounded annual total shareholder return between Jan-
uary 1, 1996, and December 31, 2011, clearly exceeding the com-
pounded returns of 7.3% of its large pharmaceutical peers or the
returns of 7.5% of the world pharmaceutical index (MSCI).
On April 8, 2011, 165 million shares were issued in connection
with the merger with Alcon, composed of 108 million newly issued
shares and 57 million treasury shares. This represented an increase
in the shares outstanding of 7.2% since December 31, 2010.
The market capitalization of Novartis amounted to USD 138 bil-
lion as of December 31, 2011, compared to USD 134 billion as of
December 31, 2010.
SHARE REPURCHASE PROGRAMS
In 2011, Novartis has carried out the share repurchases committed
to at the time of the Alcon merger announcement. These share
repurchases amounted to USD 5.3 billion including the purchases
of USD 2.4 billion of Alcon shares, a contingent value payment of
USD 0.5 billion and repurchases of USD 2.4 billion of Novartis
shares (39.4 million shares). All of these Novartis shares were
repurchased on the second trading line during the first six months
of 2011. In addition, in the second half of 2011, Novartis repur-
chased USD 1.1 billion (20.4 million shares) of own shares on the
first trading line. These shares will be kept as treasury shares to
mostly cover future employee participation programs.
No shares were cancelled in 2011 as none had been repur-
chased in the 12 months to December 2010.
Novartis will propose to shareholders at the Annual General
Meeting in February 2012 to cancel all shares repurchased on the
second trading line during 2011. If approved, a total of 39.4 million
shares, which corresponds to 1.4% of the registered Novartis share
capital, will be cancelled, and the share capital will be reduced
accordingly.
CONTINUOUSLY RISING DIVIDEND SINCE 1996
The Board of Directors proposes a 2% increase in the dividend pay-
ment for 2011 to CHF 2.25 per share (2010: CHF 2.20) for approval
at the Annual General Meeting on February 23, 2012. This repre-
sents the 15th consecutive increase in the dividend paid per share
since the creation of Novartis in December 1996. If the 2011 divi-
dend proposal is approved by shareholders, dividends paid out on
the outstanding shares will amount to approximately USD 5.8 bil-
lion (2010: USD 5.4 billion), resulting in a payout ratio of 63% of
net income attributable to Novartis shareholders (2010: 55%).
Based on the 2011 year-end share price of CHF 53.70, the dividend
yield will be 4.2% (2010: 4.0%). The dividend payment date has
been set for March 1, 2012. With the exception of 146.3 million
treasury shares, all shares issued are dividend-bearing.
DIRECT SHARE PURCHASE PLANS
Novartis has been offering US investors since 2001 an ADS Direct
Share Purchase Plan that provides investors an easy and inexpen-
sive way of directly purchasing Novartis shares and of reinvesting
dividends. This plan holds Novartis ADSs that are listed on the New
York Stock Exchange under the trading symbol NVS. At the end of
2011, the ADS Direct Plan had 1 122 participants. 
Starting in September 2004, Novartis began offering a Direct
Share Purchase Program to investors residing in Switzerland,
Liechtenstein, France and the United Kingdom, which was the first
of its kind in Europe. This plan offers an easy and inexpensive way
for investors to directly purchase Novartis registered shares and for
them to be held at no cost in a deposit account with SIX SAG AG. At
the end of 2011, a total of 9 403 shareholders were enrolled in this
program.
INFORMATION ON NOVARTIS SHARES
Further information can be found on the Internet at
http://www.novartis.com/investors.

N OVA R T I S  G R O U P  A N N UA L  R E P O R T  2 0 1 1
188
80
85
90
95
100
105
110
115
120
Jan 
Feb 
Mar 
Apr 
May 
Jun 
Jul 
Aug 
Sept 
Oct 
Nov 
Dec
Novartis 
 
Peers
MSCI World Markets
MSCI World Pharma

189
Equity Strategy and Share Information
2 | G R O U P R E V I E W  
2 0 | H E A LT H C A R E P O R T FO L I O  
6 4 | C O R P O R AT E C I T I Z E N S H I P  
9 0 | C O R P O R AT E G OV E R N A N C E  
118 | C O M P E N S AT I O N R E P O R T  
142 | F I N A N C I A L R E P O R T
TRADING
Novartis shares are listed in Switzerland and traded on the SIX
Swiss Exchange, while American Depositary Shares (ADSs) are
listed on the New York Stock Exchange. 
SYMBOLS
NYSE
SIX Swiss Exchange
(Reuters/
(Reuters/Bloomberg)
Bloomberg)
Shares
NOVN.VX/NOVN VX
ADSs
NVS
WIDELY DISPERSED SHAREHOLDINGS
Novartis shares are widely held. As of December 31, 2011, Novartis
had approximately 165 000 shareholders (2010: 160 000) listed
in its share register, representing 75% of issued shares. Based on
the Novartis AG share register and excluding treasury shares,
approximately 43% (2010: 45%) of the shares registered by name
were held in Switzerland and 45% were held in the US (2010: 42%).
Approximately 12% of the shares registered in the share register
were held by individual investors, while 88% were held by legal enti-
ties, nominees and fiduciaries.

N OVA R T I S  G R O U P  A N N UA L  R E P O R T  2 0 1 1
190
NOVARTIS GROUP CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENTS 
(For the years ended December 31, 2011 and 2010) 
2011
2010
Note
USD millions
USD millions
Net sales
3
58 566
50 624
Other revenues
809
937
Cost of Goods Sold
– 18 983
– 14 488
Gross profit
40 392
37 073
Marketing & Sales
– 15 079
– 13 316
Research & Development
– 9 583
– 9 070
General & Administration
– 2 970
– 2 481
Other income
1 354
1 234
Other expense
– 3 116
– 1 914
Operating income
3
10 998
11 526
Income from associated companies
4
528
804
Interest expense
5
– 751
– 692
Other financial income and expense
5
– 2
64
Income before taxes
10 773
11 702
Taxes
6
– 1 528
– 1 733
Net income
9 245
9 969
Attributable to:
Shareholders of Novartis AG
9 113
9 794
Non-controlling interests
132
175
Basic earnings per share (USD)
7
3.83
4.28
Diluted earnings per share (USD)
7
3.78
4.26
The accompanying notes form an integral part of the consolidated financial statements.

191
Novartis Group Consolidated Financial Statements
2 | G R O U P R E V I E W  
16 | H E A LT H C A R E P O R T FO L I O  
6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T  
138 | F I N A N C I A L R E P O R T
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(For the years ended December 31, 2011 and 2010) 
2011
2010
Note
USD millions
USD millions
Net income
9 245
9 969
Fair value adjustments on financial instruments, net of taxes
8.1
21
– 33
Actuarial losses from defined benefit plans, net of taxes
8.2
– 1 421
– 685
Novartis share of other items recorded in comprehensive income recognized by associated companies, net of taxes
8.3
1
– 94
Currency translation effects
– 559
554
Total comprehensive income
7 287
9 711
Attributable to:
Shareholders of Novartis AG
7 171
9 524
Non-controlling interests
116
187
The accompanying notes form an integral part of the consolidated financial statements.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(For the years ended December 31, 2011 and 2010) 
Non-
Share
Treasury
Share
Retained
Total
controlling
Total
capital
shares
premium
earnings
Total value
reserves
interests
equity
USD
USD
USD
USD
adjustments
USD
USD
USD
Note
millions
millions
millions
millions
USD millions
millions
millions
millions
Total equity at January 1, 2010
957
– 132
198
55 096
1 268
56 562
75
57 462
Net income
9 794
9 794
175
9 969
Other comprehensive income
8
– 94
– 176
– 270
12
– 258
Total comprehensive income
9 700
– 176
9 524
187
9 711
Dividends
9.1
– 4 486
– 4 486
– 4 486
Sale of treasury shares, net
9.2
4
338
338
342
Equity-based compensation
9.3
3
596
596
599
Impact of change of ownership of Alcon, Inc.
9.4
– 74
– 74
– 74
Excess of consideration exchanged 
for acquiring non-controlling interest 
compared to the recorded amounts
9.5
– 96
– 96
– 96
Changes in non-controlling interests
9.6
6 311
6 311
Total of other equity movements
7
– 3 722
– 3 722
6 311
2 596
Total equity at December 31, 2010
957
– 125
198
61 074
1 092
62 364
6 573
69 769
Net income
9 113
9 113
132
9 245
Other comprehensive income
8
1
– 1 943
– 1 942
– 16
– 1 958
Total comprehensive income
9 114
– 1 943
7 171
116
7 287
Dividends
9.1
– 5 368
– 5 368
– 5 368
Purchase of treasury shares, net
9.2
– 31
– 3 429
– 3 429
– 3 460
Equity-based compensation
9.3
4
802
802
806
Excess of consideration exchanged 
for acquiring non-controlling interest 
compared to the recorded amounts
9.5
– 5 664
– 5 664
– 5 664
Changes in non-controlling interests
9.6
– 6 593
– 6 593
Fair value of Novartis shares used to acquire
outstanding non-controlling interests in Alcon, Inc.
9.7
59
31
9 073
9 073
9 163
Total of other equity movements
59
4
– 4 586
– 4 586
– 6 593
– 11 116
Total equity at December 31, 2011
1 016
– 121
198
65 602
– 851
64 949
96
65 940
The accompanying notes form an integral part of the consolidated financial statements.

N OVA R T I S  G R O U P  A N N UA L  R E P O R T  2 0 1 1
192
CONSOLIDATED BALANCE SHEETS 
(At December 31, 2011 and 2010) 
2011
2010
Note
USD millions
USD millions
Assets
Non-current assets
Property, plant & equipment
10
15 627
15 840
Goodwill
11
29 943
29 692
Intangible assets other than goodwill
11
31 969
35 231
Investments in associated companies
4
8 622
8 385
Deferred tax assets
12
5 857
5 240
Financial assets
13
976
1 840
Other non-current non-financial assets
418
405
Total non-current assets
93 412
96 633
Current assets
Inventories
14
5 930
6 093
Trade receivables
15
10 323
9 873
Marketable securities and derivative financial instruments
16
1 366
2 815
Cash and cash equivalents
16
3 709
5 319
Other current assets
17
2 756
2 585
Total current assets
24 084
26 685
Total assets
117 496
123 318
Equity and liabilities
Equity
Share capital
18
1 016
957
Treasury shares
18
– 121
– 125
Reserves
64 949
62 364
Issued share capital and reserves attributable to Novartis AG shareholders
65 844
63 196
Non-controlling interests
96
6 573
Total equity
65 940
69 769
Liabilities
Non-current liabilities
Financial debts
19
13 855
14 360
Deferred tax liabilities
12
6 761
7 689
Provisions and other non-current liabilities
20
7 792
6 842
Total non-current liabilities
28 408
28 891
Current liabilities
Trade payables
4 989
4 788
Financial debts and derivative financial instruments
21
6 374
8 627
Current income tax liabilities
1 706
1 710
Provisions and other current liabilities
22
10 079
9 533
Total current liabilities
23 148
24 658
Total liabilities
51 556
53 549
Total equity and liabilities
117 496
123 318
The accompanying notes form an integral part of the consolidated financial statements.

193
Novartis Group Consolidated Financial Statements
2 | G R O U P R E V I E W  
16 | H E A LT H C A R E P O R T FO L I O  
6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T  
138 | F I N A N C I A L R E P O R T
CONSOLIDATED CASH FLOW STATEMENTS
(For the years ended December 31, 2011 and 2010) 
2011
2010
Note
USD millions
USD millions
Net income
9 245
9 969
Reversal of non-cash items
23.1
9 300
6 162
Dividends from associated companies
403
568
Dividends received from marketable securities
1
3
Interest received
66
170
Interest paid
– 640
– 525
Other financial payments
– 47
– 145
Taxes paid
– 2 435
– 2 616
Cash flows before working capital and provision changes
15 893
13 586
Restructuring payments and other cash payments from provisions
– 1 471
– 1 281
Change in net current assets and other operating cash flow items
23.2
– 113
1 762
Cash flows from operating activities
14 309
14 067
Purchase of property, plant & equipment
– 2 167
– 1 678
Proceeds from sales of property, plant & equipment
61
36
Purchase of intangible assets
– 220
– 554
Proceeds from sales of intangible assets
643
545
Purchase of financial assets
– 139
– 124
Proceeds from sales of financial assets
59
66
Purchase of non-current non-financial assets
– 48
– 15
Proceeds from sales of non-current non-financial assets
5
3
Acquisitions of interests in associated companies
– 12
Acquisitions and divestments of businesses
23.3
– 569
– 26 666
Purchase of marketable securities
– 1 750
– 40 569
Proceeds from sales of marketable securities
3 345
53 200
Cash flows used in investing activities
– 792
– 15 756
Acquisition of treasury shares
– 3 628
– 311
Disposal of treasury shares
159
711
Increase in non-current financial debts
281
5 674
Repayment of non-current financial debts
– 28
– 5
Change in current financial debts
– 3 054
2 610
Proceeds from issuance of share capital to third parties
4
19
Acquisition of Alcon non-controlling interests
– 3 187
– 32
Dividends paid to non-controlling interests and other financing cash flows
– 203
– 64
Dividends paid to shareholders of Novartis AG
– 5 368
– 4 486
Cash flows used in / from financing activities
– 15 024
4 116
Net effect of currency translation on cash and cash equivalents
– 103
– 2
Net change in cash and cash equivalents
– 1 610
2 425
Cash and cash equivalents at January 1
5 319
2 894
Cash and cash equivalents at December 31
3 709
5 319
The accompanying notes form an integral part of the consolidated financial statements.

N OVA R T I S  G R O U P  A N N UA L  R E P O R T  2 0 1 1
194
NOTES TO THE NOVARTIS GROUP CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
The Novartis Group (Group or Novartis) consolidated financial
statements comply with the International Financial Reporting Stan-
dards (IFRS) as published by the International Accounting Stan-
dards Board (IASB). They are prepared in accordance with the his-
torical cost convention except for items that are required to be
accounted for at fair value.
The preparation of financial statements requires management to
make estimates and other judgments that affect the reported
amounts of assets and liabilities as well as the accounting and dis-
closure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses dur-
ing the reporting period. Actual outcomes could differ from those
estimates.
SCOPE OF CONSOLIDATION 
The consolidated financial statements include all companies that
Novartis AG, Basel, Switzerland directly or indirectly controls (gen-
erally more than 50% of voting interest). Special purpose entities,
irrespective of their legal structure, are consolidated in instances
where the Group has the power to govern the financial and operat-
ing policies of an entity so as to obtain benefits from their activities.
Investments in associated companies (generally defined as
investments in companies in which Novartis holds between 20%
and 50% of voting shares or over which it otherwise has significant
influence) and joint ventures are accounted for using the equity
method. In these situations, the Group records its share of the esti-
mated associated company’s net income and equity. The share of
results attributed to Novartis from these associated companies is
included in the income statement line “Income from associated
companies” and is calculated after the deduction of related taxes
and non-controlling interests included in the financial results of the
associated company.
PRINCIPLES OF CONSOLIDATION
The Group’s financial year end is December 31, and the annual
closing date of the individual financial statements incorporated into
the Group’s consolidated financial statements is December 31. 
The acquisition method of accounting is used to account for
business combinations by the Group in transactions where Novartis
takes control of another entity. The cost of an acquisition is meas-
ured as the fair value of the transferred assets as well as incurred
or assumed liabilities at the date of acquisition. The fair value of
any contingent consideration potentially due to former owners of
the acquired business is included in the cost of the acquisition.
Transaction costs for acquisitions are expensed as incurred. Identi-
fiable acquired assets as well as assumed liabilities and contingent
liabilities obtained in a business combination are measured initially
at their fair values as of the acquisition date, irrespective of the
extent of any non-controlling interest. The excess of the considera-
tion transferred to obtain a controlling interest and the fair value of
any previous non-controlling interest in the acquiree, over the fair
value of the Group’s share of net identifiable assets in a business
combination, is recorded as goodwill in the balance sheet and is
denominated in the functional currency of the related acquisition.
The excess of the cost of acquiring an additional interest in an entity
already controlled by the Group over the identifiable net assets
related to that non-controlling interest is recorded in consolidated
equity. Any difference between the proceeds received from reduc-
ing the interest in a controlled entity compared to the share of the
related net assets is recorded in consolidated equity. For an acqui-
sition of an entity in stages, any revaluation of an initial non-control-
ling interest in an entity required as a result of obtaining control is
recorded in the consolidated income statement. Novartis has
elected to value any remaining outstanding non-controlling interest
in a controlled subsidiary only at its proportionate share of the fair
value of the net identified assets. Companies acquired or disposed
of during the year are included in the consolidated financial state-
ments from the date of acquisition or until the date of disposal.
Intercompany income and expenses, including unrealized prof-
its from internal Novartis transactions and intercompany receiv-
ables and payables, are eliminated.
FOREIGN CURRENCIES
The consolidated financial statements of Novartis are presented in
US dollars (USD). The functional currency of certain Swiss and for-
eign finance companies used for preparing the consolidated finan-
cial statements is USD instead of the respective local currencies.
This reflects the fact that the cash flows and transactions of these
entities are primarily denominated in USD. Generally, the respective
local currency is used as the functional currency for other entities.
In the respective entity financial statements, monetary assets and
liabilities denominated in foreign currencies are translated at the
prevailing exchange rate at the balance sheet date. Transactions are
recorded using the approximate exchange rate at the time of the
transaction. All resulting foreign exchange transaction gains and
losses are recognized in the entity’s income statement.
Income, expense and cash flows of the consolidated entities
have been translated into USD using the average of monthly
exchange rates during the year. Balance sheets are translated using
year-end exchange rates. Translation differences arising from move-
ments in exchange rates used to translate equity and long-term
intercompany financing transactions relating to net investments in
a foreign entity, retained earnings and other equity components
and net income for the year are allocated directly to the cumulative

195
Notes to the Novartis Group Consolidated Financial Statements
2 | G R O U P R E V I E W  
16 | H E A LT H C A R E P O R T FO L I O  
6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T  
138 | F I N A N C I A L R E P O R T
translation effects included in the fair value adjustments in the con-
solidated statement of comprehensive income. Translation gains
and losses accumulated in the consolidated statement of compre-
hensive income are included in the income statement when the for-
eign operation is completely or partially liquidated or is sold.
IMPAIRMENT OF LONG-LIVED INTANGIBLE AND TANGIBLE ASSETS
Novartis reviews long-lived intangible and tangible assets for impair-
ment whenever events or changes in circumstance indicate that the
asset’s balance sheet carrying amount may not be recoverable.
An asset, as defined, is generally considered impaired when its
carrying amount exceeds its estimated recoverable amount. The
recoverable amount is measured as the higher of: a) an asset or
related cash-generating unit’s fair value less costs to sell and b) its
value in use. Fair value reflects the Group’s estimates of assump-
tions that market participants would use when pricing the asset. In
contrast the value in use concept reflects the Group’s estimates
based on its expected use of the asset, including the effects of fac-
tors that may be specific to the Group and not applicable to enti-
ties in general. Value in use, and fair value, are measured princi-
pally on the basis of discounted cash flow analysis using
management’s best estimate of the range of economic conditions
that are expected to exist over the remaining useful life of the asset.
Also value in use measurements specifically exclude consideration
of any estimated future net cash flows that might be expected to
arise from future restructuring or from improving or enhancing the
asset’s performance.
The net present values involve highly sensitive estimates and
assumptions including consideration of factors such as the following:
– the amount and timing of projected future cash flows;
– the selected discount and tax rate;
– the outcome of Research & Development (R&D) activities (com-
pound efficacy, results of clinical trials, etc.);
– the amount and timing of projected costs to develop In-Process
Research & Development (IPR&D) projects into commercially
viable products;
– the probability of obtaining regulatory approval;
– long-term sales forecasts for periods of up to 25 years;
– sales erosion rates after the end of patent protection and timing
of the entry of generic competition; and
– the behavior of competitors (launch of competing products, mar-
keting initiatives, etc.).
Factors that could result in shortened useful lives or impairments
include:
– entry into the market of generic or alternative products;
– lower than expected sales for acquired products or for sales asso-
ciated with patents and trademarks;
– lower than anticipated future sales resulting from acquired IPR&D;
– the closing of facilities; and
– changes in the planned use of property, plant & equipment.
Goodwill and the Alcon brand name have an indefinite useful life
and impairment testing is done at least annually. Any impairment
charge is recorded in the consolidated income statement under
“Other expense”. Novartis considers that the Alcon brand name has
an indefinite life as Alcon has a history of strong revenue and cash
flow performance, and Novartis has the intent and ability to support
the brand with marketplace spending for the foreseeable future.
IPR&D is also assessed for impairment at least on an annual basis,
with any impairment charge recorded in the consolidated income
statement under “Research & Development”. Once a project
included in IPR&D has been successfully developed and is avail-
able for use, it is amortized over its useful life in the consolidated
income statement under “Cost of Goods Sold”, where related
impairment charges, if any, are also recorded.
Novartis has adopted a uniform method for assessing goodwill
and indefinite-life intangible assets for impairment and any other
intangible asset indicated as being possibly impaired. Generally, for
intangible assets Novartis uses cash flow projections for the whole
useful life of these assets, and for goodwill and the Alcon brand
name, Novartis utilizes cash flow projections for a five-year period
based on management forecasts, with a terminal value based on
sales projections usually in line with or lower than inflation rates for
later periods. Probability-weighted scenarios are typically used.
Discount rates used in these scenarios are based on the Group’s
weighted average cost of capital as an approximation of the
weighted average cost of capital of a comparable market partici-
pant, which are adjusted for specific country and currency risks
associated with cash flow projections.
Due to the above factors, actual cash flows and values could vary
significantly from forecasted future cash flows and related values
derived using discounting techniques.
PROPERTY, PLANT & EQUIPMENT
Land is recorded at acquisition cost less accumulated impairment,
if any. Prepayments for long-term leasehold land agreements are
amortized over the life of the lease.
Other items of property, plant & equipment are recorded at
acquisition cost or production cost and are depreciated on a
straight-line basis to the consolidated income statement over the
following estimated useful lives:
Buildings
20 to 40 years 
Other property, plant & equipment:
– Machinery and equipment
7 to 20 years 
– Furniture and vehicles
5 to 10 years 
– Computer hardware
3 to 7 years 
Additional costs that enhance the future economic benefit of prop-
erty, plant & equipment are capitalized. Government grants for con-
struction activities and equipment are deducted from the carrying
value of the assets. Borrowing costs associated with the construction
of new property, plant and equipment projects are capitalized. Prop-
erty, plant & equipment is reviewed for impairment whenever events

N OVA R T I S  G R O U P  A N N UA L  R E P O R T  2 0 1 1
196
1. ACCOUNTING POLICIES (CONTINUED)
or changes in circumstances indicate that the balance sheet carrying
amount may not be recoverable.
Property, plant & equipment that are financed by leases giving
Novartis substantially all risks and rewards of ownership are capi-
talized at the lower of the fair value of the leased asset or the pres-
ent value of minimum lease payments at the inception of the lease.
These are depreciated in the same manner as other assets over the
shorter of the lease term or their useful life. Leases in which a sig-
nificant portion of the ownership risks and rewards are retained by
the lessor are classified as operating leases. These are charged to
the consolidated income statement over the life of the lease, gen-
erally, on a straight-line basis.
INTANGIBLE ASSETS
GOODWILL
The excess of the consideration transferred to obtain a controlling
interest and the fair value of any previous non-controlling interest
in the acquiree, over the fair value of the Group’s share of net iden-
tifiable assets in a business combination, is recorded as goodwill 
in the balance sheet and is denominated in the functional currency
of the related acquisition. Goodwill is allocated to an appropriate
cash-generating unit which is defined as the smallest group of
assets that generates independent cash inflows that support the
goodwill. All goodwill is tested for impairment at least annually. In
addition, goodwill is evaluated for impairment at each reporting date
for each cash-generating unit with any resulting goodwill impair-
ment charge recorded under “Other Expense” in the consolidated
income statement.
Goodwill is tested for possible impairment annually and when-
ever events or changes in circumstances indicate the value may not
be fully recoverable. If the initial accounting for goodwill in the
reporting period is only provisional, it is not tested for impairment
unless an impairment indicator exists, and not included in the cal-
culation of the net book values at risk from changes in the amount
of discounted cash flows. An impairment is recognized when the
consolidated balance sheet carrying amount is higher than the
greater of “fair value less costs to sell” and “value in use.”
OTHER INTANGIBLE ASSETS
All identifiable intangible assets acquired in a business combina-
tion are recognized at their fair value. Furthermore, all acquired
Research & Development assets, including upfront and milestone
payments on licensed or acquired compounds, which are deemed
to enhance the intellectual property of Novartis, are capitalized at
cost as intangible assets, when it is probable that future economic
benefits will arise, even though uncertainties exist as to whether the
R&D projects will be ultimately successful in producing a commer-
cial product. 
All Novartis intangible assets are allocated to cash-generating
units. IPR&D and the Alcon brand name are the only classes of sep-
arately identified intangible assets that are not amortized. Both are
tested for impairment on an annual basis or when facts and circum-
stances warrant an impairment test. Any impairment charge is
recorded in the consolidated income statement under “Research &
Development” for IPR&D and under “Other Expense” for the Alcon
brand name. Once a project included in IPR&D has been successfully
developed and is available for use, it is amortized over its useful life
in the consolidated income statement under “Cost of Goods Sold,”
where any related impairment charges are also recorded. The Alcon
brand name is considered to have an indefinite life as Alcon has a his-
tory of strong revenue and cash flow performance, and we have the
intent and ability to support the brand with marketplace spending
for the foreseeable future.
Internally developed computer software is capitalized and once
available for use amortized over its estimated useful life.
All other intangible assets are amortized over their estimated
useful lives once they are available for use and tested for impair-
ment whenever facts and circumstances indicate that their carry-
ing value may not be recoverable. The useful lives assigned to
acquired intangible assets are based on the period over which they
are expected to generate economic benefits, commencing in the
year in which they first generate sales or are used in development.
Acquired intangible assets are amortized on a straight-line basis
over the following periods:
Trademarks
Over their estimated economic or legal
life with a maximum of 20 years 
Currently marketed 
products and 
marketing know-how
5 to 25 years 
Technology
10 to 30 years
Software
3 to 5 years 
Others
3 to 5 years

197
Notes to the Novartis Group Consolidated Financial Statements
2 | G R O U P R E V I E W  
16 | H E A LT H C A R E P O R T FO L I O  
6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T  
138 | F I N A N C I A L R E P O R T
FINANCIAL ASSETS
Investments in debt and equity securities are initially recorded at
fair value on the trade date, and subsequently carried at fair value.
The fair values of quoted investments are based on current market
prices. If the market for a financial asset is not active or no market
is available, fair values are established using valuation techniques.
These include the use of data from the most recent arm’s length rel-
evant transactions, such as new financing rounds or partial dispos-
als; reference to other instruments that are substantially the same;
a discounted cash flow analysis; and other pricing models that
make maximum use of observable market data. Loans are carried
at amortized cost, less any allowances for uncollectable amounts.
Exchange rate gains and losses and interest income using the effec-
tive interest rate method on loans are recorded in the consolidated
income statement. All other changes in the fair value of financial
assets are deferred as a fair value adjustment in the consolidated
statement of comprehensive income and recognized in the income
statement when the asset is sold. Any impairments in value below
initial cost are immediately expensed in the consolidated income
statement.
ASSOCIATED COMPANIES
Novartis uses the equity method to account for investments in asso-
ciated companies (generally defined as investments in companies
that correspond to holdings of between 20% and 50% of voting
shares or over which Novartis otherwise has significant influence).
Novartis considers investments in associated companies for
impairment testing whenever there is a quoted share price and
when this has a fair value less than the carrying value per share for
the investment. For unquoted investments in associated companies
recent financial information is taken into account to assess whether
impairment testing is necessary. In a situation in which, based on
the quoted share price, the fair value less cost to sell is considered
to be below the carrying amount, the value in use is determined in
order to test the investment for impairment. If the value in use is
also below the carrying amount an impairment loss is recognized
for the difference between carrying amount and the higher of “value
in use” or “fair value less costs to sell”. In addition, an impairment
test for separately identified assets of the associated company
other than its goodwill is performed whenever an indication for
impairment exists. Any impairment charge is recorded in the
income statement under “Income from associated companies”.
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING
Derivative financial instruments are initially recognized in the bal-
ance sheet at fair value, and they are re-measured to their current
fair value at the end of each subsequent reporting period.
The method of recognizing the resulting gain or loss is depend-
ent on whether a derivative contract is designed to hedge a specific
risk and qualifies for hedge accounting. The purpose of hedge
accounting is to match the impact of the hedged item and the hedg-
ing instrument in the consolidated income statement. The Group
designates derivatives that qualify as hedges for accounting pur-
poses as either a) a hedge of the fair value of a recognized asset or
liability (fair value hedge), or b) a hedge of a forecasted transaction
or firm commitment (cash flow hedge) or c) a hedge of a net invest-
ment in a foreign entity.
Changes in the fair value of derivatives that are fair value hedges
and that are highly effective are recognized in the consolidated
income statement along with any changes in the fair value of the
hedged asset or liability attributable to the hedged risk. Any gain or
loss on the hedging instrument relating to the effective portion of
changes in the fair value of derivatives in cash flow hedges are rec-
ognized in the consolidated statement of comprehensive income.
Gains or losses relating to the ineffective portion are recognized
immediately in the consolidated income statement. In determining
whether the impact of a cash flow hedge can be deferred in the con-
solidated statement of comprehensive income, management
assesses the probability of the forecasted transaction occurring.
Amounts are only deferred when management judges the fore-
casted transaction to be highly probable.

199
Notes to the Novartis Group Consolidated Financial Statements
2 | G R O U P R E V I E W  
16 | H E A LT H C A R E P O R T FO L I O  
6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T  
138 | F I N A N C I A L R E P O R T
DEFINED BENEFIT PENSION PLANS, OTHER POST-EMPLOYMENT BENEFITS
AND OTHER NON-CURRENT BENEFITS OF ASSOCIATES
DEFINED BENEFIT PENSION PLANS
The liability in respect of defined benefit pension plans is the defined
benefit obligation calculated annually by independent actuaries
using the projected unit credit method. The defined benefit obligation
is measured as the present value of the estimated future payments
required to settle the obligation that is attributable to the service of
associates in the current and prior periods. The service cost for such
pension plans is included in the personnel expenses of the various
functions where the associates are employed, while the expected
return on assets and interest expense are recognized as “Other
income” or “Other expense”. Plan assets are recorded at their fair
value. Unvested past service costs arising from amendments to pen-
sion plans are charged or credited on a straight-line basis to income
over the associates’ remaining vesting period. Vested past service
costs, including such costs for retired associates are immediately rec-
ognized in the consolidated income statement. Gains or losses aris-
ing from plan curtailments or settlements are accounted for at the
time they occur. Any net pension asset is limited to the present value
of future economic benefits available to the Group in the form of
refunds from the plan or expected reductions in future contributions
to the plan.
The effects of changes in actuarial assumptions and experience
adjustments on the value of plan assets and liabilities of defined
benefit plans are immediately recognized in the consolidated bal-
ance sheet with a corresponding movement in the consolidated
statement of comprehensive income.
OTHER POST-EMPLOYMENT BENEFITS 
Certain subsidiaries provide healthcare and insurance benefits for
a portion of their retired associates and their eligible dependents.
The cost of these benefits is actuarially determined and accrued
over the service lives of the related associates. Service costs are
included in the personnel expenses of the various functions where
the associates are located, while the expected return on assets and
interest expense are recognized as “Other income” or “Other
expense”. The related obligation is recognized in non-current liabil-
ities.
OTHER NON-CURRENT BENEFITS OF ASSOCIATES
Other non-current benefits of associates represent amounts due to
associates under deferred compensation arrangements available in
certain jurisdictions in which the Group conducts its operations.
Benefit costs are recognized on an accrual basis in the personnel
expenses of the various functions where the associates are located.
The related obligation is recognized in other non-current liabilities.
EQUITY-BASED COMPENSATION
The fair value of Novartis shares, restricted shares, restricted share
units (RSU) and American Depositary Shares (ADS) and related
options granted to associates as compensation is recognized as an
expense over the related vesting or service period adjusted to
reflect actual and expected vesting levels. The charge for equity-
based compensation is included in the personnel expenses which
are allocated to functional costs and credited to equity for equity-
settled amounts or to other current liabilities for cash-settled
amounts. An option’s fair value at grant date is calculated using the
trinomial valuation method. Accurately measuring the value of
share options is difficult and requires an estimate of factors used
in the valuation model. These key factors involve uncertain future
events, such as expected dividend yield and expected share price
volatility. Expected volatilities are based on those implied from listed
warrants on Novartis shares, and – to the extent that equivalent
options are not available – a future extrapolation based on historical
volatility. Novartis shares, restricted shares, RSUs and ADSs are val-
ued using the market value on the grant date.
REVENUE RECOGNITION
Revenue is recognized when there is persuasive evidence that a
sales arrangement exists, title and risks and rewards for the prod-
ucts are transferred to the customer, the price is determinable and
collectability is reasonably assured. Where contracts contain cus-
tomer acceptance provisions, sales are recognized upon the satis-
faction of acceptance criteria. Revenue is recognized for products
that are stockpiled at the request of the customer once the prod-
ucts have been inspected and accepted by the customer and there
is no right of return or replenishment on product expiry, and cost
of storage will be paid by the customer on normal commercial
terms. Provisions for rebates and discounts granted to government
agencies, wholesalers, retail pharmacies, managed care and other
customers are recorded as a reduction of revenue at the time the
related revenues are recorded or when the incentives are offered.
They are calculated on the basis of historical experience and the
specific terms in the individual agreements. Provisions for refunds
granted to healthcare providers under innovative pay for perform-
ance agreements are recorded as a reduction of revenue at the time
the related revenues are recorded. They are calculated on the basis
of historical experience and clinical data for the product as well as
the specific terms in the individual agreements. In cases where his-
torical experience and clinical data are not sufficient for a reliable
estimation of the outcome, revenue recognition is deferred until
such history is available.
Cash discounts are offered to customers to encourage prompt
payment and are recorded as revenue deductions. Wholesaler
shelf-inventory adjustments are granted to customers based on the
existing inventory of a product at the time of decreases in the
invoice or contract price of a product or at the point of sale if a price
decline is reasonably estimable. Where there is an historical expe-
rience of Novartis agreeing to customer returns or Novartis can

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1. ACCOUNTING POLICIES (CONTINUED)
otherwise reasonably estimate expected future returns, Novartis
records a provision for estimated sales returns. In doing so it
applies the estimated rate of return, determined based on histori-
cal experience of customer returns or considering any other rele-
vant factors, to the amounts invoiced also considering the amount
of returned products to be destroyed versus products that can be
placed back in inventory for resale. Where shipments are made on
a re-sale or return basis, without sufficient historical experience for
estimating sales returns, revenue is only recorded when there is
evidence of consumption or when the right of return has expired.
Provisions for revenue deductions are adjusted to actual amounts
as rebates, discounts and returns are processed.
RESEARCH & DEVELOPMENT
Internal Research & Development (R&D) costs are fully charged to
the consolidated income statement in the period in which they are
incurred. The Group considers that regulatory and other uncertain-
ties inherent in the development of new products preclude the cap-
italization of internal development expenses as an intangible asset
until marketing approval from a regulatory authority is obtained in
a major market such as for the US, the EU, Switzerland or Japan.
Payments made to third parties in compensation for subcon-
tracted R&D that is deemed not to enhance the intellectual prop-
erty of Novartis such as contract research and development organ-
izations are expensed as internal R&D expenses in the period in
which they are incurred. Such payments are only capitalized if they
meet the criteria for recognition of an internally generated intangi-
ble asset, usually when marketing approval has been achieved from
a regulatory authority in a major market.
Payments made to third parties in order to in-license or acquire
intellectual property rights, compounds and products (In-Process
Research & Development assets, “IPR&D”), including initial upfront
and subsequent milestone payments, are capitalized as are pay-
ments for other assets, such as technologies to be used in R&D
activities. If additional payments are made to the originator com-
pany to continue to perform R&D activities, an evaluation is made
as to the nature of the payments. Such additional payments will be
expensed if such additional payments are deemed to be compen-
sation for subcontracted R&D services not resulting in an additional
transfer of intellectual property rights to Novartis. By contrast, such
additional payments will be capitalized if these additional pay-
ments are deemed to be compensation for the transfer to Novartis
of additional intellectual property developed at the risk of the orig-
inator company. Subsequent internal R&D costs in relation to
IPR&D and other assets are expensed since the technical feasibil-
ity of the internal R&D activity can only be demonstrated by the
receipt of marketing approval for a related product from a regula-
tory authority in a major market.
Costs for post-approval studies performed to support the con-
tinued registration of a marketed product are recognized as mar-
keting expenses. Costs for activities that are required by regulatory
authorities as a condition for obtaining marketing approval are
charged as development expenses as they are incurred in cases
where it is anticipated that the related product will be sold over a
longer period than the activities required to be performed to obtain
the marketing approval. In the rare cases where costs related to the
conditional approval need to be incurred over a period beyond that
of the anticipated product sales, then the expected costs of these
activities will be expensed over the shorter period of the anticipated
product sales. As a result, all activities necessary as a condition to
maintain a received approval, whether conditional or not, are
expensed in the consolidated income statement.
IPR&D assets are amortized in the consolidated income state-
ment over their useful life once the related project has been suc-
cessfully developed and regulatory approval for a product launch
has been obtained. Other acquired technologies included in intan-
gible assets are amortized in the consolidated income statement
over their estimated useful lives.
Laboratory buildings and equipment included in property, plant
& equipment are depreciated in the consolidated income statement
over their estimated useful lives.
GOVERNMENT GRANTS
Grants from the government are recognized at their fair value where
there is a reasonable assurance that the grant will be received and
the Group will comply with all attached conditions.
Government grants are deferred and recognized in the consoli-
dated income statement over the period necessary to match them
with the related costs which they are intended to compensate.
Government grants relating to property, plant and equipment
are deducted from the carrying value of assets and released to the
consolidated income statement on a straight-line basis over the
expected lives of the related assets.
Government grants related to income are deducted in reporting
the related expense.
PROVISIONS
Novartis records provisions when it is judged probable that a liabil-
ity has been incurred and the amount can be reliably estimated.
These provisions are adjusted periodically as assessments change
or additional information becomes available.
Cost of future expenditures do not usually reflect any insurance
or other claims or recoveries, as Novartis only recognizes insurance
or other recoveries at such time the amount is reliably estimable
and collection is virtually certain.

201
Notes to the Novartis Group Consolidated Financial Statements
2 | G R O U P R E V I E W  
16 | H E A LT H C A R E P O R T FO L I O  
6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T  
138 | F I N A N C I A L R E P O R T
PRODUCT LIABILITIES
Provisions are made for present product liability obligations result-
ing from past sales including related legal and other fees and
expenses. The provision is actuarially determined taking into con-
sideration such factors as past experience, amount and number of
claims reported and estimates of claims incurred but not yet
reported. Individually significant cases are provided for when prob-
able and reliably estimable.
LEGAL LIABILITIES
Provisions are made for anticipated settlement costs where a reli-
able estimate can be made of the probable outcome of legal or
other disputes against the Group. In addition, provisions are made
for legal and other fees and expenses arising from claims affecting
Novartis.
ENVIRONMENTAL LIABILITIES
Novartis is exposed to environmental liabilities relating to its past
operations, principally in respect to remediation costs. Provisions
for remediation costs are made when expenditure on remedial work
is probable and the cost can be reliably estimated. These remedia-
tion costs are calculated as the present value of expected cash out-
flows including anticipated inflation, discounted at a rate based on
the market yields for high quality corporate bonds. The increase in
provisions due to the passage of time and the effect of changes in
the discount rates are included in Interest Expense.
CONTINGENT CONSIDERATION IN A BUSINESS COMBINATION
Contingent consideration potentially due to former owners as part
of the consideration paid for a business combination is recognized
as a liability at fair value as of the acquisition date. Any subsequent
change in the fair value of the contingent consideration liability is
recognized in the consolidated income statement.
RESTRUCTURING CHARGES
Restructuring charges are accrued against operating income in the
period in which management has committed to a plan and has
raised the valid expectation of the plan’s implementation by those
affected and the amount can be reliably estimated. The Group rec-
ognizes the costs for terminating the employment contracts of
associates when it is demonstrably committed to either terminat-
ing employment according to a detailed formal plan without possi-
bility of withdrawal or when it is committed to providing termina-
tion benefits as a result of an offer made to encourage voluntary
redundancy.
Charges to increase restructuring provisions are included in
“Other expense” in the consolidated income statement. Corre-
sponding releases are recorded in “Other income”.
DIVIDENDS
Dividends are recorded in the Group’s consolidated financial state-
ments in the period in which they are approved by the Group’s
shareholders.
TREASURY SHARES
Treasury shares are deducted from consolidated equity at their nom-
inal value of CHF 0.50 per share. Differences between this amount
and the amount paid for acquiring, or received for disposing of,
treasury shares are recorded in consolidated retained earnings.
REPORTING SEGMENTS
Reporting segments are presented in a manner consistent with the
internal reporting to the chief operating decision maker. The chief
operating decision maker, who is responsible for allocating
resources and assessing the performance of the reporting seg-
ments, has been identified as being the Executive Committee.
STATUS OF ADOPTION OF SIGNIFICANT NEW OR AMENDED IFRS
STANDARDS OR INTERPRETATIONS
The following new or amended IFRS standards will, based on a
Novartis analysis, be of significance to the Group, but have not yet
been adopted.
In 2009, 2010 and 2011, IFRS 9 Financial Instruments was
issued which will substantially change the classification and meas-
urement of financial instruments, hedging requirements and the
recognition of certain fair value changes in the consolidated finan-
cial statements. Currently, only new requirements on the classifica-
tion and measurement for financial assets and financial liabilities
have been issued. The mandatory effective date for requirements
issued as part of IFRS 9 will be on or after January 1, 2015. Early
application of the requirements is permitted.
In 2011, IAS 19 revised on Employee Benefits was issued, for
adoption by January 1, 2013. The principal impact for Novartis will
be that the concepts of expected return on plan assets and interest
expense on the defined benefit obligation as separate components
of defined benefit cost will be replaced by a concept that interest
will be calculated on the net of the defined benefit obligation and
funded post-employment obligation assets generally using an inter-
est rate reflecting market yields of high quality corporate bonds in
deep markets. If this concept had been adopted by Novartis in
2011, it is estimated that operating income would have been lower
by approximately USD 260 million. Novartis will retrospectively
adopt the standard on January 1, 2013.
Two other new standards were also issued in 2011, IFRS 10 Con-
solidated Financial Statements and IFRS 11 Joint Arrangements
which are potentially important for Novartis. Under IFRS 10,
Novartis will need to consolidate an investee based on control, i.e.
when it is exposed, or has rights, to variable returns from its involve-
ment with the investee and has the ability to affect those returns
through its power over the investee. IFRS 11 will require that
Novartis classifies joint arrangements as either joint operations,

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1. ACCOUNTING POLICIES (CONTINUED)
where assets, liabilities, revenues and expenses are accounted for
proportionally in accordance with the agreement, or as joint ven-
tures, which are accounted for under the equity method. These new
standards become effective on January 1, 2013. 
The following IFRSs and amendments are not yet effective and
are not early adopted by the Group:
– IFRS 12, Disclosures of interests in other entities, effective for
annual periods beginning on or after January 1, 2013
– IFRS 13, Fair value measurement, effective for annual periods
beginning on or after January 1, 2013
– Amendment to IAS 1, Presentation of items of other comprehensive
income, effective for annual periods beginning on or after July 1,
2012
Although Novartis is still completing its evaluation of these new
standards, apart from where indicated, Novartis does not currently
consider that the other new standards will have a significant impact.
2. SIGNIFICANT TRANSACTIONS, BUSINESS COMBINATIONS AND DIVESTMENTS
The following acquisitions, business combinations or other signifi-
cant transactions occurred during 2011 and 2010. See notes 3 and
24 for further details of the impact of these transactions on the con-
solidated financial statements.
ALCON MAJORITY CONTROL IN 2010; FULL OWNERSHIP AND MERGER 
IN 2011
On August 25, 2010 Novartis completed the acquisition of a further
52% interest in Alcon, Inc. (Alcon) following on from the January 4,
2010 announcement that Novartis had exercised its call option to
acquire Nestlé’s remaining 52% Alcon interest for approximately
USD 28.3 billion or USD 180 per share. The overall purchase price
of USD 38.7 billion included certain adjustments for Alcon divi-
dends and interest due. This increased the interest in Alcon to a
77% controlling interest as Novartis had already acquired an initial
25% Alcon interest from Nestlé for USD 10.4 billion or USD 143 per
share in July 2008.
On December 14, 2010 Novartis entered into a definitive agree-
ment to merge Alcon into Novartis in consideration for Novartis
shares and a Contingent Value Amount. The acquisition of the
remaining outstanding non-controlling interests in Alcon were sep-
arate transactions following the previous acquisition of majority
ownership in Alcon by Novartis in 2010.
On April 8, 2011 a Novartis Extraordinary General Meeting
approved the merger with Alcon, Inc. leading to the creation of the
Alcon Division which became the fifth reported segment in Novartis’
strategically diversified healthcare portfolio. The Extraordinary 
General Meeting also authorized the issuance of 108 million new
shares. Alcon shareholders received 2.9228 Novartis shares (which
included a dividend adjustment) and USD 8.20 in cash for each
share of Alcon, resulting in a total consideration of USD 168.00 
per share.
For business combinations achieved in stages, IFRS requires
that any previously held interest of an acquirer in an acquiree is
adjusted to its fair value through the consolidated income state-
ment as of the acquisition date. The agreement that Novartis
entered into with Nestlé in 2008 specified an average price of up to
USD 168 per share for all of the approximately 77% interest in
Alcon held by Nestlé, including USD 143 per share for the initial
25% interest acquired by Novartis in 2008, and a maximum of USD
181 per share for the remaining 52%, including a premium for the
change of majority ownership.
Novartis reassessed the fair value of the initial 25% non-con-
trolling interest in Alcon it acquired from Nestlé in 2008. In 2010,
Novartis recognized a revaluation gain of USD 378 million on its
initial 25% equity-method investment in Alcon upon acquiring a
52% controlling interest in the second-stage purchase from Nestlé
on August 25, 2010. This gain was based on Novartis concluding
that the fair value of that interest had a corresponding per-share
value of USD 139. On this date the quoted marked price of Alcon
on the NYSE was USD 160. Novartis measured this revaluation gain
based on the estimated current fair value of its investment in Alcon,
with the assistance of outside specialist investment bank advisors.
This valuation demonstrated that, as at August 25, 2010, the
quoted price for Alcon was affected by an anticipated premium on
Novartis’ eventual purchase of the 23% not owned at that time.
Novartis concluded that this “premium” should not be included in
the valuation of the previously held equity interest.
This gain was reduced by USD 43 million of accumulated losses
recorded in the consolidated statement of comprehensive income
of Novartis since the July 2008 acquisition date of the initial inter-
est. These accumulated losses were recorded under the equity
accounting method, which requires such accumulated losses to be
recycled into the consolidated income statement at the time of

203
Notes to the Novartis Group Consolidated Financial Statements
2 | G R O U P R E V I E W  
16 | H E A LT H C A R E P O R T FO L I O  
6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T  
138 | F I N A N C I A L R E P O R T
acquiring majority ownership. The net amount of USD 335 million
was recorded as a gain under “Income from Associated Companies”.
At December 31, 2010 Novartis recorded the outstanding non-
controlling interests in Alcon at their proportionate share of identi-
fiable net assets which amounted to USD 6.3 billion. After the acqui-
sition of majority ownership in Alcon, Inc. on August 25, 2010,
Alcon contributed in 2010 net sales of USD 2.4 billion and operat-
ing income of USD 323 million to the 2010 consolidated income
statement.
During 2011, prior to the merger of Alcon, Inc. into Novartis AG
on April 8, 4.8% of the non-controlling interests in Alcon, Inc. were
acquired for USD 2.4 billion. Completion of the acquisition of the
outstanding 18.6% on April 8, 2011 and subsequent merger,
resulted in the issuance of Novartis shares with a fair value of USD
9.2 billion and a contingent value payment of USD 0.5 billion.
The final purchase price allocation was completed in 2011 and
resulted in a fair value of net identifiable assets of USD 27.0 billion
and goodwill of USD 18.0 billion. The excess of the value exchanged
for the non-controlling interests in 2011 over the recorded value of
the non-controlling interest together with merger related transac-
tion costs resulted in a reduction in equity of USD 5.7 billion.
Pharmaceuticals – Acquisition of Genoptix, Inc.
On March 7, 2011 Novartis completed the acquisition of Genoptix,
Inc., a specialized laboratory providing personalized diagnostic serv-
ices to community-based hematologists and oncologists. Genoptix
employed approximately 500 people and became part of the Novartis
Molecular Diagnostics unit within the Pharmaceuticals Division.
The acquisition in cash of 100% of the shares of Genoptix
totaled USD 458 million, excluding the USD 24 million of cash
acquired. The final purchase price allocation resulted in net identi-
fied assets of USD 237 million and goodwill of USD 221 million.
Results of operations since the acquisition date were not material.
Vaccines and Diagnostics – Acquisition of Zhejiang Tianyuan
On March 22, 2011 Novartis completed the acquisition in cash of
an 85% stake in the Chinese vaccines company, Zhejiang Tianyuan
Bio-Pharmaceutical Co. Ltd. The acquisition provides Novartis with
an expanded presence in the Chinese vaccines market and is
expected to facilitate the introduction of additional Novartis vac-
cines into China. The total amount paid for the 85% interest was
USD 194 million, excluding USD 39 million of cash acquired. The
final purchase price allocation resulted in net identified assets of
USD 131 million and goodwill of USD 82 million. Non-controlling
interests have increased by USD 19 million from this transaction.
Results of operations since the acquisition date were not material.
Pharmaceuticals – Divestment of Elidel®
On May 11, 2011 Novartis completed the divestment of Elidel®
Cream 1% to Meda Pharma Sarl and Novartis received an upfront
payment of USD 420 million and recognized a gain of USD 324 mil-
lion in “Other Income”.
OTHER SIGNIFICANT TRANSACTIONS IN 2010
Pharmaceuticals – Acquisition of Corthera
On February 3, 2010 Novartis completed the 100% acquisition
(announced on December 23, 2009) of the privately held US-based
Corthera Inc., gaining worldwide rights to relaxin for the treatment
of acute decompensated heart failure and assumed full responsi-
bility for development and commercialization for a total purchase
consideration of USD 327 million. This amount consists of an ini-
tial cash payment of USD 120 million and USD 207 million of
deferred contingent consideration. The deferred contingent consid-
eration is the net present value of the additional milestone pay-
ments due to Corthera’s previous shareholders which they are eli-
gible to receive contingent upon the achievement of specified
development and commercialization milestones. The final purchase
price allocation resulted in net identified assets of USD 309 million
and goodwill of USD 18 million. Results of operations since the
acquisition date were not material.
Corporate – Issuance of bond in US dollars
On March 9, 2010 Novartis issued a three-tranche bond totaling
USD 5.0 billion registered with the US Securities and Exchange
Commission as part of a shelf registration statement filed by
Novartis in 2008. A 1.9% three-year tranche totaling USD 2.0 bil-
lion, a 2.9% five-year tranche totaling USD 2.0 billion and a 4.4%
10-year tranche totaling USD 1.0 billion were issued by the Group’s
US entity, Novartis Capital Corp. All tranches are unconditionally
guaranteed by Novartis AG.
Corporate – Change of pension plan in Switzerland
On April 23, 2010 the Board of Trustees of the Novartis Swiss Pen-
sion Fund agreed to amend the conditions and insured benefits of
the current Swiss pension plan with effect from January 1, 2011.
These amendments do not have an impact on existing pensions in
payment or on plan members born before January 1, 1956. Under
the previous rules, benefits from the plan are primarily linked to the
level of salary in the years prior to retirement while under the new
rules benefits are also partially linked to the level of contributions
made by the members during their active service period up to their
retirement. This has led to changes in the amounts that need to be
included in the Group’s consolidated financial statements prepared
using IFRS in respect of the Swiss Pension Fund.
As part of this change, Novartis, supported by the Swiss Pension
Fund, will make transitional payments, which vary according to the
member’s age and years of service. As a result, it is estimated that
additional payments will be made over a ten-year period of up to
approximately USD 481 million (CHF 453 million) depending on
whether or not all current members affected by the change remain
in the plan over this ten-year period.

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2. SIGNIFICANT TRANSACTIONS, BUSINESS COMBINATIONS AND DIVESTMENTS (CONTINUED)
The accounting consequence of this change in the Swiss pen-
sion plan rules results in the Group’s consolidated financial state-
ments prepared under IFRS reflecting a net pre-tax curtailment
gain of USD 265 million (CHF 283 million) in 2010. This calculation
only takes into account the discounted value of transition payments
of USD 202 million (CHF 219 million) attributed to already com-
pleted years of service of the affected plan members as calculated
in accordance with IFRS requirements. It does not take into account
any amount for transitional payments related to their future years
of service.
Sandoz – Acquisition of Oriel Therapeutics
On June 1, 2010 Sandoz completed the 100% acquisition of the
privately held US-based Oriel Therapeutics Inc., to broaden its port-
folio of projects in the field of respiratory drugs for a total purchase
consideration of USD 332 million. This amount consists of an ini-
tial cash payment of USD 74 million and USD 258 million of
deferred contingent consideration. Oriel’s previous shareholders
are eligible to receive milestone payments, which are contingent
upon the company achieving future development steps, regulatory
approvals and market launches, and sales royalties. The total USD
258 million of deferred contingent consideration represents the net
present value of expected milestone and royalty payments. The final
purchase price allocation, including the valuation of the contingent
payment elements of the purchase price, resulted in net identified
assets of USD 281 million and goodwill of USD 51 million. Results
of operations since the acquisition date were not material. During
2011, USD 106 million of contingent consideration has been
released to the consolidated income statement as it is remote that
the related contingent event will occur.
Pharmaceuticals – Divestment of Enablex®
On October 18, 2010 Novartis finalized the sale of the US rights for
Enablex® (darifenacin) to Warner Chilcott Plc for USD 400 million
and recognized a gain of USD 392 million.
3. SEGMENTATION OF KEY FIGURES 2011 AND 2010
REPORTING SEGMENTS
The businesses of Novartis are divided operationally on a worldwide
basis into five reporting segments: Pharmaceuticals, Alcon, Sandoz,
Vaccines and Diagnostics and Consumer Health and Corporate
activities. Following the full acquisition of Alcon, Inc., on April 8,
2011 a new divisional segment allocation was introduced. As a
result, the Alcon Division includes CIBA Vision and certain Pharma-
ceuticals Division ophthalmology products. Falcon, the US generics
business of Alcon, Inc. was transferred to the Sandoz Division. Cer-
tain residual operational costs incurred for the Consumer Health
Division headquarters were transferred to Corporate and Corporate
R&D was transferred to the Pharmaceuticals Division. All segment
results for 2010 and 2011 use this new allocation. Except for Con-
sumer Health, these segments reflect the Group’s internal manage-
ment structures. These segments are managed separately, includ-
ing the two divisions of the Consumer Health segment, because
they manufacture, distribute, and sell distinct products which
require differing marketing strategies. In the case of Consumer
Health, the segment comprises two divisions which are also man-
aged separately, however, neither of these two divisions is material
enough to the Group to be disclosed separately as a segment. The
reported segments are as follows:
Pharmaceuticals researches, develops, manufactures, distrib-
utes and sells patented prescription medicines in the following
therapeutic areas: Cardiovascular and Metabolism; Oncology; Neu-
roscience and Ophthalmics; Respiratory; Integrated Hospital Care;
and additional products. Pharmaceuticals is organized into global
business franchises responsible for the development and market-
ing of various products, as well as a business unit, called Novartis
Oncology, responsible for the global development and marketing of
oncology products. The Novartis Oncology Business Unit is not
required to be disclosed separately as a segment since it shares
common long-term economic perspectives, customers, research,
development, production, distribution and regulatory factors with
the rest of the division.
Alcon discovers, develops, manufactures, distributes and sells eye
care products. Alcon is the global leader in eye care with product
offerings in Surgical, Ophthalmic Pharmaceuticals and Vision Care.
In Surgical, Alcon develops, manufactures, distributes and sells
ophthalmic surgical equipment, instruments, disposable products
and intraocular lenses. In Ophthalmic Pharmaceuticals, Alcon dis-
covers, develops, manufactures, distributes and sells medicines to
treat chronic and acute diseases of the eye, as well as over-the-
counter medicines for the eye. In Vision Care, Alcon develops, man-
ufactures, distributes and sells contact lenses and lens care products.

205
Notes to the Novartis Group Consolidated Financial Statements
2 | G R O U P R E V I E W  
16 | H E A LT H C A R E P O R T FO L I O  
6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T  
138 | F I N A N C I A L R E P O R T
Sandoz develops, manufactures, distributes and sells prescrip-
tion medicines, as well as pharmaceutical and biotechnological
active substances, which are not protected by valid and enforce-
able third-party patents. Sandoz has activities in Retail Generics,
Anti-Infectives, Biopharmaceuticals & Oncology Injectables. In
Retail Generics, Sandoz develops, manufactures, distributes and
markets active ingredients and finished dosage forms of pharma-
ceuticals, as well as supplying active ingredients to third parties. In
Anti-Infectives, Sandoz develops and manufactures, distributes and
sells active pharmaceutical ingredients and intermediates – mainly
antibiotics – for internal use by Retail Generics and for sale to third-
party customers. In Biopharmaceuticals, Sandoz develops, manu-
factures, distributes and markets protein- or other biotechnology-
based products (known as biosimilars or follow-on biologics) and
sells biotech manufacturing services to other companies. In Oncol-
ogy Injectables, Sandoz develops, manufacturers, and markets
cytotoxic products for the hospital market.
Vaccines and Diagnostics consists of two activities: Vaccines
and Diagnostics. Vaccines researches, develops, manufactures, dis-
tributes and sells human vaccines worldwide. Diagnostics researches,
develops, distributes and sells blood testing and molecular diag-
nostics products.
Consumer Health now consists of two divisions: OTC (over-the-
counter medicines) and Animal Health. OTC offers readily available
consumer medicine. Animal Health provides veterinary products for
farm and companion animals.
The following shows an overview of the impact of the restate-
ment on the segmentation structure. Unless otherwise stated this
has been used for all years presented in this Annual Report.
Segment
Newly included
Newly excluded
Pharmaceuticals
Corporate R&D
Certain ophthalmic 
products
Alcon
CIBA Vision, 
Falcon
certain ophthalmic 
products
Sandoz
Falcon
Consumer Health
CIBA Vision; disbanded
Consumer Health
divisional management
costs
Corporate
Disbanded 
Corporate R&D
Consumer Health 
divisional 
management costs
A summary of the above restatements on 2010 net sales and oper-
ating income is as follows:
Operating 
Segment (USD m)
Net sales
income
Pharmaceuticals
– 252
– 327
Alcon
2 020
473
Sandoz
74
49
Consumer Health
– 1 842
– 375
Corporate
180
Total
0
0
Inter-segmental sales are made at amounts which are considered
to approximate arm’s length transactions. Where practicable, the
same accounting policies are applied by the Group and the seg-
ments. Currently, the Executive Committee principally evaluates
segmental performance and allocates resources among the seg-
ments based on their operating income, cash flow and cash flow
return on invested capital (CFROI).
Segment net operating assets consist primarily of property,
plant & equipment, intangible assets, inventories and trade and
other operating receivables less operating liabilities.
CORPORATE
Income and expenses relating to Corporate include the costs of the
Group headquarters and those of corporate coordination functions
in major countries. In addition, Corporate includes other items of
income and expense which are not attributable to specific seg-
ments such as certain expenses related to post-employment bene-
fits, environmental liabilities, charitable activities, donations and
sponsorships. Usually, no allocation of Corporate items is made to
the segments. Corporate assets and liabilities principally consist of
net liquidity (cash and cash equivalents, marketable securities less
financial debts), investments in associated companies and current
and deferred taxes and non-segmental specific environmental and
post-employment benefit liabilities.

N OVA R T I S  G R O U P  A N N UA L  R E P O R T  2 0 1 1
206
3. SEGMENTATION1 OF KEY FIGURES 2011 AND 2010 (CONTINUED)
Pharmaceuticals
Alcon
(In USD millions)
2011
2010
2011
20102
Net sales to third parties
32 508
30 306
9 958
4 446
Sales to other segments
244
157
22
14
Net sales of segments
32 752
30 463
9 980
4 460
Other revenues
453
422
43
34
Cost of Goods Sold
– 6 573
– 5 272
– 4 566
– 1 760
Gross profit
26 632
25 613
5 457
2 734
Marketing & Sales
– 8 929
– 8 663
– 2 537
– 1 299
Research & Development
– 7 232
– 7 276
– 892
– 352
General & Administration
– 1 047
– 919
– 509
– 255
Other income
697
687
262
7
Other expense
– 1 825
– 971
– 309
– 39
Operating income
8 296
8 471
1 472
796
Income from associated companies
– 3
– 16
Interest expense
Other financial income and expense
Income before taxes
Taxes
Group net income
Attributable to:
Shareholders of Novartis AG
Non-controlling interests
Included in net income are:
Interest income
Depreciation of property, plant & equipment
– 870
– 726
– 306
– 127
Amortization of intangible assets
– 423
– 457
– 1 928
– 65
Impairment charges on property, plant & equipment
– 403
4
– 5
Impairment charges on intangible assets
– 552
– 894
– 20
Impairment charges on financial assets
– 30
– 41
– 4
Additions to restructuring provisions
– 265
– 133
– 74
Equity-based compensation of Novartis and Alcon equity plans
– 648
– 559
– 113
– 30
Total assets
24 111
24 681
46 065
47 775
Total liabilities
– 10 415
– 9 469
– 2 273
– 1 522
Total equity
13 696
15 212
43 792
46 253
Net debt
Net operating assets
13 696
15 212
43 792
46 253
Included in total assets and total liabilities are:
Total property, plant & equipment
8 071
8 360
2 056
2 060
Additions to property, plant & equipment 3
1 041
777
354
193
Total goodwill and intangible assets
6 244
6 696
40 542
42 410
Additions to goodwill and intangible assets 3
219
414
80
20
Total investment in associated companies
3
2
18
17
Additions to investment in associated companies
5
3
Cash, marketable securities and derivative financial instruments
Financial debts and derivative financial instruments
Current income tax and deferred tax liabilities

207
Notes to the Novartis Group Consolidated Financial Statements
2 | G R O U P R E V I E W  
16 | H E A LT H C A R E P O R T FO L I O  
6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T  
138 | F I N A N C I A L R E P O R T
Corporate
Sandoz
Vaccines and Diagnostics
Consumer Health
(including eliminations)
Total Group
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
9 473
8 592
1 996
2 918
4 631
4 362
58 566
50 624
319
267
73
60
15
35
– 673
– 533
9 792
8 859
2 069
2 978
4 646
4 397
– 673
– 533
58 566
50 624
9
16
295
433
24
34
– 15
– 2
809
937
– 5 445
– 4 878
– 1 410
– 1 551
– 1 735
– 1 560
746
533
– 18 983
– 14 488
4 356
3 997
954
1 860
2 935
2 871
58
– 2
40 392
37 073
– 1 591
– 1 450
– 363
– 338
– 1 674
– 1 569
15
3
– 15 079
– 13 316
– 640
– 658
– 523
– 523
– 296
– 261
– 9 583
– 9 070
– 369
– 350
– 150
– 149
– 291
– 269
– 604
– 539
– 2 970
– 2 481
88
77
18
35
91
38
198
390
1 354
1 234
– 422
– 295
– 185
– 273
– 38
– 32
– 337
– 304
– 3 116
– 1 914
1 422
1 321
– 249
612
727
778
– 670
– 452
10 998
11 526
4
3
2
7
525
810
528
804
– 751
– 692
– 2
64
10 773
11 702
– 1 528
– 1 733
9 245
9 969
9 113
9 794
132
175
62
103
– 303
– 285
– 115

N OVA R T I S  G R O U P  A N N UA L  R E P O R T  2 0 1 1
208
3. SEGMENTATION OF KEY FIGURES 2011 AND 2010 (CONTINUED)
The following countries accounted for more than 5% of at least one of the respective Group totals for the years ended December 31, 2011
and 2010:
Country
Net sales 1
Total of selected non-current assets 2
USD millions
2011
%
2010
%
2011
%
2010
%
Switzerland
726
1
608
1
38 827
45
40 246
45
United States
19 225
33
16 893
33
30 061
35
30 377
34
Germany
4 362
7
3 999
8
4 214
5
4 267
5
Japan
5 281
9
4 288
8
204
153
France
2 848
5
2 460
5
299
317
Other
26 124
45
22 376
45
12 556
15
13 788
16
Group
58 566
100
50 624
100
86 161
100
89 148
100
Europe
21 507
37
19 169
38
51 101
59
53 461
60
Americas
24 705
42
21 545
43
33 211
39
33 868
38
Asia / Africa / Australasia
12 354
21
9 910
19
1 849
2
1 819
2
Group
58 566
100
50 624
100
86 161
100
89 148
100
1Net sales from operations by location of third party customer.
2Total of property, plant and equipment, goodwill, intangible assets and investment in associated companies
The Group’s largest customer accounts for approximately 9% of net
sales, and the second and third largest customer account for 7%
each of net sales (2010: 8%, 8% and 7% respectively). No other cus-
tomer accounts for 2% or more of net sales, in both years.
The highest amounts of trade receivables outstanding were for
these three customers. They amounted to 10%, 6% and 6%,
respectively, of the Group’s trade receivables at December 31, 2011
(2010: 9%, 5% and 6% respectively).

209
Notes to the Novartis Group Consolidated Financial Statements
2 | G R O U P R E V I E W  
16 | H E A LT H C A R E P O R T FO L I O  
6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T  
138 | F I N A N C I A L R E P O R T
PHARMACEUTICALS DIVISION THERAPEUTIC AREA NET SALES
Therapeutic areas
2011
2010
Change
USD millions
USD millions
USD %
Cardiovascular and Metabolism
Hypertension medicines
Diovan
5 665
6 053
– 6
Exforge
1 209
904
34
Subtotal Valsartan Group
6 874
6 957
– 1
Tekturna/Rasilez
557
438
27
Subtotal Hypertension
7 431
7 395
0
Galvus
677
391
73
Total strategic franchise products
8 108
7 786
4
Established medicines
1 027
1 369
– 25
Total Cardiovascular and 
Metabolism products
9 135
9 155
0
Oncology
Gleevec/Glivec
4 659
4 265
9
Tasigna
716
399
79
Subtotal Bcr-Abl franchise
5 375
4 664
15
Zometa
1 487
1 511
– 2
Sandostatin
1 443
1 291
12
Femara
911
1 376
– 34
Exjade
850
762
12
Afinitor
443
243
82
Other
163
181
– 10
Total Oncology products
10 672
10 028
6
Neuroscience and Ophthalmics
Lucentis
2 050
1 533
34
Exelon/Exelon Patch
1 067
1 003
6
Comtan/Stalevo
614
600
2
Gilenya
494
15
nm
Extavia
154
124
24
Other (including Fanapt)
159
190
– 16
Total strategic franchise products
4 538
3 465
31
Established medicines
547
567
– 4
Total Neuroscience and 
Ophthalmics products
5 085
4 032
26
Therapeutic areas
2011
2010
Change
USD millions
USD millions
USD %
Respiratory
Xolair
478
369
30
TOBI
296
279
6
Onbrez Breezhaler
103
33
nm
Total strategic franchise products
877
681
29
Established medicines
172
174
– 1
Total Respiratory products
1 049
855
23
Integrated Hospital Care (IHC)*
Neoral/Sandimmun
903
871
4
Myfortic
518
444
17
Zortress/Certican
187
144
30
Ilaris
48
26
85
Other
363
293
24
Total strategic franchise products
2 019
1 778
14
Established medicines
1 453
1 469
– 1
Total IHC products
3 472
3 247
7
Additional products
Voltaren (excl. OTC)
794
791
0
Ritalin/Focalin
550
464
19
Tegretol
364
355
3
Foradil
312
353
– 12

N OVA R T I S  G R O U P  A N N UA L  R E P O R T  2 0 1 1
210
4. ASSOCIATED COMPANIES
Novartis has the following significant investments in associated
companies which are accounted for using the equity method:
Balance sheet value
Net income statement effect
2011
2010
2011
2010
USD millions
USD millions
USD millions
USD millions
Roche Holding AG, 
Switzerland
8 362
8 173
499
380
Alcon Inc., 
Switzerland
433
Others
260
212
29
– 9
Total
8 622
8 385
528
804
The results of the Group’s associated companies are adjusted to be
in accordance with IFRS as applied by Novartis in cases where IFRS
is not already used.
Since up-to-date financial data are not available when Novartis
produces its consolidated financial results, a survey of analyst esti-
mates is used to estimate the Group’s share of net income in Roche
Holding. Any differences between these estimates and actual
results are adjusted in the Group’s 2012 consolidated financial
statements when available.
The following table shows summarized financial information of
Roche for the year ended December 31, 2010 since 2011 data is
not yet available:
Asset
Liabilities
Revenue
Net income
billions
billions
billions
billions
Roche (CHF)
61.0
49.4
49.2
8.9
ROCHE HOLDING AG 
The Group’s holding in Roche voting shares was 33.3% at Decem-
ber 31, 2011 and 2010. This investment represents approximately
6.3% of Roche’s total outstanding voting and non-voting equity
instruments. The purchase price allocation was performed on the
basis of publicly available information at the time of acquisition.
The December 31, 2011 balance sheet value allocation is as
follows:
USD millions
Novartis share of Roche’s estimated net assets
2 828
Novartis share of re-appraised intangible assets
1 882
Implicit Novartis goodwill
3 030
Current value of share in net identifiable assets and
goodwill
7 740
Accumulated equity accounting adjustments and translation 
effects less dividends received
622
December 31, 2011 balance sheet value
8 362
The identified intangible assets principally relate to the value of cur-
rently marketed products and are amortized on a straight-line basis
over their estimated average useful life of 20 years. 
The income statement effects from applying Novartis account-
ing principles for this investment in 2011 and 2010 are as follows:
2011
2010
USD millions
USD millions
Novartis share of Roche’s estimated current-year
consolidated net income
702
559
Prior-year adjustment
– 41
– 43
Amortization of fair value adjustments relating
to intangible assets, net of taxes of USD 47 million
(2010: USD 41 million)
– 162
– 136
Net income effect
499
380
The publicly quoted market value of the Novartis interest in Roche
(Reuters symbol: RO.S) at December 31, 2011, was USD 9.5 billion
(2010: USD 8.2 billion).
ALCON, INC. 
The Group’s initial holding in Alcon voting shares was acquired on
July 7, 2008. In 2010, the Group completed its purchase of an
additional 52% of Alcon resulting in approximately 77% ownership.
As from August 25, 2010 Alcon is fully consolidated and no longer
accounted for as an associated company. The impact on the
Group’s consolidated income statement for the period from Janu-
ary 1, 2010 to August 25, 2010 is as follows:
2010
USD millions
Novartis share of Alcon’s
current-year consolidated net income
385
Prior-year adjustment
2
Revaluation of initial 25% interest to fair value
378
Recycling of losses accumulated in comprehensive 
income from July 7, 2008 to August 25, 2010
– 43
Amortization of fair value adjustments relating to intangible assets, 
net of taxes of USD 61 million
– 289
Net income effect
433

213
Notes to the Novartis Group Consolidated Financial Statements
2 | G R O U P R E V I E W  
16 | H E A LT H C A R E P O R T FO L I O  
6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T  
138 | F I N A N C I A L R E P O R T
The following table summarizes these value adjustments and currency translation effects attributable to Novartis shareholders:
Fair value
Fair value
Actuarial
Revaluation 
Cumulative
adjustments adjustments of
losses
of previously 
currency 
to marketable
deferred cash
from defined
held equity 
translation
Total value
securities
flow hedges
benefit plans
interests
effects
adjustments
USD millions
USD millions
USD millions
USD millions
USD millions
USD millions
Value adjustments at January 1, 2010
231
– 223
– 2 560
685
3 135
1 268
Fair value adjustments on financial instruments
– 73
41
– 32
Net actuarial losses from defined benefit plans
– 678
– 678
Currency translation effects
534
534
Total value adjustments in 2010
– 73
41
– 678
534
– 176
Value adjustments at December 31, 2010
158
– 182
– 3 238
685
3 669
1 092
Fair value adjustments on financial instruments
– 21
41
20
Net actuarial losses from defined benefit plans
– 1 429
– 1 429
Currency translation effects
– 534
– 534
Total value adjustments in 2011
– 21
41
– 1 429
– 534
– 1 943
Value adjustments at December 31, 2011
137
– 141
– 4 667
685
3 135
– 851
8.1) The 2011 and 2010 changes in the fair value of financial instruments:
Fair value
Fair value
adjustments adjustments of
to marketable
deferred cash
securities
flow hedges
Total 
USD millions
USD millions
USD millions
Fair value adjustments at January 1, 2011
157
– 182
– 25
Changes in fair value:
– Available-for-sale marketable securities
– 32
– 32
– Available-for-sale financial investments
– 141
– 141
– Associated companies’ movements in comprehensive income
– 8
– 8
Realized net gains transferred to the consolidated income statement:
–
– Marketable securities sold
– 13
– 13
– Other financial assets sold
– 13
– 13
Amortized net losses on cash flow hedges transferred to the consolidated income statement
44
44
Impaired marketable securities and other financial assets transferred to the consolidated income statement
192
192
Deferred tax on above items
– 5
– 3
– 8
Fair value adjustments during the year
– 20
41
21
Attributable to:
Shareholders of Novartis AG
– 21
41
20
Non-controlling interests
1
1
Fair value adjustments at December 31, 2011
137
– 141
– 4

N OVA R T I S  G R O U P  A N N UA L  R E P O R T  2 0 1 1
214
8. CHANGES IN CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (CONTINUED)
Fair value
Fair value
adjustments adjustments of
to marketable
deferred cash
securities
flow hedges
Total 
USD millions
USD millions
USD millions
Fair value adjustments at January 1, 2010
231
– 223
8
Changes in fair value:
– Available-for-sale marketable securities
19
19
– Available-for-sale financial investments
– 226
– 226
– Associated companies’ movements in comprehensive income
– 5
– 5
Realized net gains transferred to the consolidated income statement:
– Marketable securities sold
– 39
– 39
– Other financial assets sold
– 15
– 15
Amortized net losses on cash flow hedges transferred to the consolidated income statement
44
44
Impaired marketable securities and other financial assets transferred to the consolidated income statement
164
164
Deferred tax on above items
28
– 3
25
Fair value adjustments during the year
– 74
41
– 33
Attributable to:
Shareholders of Novartis AG
– 73
41
– 32
Non-controlling interests
– 1
– 1
Fair value adjustments at December 31, 2010
157
– 182
– 25
8.2) Actuarial losses from defined benefit plans arise from:
2011
2010
USD millions
USD millions
Defined benefit pension plans before tax
– 1 876
– 832
Other post-employment benefit plans before tax
– 55
– 24
Taxation on above items
510
171
Total after tax
– 1 421
– 685
Attributable to:
Shareholders of Novartis AG
– 1 429
– 678
Non-controlling interests
8
– 7
8.3) The Group has investments in associated companies, princi-
pally Roche Holding AG. The Group’s share in movements in these
companies’ other comprehensive income are recognized directly in
the respective categories of the Novartis consolidated statement of
comprehensive income, net of tax. The currency translation effects
and fair value adjustments of associated companies are included in
the corresponding Group amounts. All other movements in these
companies’ statements of comprehensive income are recognized
directly in the consolidated statement of comprehensive income
under “Novartis share of other items recorded in comprehensive
income recognized by associated companies, net of taxes”. These
amounted to income of USD 1 million (2010: loss of USD 94 mil-
lion. The loss includes a gain of USD 43 million arising from the
recycling to the consolidated income statement the net losses accu-
mulated in the consolidated statement of comprehensive income
during the time Alcon, Inc. was accounted for as an associated com-
pany from July 2008 to August 2010).

215
Notes to the Novartis Group Consolidated Financial Statements
2 | G R O U P R E V I E W  
16 | H E A LT H C A R E P O R T FO L I O  
6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T  
138 | F I N A N C I A L R E P O R T
9. CHANGES IN CONSOLIDATED EQUITY
9.1) At the 2011 Annual General meeting, a dividend of CHF 2.20
per share was approved that amounted to USD 5.4 billion, and was
paid in 2011 (2010: CHF 2.10 per share dividend payment that
amounted to USD 4.5 billion). The amount available for distribu-
tion as a dividend to shareholders is based on the available distrib-
utable retained earnings of Novartis AG determined in accordance
with the legal provisions of the Swiss Code of Obligation.
9.2) In 2011 a total of 54.7 million shares net were purchased for
USD 3.5 billion (2010: sale of 8.4 million for USD 342 million), out
of which 39.4 million shares were acquired under the share repur-
chase program.
9.3) Equity-settled share-based compensation is expensed in the
consolidated income statement in accordance with the vesting or
service period of the share-based compensation plans. In 2011 7.2
million shares (2010: 6.7 million shares) were transferred to asso-
ciates as part of equity-based compensation. The value for the
shares and options expensed in 2011, including associated tax,
amounted to USD 806 million (2010: USD 599 million) and is cred-
ited to consolidated equity.
9.4) In 2010 a reduction in consolidated equity attributable to
Novartis of USD 74 million arose from a dilution of the Novartis
interest in Alcon, Inc. since obtaining majority control on August 25,
2010. This was due to an increase in Alcon’s outstanding shares,
principally due to the issuance of new shares and the use of Alcon
treasury shares to satisfy conversion of Alcon’s equity-based instru-
ments held by associates.
9.5) As required by IAS 27 the excess of the consideration exchanged
by Novartis to acquire the additional non-controlling interests in
Alcon, Inc. over the value of the related outstanding non-controlling
interests of Alcon, Inc. is recognized against consolidated equity. In
2011 this led to a USD 5.7 billion reduction in equity (2010: USD
96 million, mainly due to the acquisition of additional shares in
Alcon, Inc.). Also deducted are USD 59 million of merger related
transaction costs.
9.6) Changes in non-controlling interests are mainly due to the
acquisition of the remaining non-controlling interests in Alcon, Inc.
leading to a reduction of USD 6.6 billion (2010: increase of USD 6.3
billion due to full consolidation of Alcon, Inc. from August 25, 2010).
9.7) A total of 164.7 million Novartis shares with a fair value of USD
9.2 billion were exchanged on April 8, 2011 to obtain the outstand-
ing non-controlling interest in Alcon, Inc. These shares consisted of
108 million newly issued shares and 56.7 million treasury shares.

N OVA R T I S  G R O U P  A N N UA L  R E P O R T  2 0 1 1
216
10. PROPERTY, PLANT & EQUIPMENT MOVEMENTS
Machinery 
Construction 
& other 
Land
Buildings
in progress
equipment 
Total
USD millions
USD millions
USD millions
USD millions
USD millions
2011
Cost
January 1
827
10 674
2 327
15 129
28 957
Acquisition and divestment of consolidated business
12
20
9
41
Reclassifications 1
888
– 1 688
800
Additions
2
105
1 616
463
2 186
Disposals and derecognitions 2
– 3
– 148
– 21
– 638
– 810
Currency translation effects
– 7
– 110
– 70
– 252
– 439
December 31
831
11 429
2 164
15 511
29 935
Accumulated depreciation
January 1
– 19
– 4 318
– 6
– 8 774
– 13 117
Depreciation on divested consolidated business
3
6
9
Reclassifications 1
– 3
3
Depreciation charge
– 3
– 438
– 1 287
– 1 728
Depreciation on disposals and derecognitions 2
117
575
692
Impairment charge
– 55
– 4
– 354
– 413
Currency translation effects
48
201
249
December 31
– 22
– 4 646
– 10
– 9 630
– 14 308
Net book value at December 31
809
6 783
2 154
5 881
15 627
Insured value at December 31
34 483
Net book value of property, plant & equipment under finance lease contracts
4
Commitments for purchases of property, plant & equipment
583
1Reclassifications between various asset categories due to completion of plant and other equipment under construction.
2Derecognition of tangible assets which are no longer used and are not considered to have a significant disposal value or other alternative use.
The Group was awarded government grants in the United States for
the construction of a manufacturing facility to produce flu vaccines.
The contracts included a maximum of USD 294 million cost reim-
bursement for construction activities and equipment, of which USD
223 million was received by December 31, 2011 (2010: USD 185
million). These grants were deducted in arriving at the carrying
value of the assets since the receipt of the respective government
grant is reasonably assured. There are no onerous contracts or
unfulfilled conditions in connection with this grant.
Borrowing costs on new additions to property, plant and equip-
ment have been capitalized and amounted to USD 1 million in
2011 (2010: USD 1 million).
The impairment charge for property, plant and equipment in
2011 amounted to USD 413 million (2010: USD 10 million).

217
Notes to the Novartis Group Consolidated Financial Statements
2 | G R O U P R E V I E W  
16 | H E A LT H C A R E P O R T FO L I O  
6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T  
138 | F I N A N C I A L R E P O R T
Machinery 
Construction 
& other 
Land
Buildings
in progress
equipment 
Total
USD millions
USD millions
USD millions
USD millions
USD millions
2010
Cost
January 1
709
9 380
2 176
13 635
25 900
Impact of business combinations
95
474
244
606
1 419
Reclassifications 1
12
616
– 1 407
779
Additions
3
62
1 260
328
1 653
Disposals and derecognitions 2
– 2
– 49
– 28
– 295
– 374
Currency translation effects
10
191
82
76
359
December 31
827
10 674
2 327
15 129
28 957
Accumulated depreciation
January 1
– 13
– 3 869
– 8
– 7 935
– 11 825
Reclassifications 1
5
– 5
Depreciation charge
– 4
– 343
– 1 016
– 1 363
Depreciation on disposals and derecognitions 2
29
264
293
Impairment charge
– 3
2
– 9
– 10
Currency translation effects
– 2
– 137
– 73
– 212
December 31
– 19
– 4 318
– 6
– 8 774
– 13 117
Net book value at December 31
808
6 356
2 321
6 355
15 840
Insured value at December 31
32 288
Net book value of property, plant & equipment under finance lease contracts
4
Commitments for purchases of property, plant & equipment
597
1Reclassifications between various asset categories due to completion of plant and other equipment under construction.
2Derecognition of tangible assets which are no longer used and are not considered to have a significant disposal value or other alternative use.

N OVA R T I S  G R O U P  A N N UA L  R E P O R T  2 0 1 1
218
11. GOODWILL AND INTANGIBLE ASSET MOVEMENTS
Total of 
Acquired
Currently
Other
intangible
research &
Alcon 
marketed 
Marketing 
intangible
assets other
Goodwill
development
brand name
Technologies
products 
know-how
assets
than goodwill
USD millions
USD millions
USD millions
USD millions
USD millions
USD millions
USD millions
USD millions
2011
Cost
January 1
30 261
4 627
2 980
6 699
22 740
5 960
1 135
44 141
Impact of business combinations
303
7
3
101
1
112
Reclassifications 1
– 255
260
– 5
Additions 2
69
122
43
102
267
Disposals and derecognitions 3
– 48
– 1 420
– 19
– 4
– 1 443
Currency translation effects
– 134
10
– 21
– 85
– 7
– 103
December 31
30 451
3 091
2 980
6 681
23 040
5 960
1 222
42 974
Accumulated amortization
January 1
– 569
– 1 565
– 370
– 6 254
– 721
– 8 910
Amortization charge
– 589
– 2 090
– 238
– 111
– 3 028
Amortization on disposals and derecognitions 3
48
1 420
19
4
1 443
Impairment charge
– 338
– 287
– 2
– 627
Reversal of impairment charge
8
8
Currency translation effects
13
22
9
69
9
109
December 31
– 508
– 461
– 950
– 8 535
– 238
– 821
– 11 005
Net book value at December 31
29 943
2 630
2 980
5 731
14 505
5 722
401
31 969
1Reclassifications between various asset categories as a result of product launches of acquired In-Process Research & Development.
2Additions to goodwill relates to finalization of Alcon, Inc., acquisition accounting
3Derecognitions of intangible assets which are no longer used or being developed  and are not considered to have a significant disposal value or other alternative use.

219
Notes to the Novartis Group Consolidated Financial Statements
2 | G R O U P R E V I E W  
16 | H E A LT H C A R E P O R T FO L I O  
6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T  
138 | F I N A N C I A L R E P O R T
Total of 
Acquired
Currently
Other
intangible
research &
Alcon 
marketed 
Marketing 
intangible
assets other
Goodwill
development
brand name
Technologies
products 
know-how
assets
than goodwill
USD millions
USD millions
USD millions
USD millions
USD millions
USD millions
USD millions
USD millions
2010
Cost
January 1
12 624
3 216
1 271
11 737
954
17 178
Impact of business combinations
17 986
1 418
2 980
5 460
10 561
5 960
44
26 423
Reclassifications 1
– 474
474
Additions
344
62
89
495
Disposals and derecognitions 2
– 24
– 184
– 13
– 221
Currency translation effects
– 349
147
– 32
90
61
266
December 31
30 261
4 627
2 980
6 699
22 740
5 960
1 135
44 141
Accumulated amortization
January 1
– 585
– 547
– 273
– 5 395
– 632
– 6 847
Reclassifications 1
– 16
16
Amortization charge
– 91
– 970
– 74
– 1 135
Amortization on disposals and derecognitions 2
22
95
12
129
Impairment charge
– 991
– 14
– 13
– 1 018
Reversal of impairment charge
2
105
107
Currency translation effects
16
– 51
10
– 75
– 30
– 146
December 31
– 569
– 1 565
– 370
– 6 254
– 721
– 8 910
Net book value at December 31
29 692
3 062
2 980
6 329
16 486
5 960
414
35 231
1Reclassifications between various asset categories as a result of product launches of acquired In-Process Research & Development.
2Derecognitions of intangible assets which are no longer used or being developed  and are not considered to have a significant disposal value or other alternative use.
SEGMENTATION OF GOODWILL AND INTANGIBLE ASSETS
The net book values at December 31, 2011 of goodwill and intangible assets are allocated to the Group’s segments as summarized
below:
Total of 
Acquired
Currently
Other
intangible
research &
Alcon 
marketed 
Marketing 
intangible
assets other
Goodwill
development
brand name
Technologies
products 
know-how
assets
than goodwill
USD millions
USD millions
USD millions
USD millions
USD millions
USD millions
USD millions
USD millions
Pharmaceuticals
3 077
1 309
2
1 639
217
3 167
Alcon
17 740
598
2 980
4 836
8 639
5 722
27
22 802
Sandoz
7 697
592
678
2 378
11
3 659
Vaccines and Diagnostics
1 197
128
215
1 210
133
1 686
Consumer Health
226
639
2
641
Corporate
6
3
11
14
Total
29 943
2 630
2 980
5 731
14 505
5 722
401
31 969
Potential impairment charge, if any, 
if discounted cash flows fell by 5%
3
5
Potential impairment charge, if any, 
if discounted cash flows fell by 10%
7
21

N OVA R T I S  G R O U P  A N N UA L  R E P O R T  2 0 1 1
220
11. GOODWILL AND INTANGIBLE ASSET MOVEMENTS (CONTINUED)
The recoverable amount of a cash-generating unit and related
goodwill is based on the higher of “fair value less costs to sell” or
“value in use”. The following assumptions are used in the calcula-
tions:
Vaccines and
Consumer
Pharmaceuticals
Alcon
Sandoz
Diagnostics
Health
%
%
%
%
%
Sales growth rate 
assumptions after 
forecast period
0.4
3
0 to 2
0.5
0 to 2
Discount rate (post-tax)
7
7
7
7
7
In 2011, intangible asset impairment charges of USD 627 million
were recorded. USD 552 million of these arose in the Pharmaceu-
ticals Division, principally due to the expected reduction in demand
for Tekturna/Rasilez (aliskiren) and discontinuation of PRT128
(elinogrel), SMC021 (oral calcitonin), PTK796 and AGO178 (agome-
latine) development programs. USD 75 million of impairment
charges arose in all other Divisions.
In 2010, Novartis recorded impairment charges totaling USD
1.0 billion. These relate to impairment charges of USD 356 million
for Mycograb, USD 250 million for PTZ601, USD 228 million for
albinterferon alfa-2b and USD 120 million for ASA404 as Novartis
decided to discontinue the related development projects. Addition-
ally, USD 40 million were recorded for various other impairment
charges in the Pharmaceuticals Division. Novartis also recorded
various impairment charges of USD 24 million in Sandoz and Con-
sumer Health.
Reversal of prior year impairment charges amounted to USD 8
million (2010: USD 107 million).

221
Notes to the Novartis Group Consolidated Financial Statements
2 | G R O U P R E V I E W  
16 | H E A LT H C A R E P O R T FO L I O  
6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T  
138 | F I N A N C I A L R E P O R T
12. DEFERRED TAX ASSETS AND LIABILITIES
Pensions and
Property, 
other benefit 
Other assets,
plant &
Intangible
obligations
Tax loss
provisions
Valuation
equipment
assets
of associates
Inventories
carryforwards
and accruals
allowance
Total
USD millions
USD millions
USD millions
USD millions
USD millions
USD millions
USD millions
USD millions
Gross deferred tax assets at January 1, 2011
131
251
1 086
1 792
241
2 007
– 19
5 489
Gross deferred tax liabilities at January 1, 2011
– 951
– 5 689
– 409
– 253
– 10
– 626
– 7 938
Net deferred tax balance at January 1, 2011
– 820
– 5 438
677
1 539
231
1 381
– 19
– 2 449
At January 1, 2011
– 820
– 5 438
677
1 539
231
1 381
– 19
– 2 449
(Charged)/credited to income
68
350
28
418
– 28
322
– 16
1 142
(Charged)/credited to equity
22
22
(Charged)/credited to comprehensive income
510
– 32
478
Impact of business combinations
– 9
– 9
Other movements
– 38
154
– 12
– 162
– 15
– 18
3
– 88
Net deferred tax balance at December 31, 2011
– 790
– 4 934
1 203
1 795
188
1 666
– 32
– 904
Gross deferred tax assets at December 31, 2011
157
234
1 576
2 020
201
2 221
– 32
6 377
Gross deferred tax liabilities at December 31, 2011
– 947
– 5 168
– 373
– 225
– 13
– 555
– 7 281
Net deferred tax balance at December 31, 2011
– 790
– 4 934
1 203
1 795
188
1 666
– 32
– 904
Deferred tax assets and liabilities after offsetting 
amounts of USD 520 millions recorded in companies 
within the same tax jurisdiction
Deferred tax assets at December 31, 2011
5 857
Deferred tax liabilities at December 31, 2011
– 6 761
Net deferred tax balance at December 31, 2011
– 904
Gross deferred tax assets at January 1, 2010
72
281
931
1 429
232
1 687
– 17
4 615
Gross deferred tax liabilities at January 1, 2010
– 829
– 2 024
– 526
– 275
– 753
– 4 407
Net deferred tax balance at January 1, 2010
– 757
– 1 743
405
1 154
232
934
– 17
208
At January 1, 2010
– 757
– 1 743
405
1 154
232
934
– 17
208
(Charged)/credited to income
– 11
431
– 127
165
– 49
32
441
(Charged)/credited to equity
– 4
– 4
(Charged)/credited to comprehensive income
171
41
212
Impact of business combinations
– 54
– 4 163
203
237
60
357
– 2
– 3 362
Other movements
2
37
25
– 17
– 12
21
56
Net deferred tax balance at December 31, 2010
– 820
– 5 438
677
1 539
231
1 381
– 19
– 2 449
Gross deferred tax assets at December 31, 2010
131
251
1 086
1 792
241
2 007
– 19
5 489
Gross deferred tax liabilities at December 31, 2010
– 951
– 5 689
– 409
– 253
– 10
– 626
– 7 938
Net deferred tax balance at December 31, 2010
– 820
– 5 438
677
1 539
231
1 381
– 19
– 2 449
Deferred tax assets and liabilities after offsetting 
amounts of USD 249 millions recorded in companies 
within the same tax jurisdiction
Deferred tax assets at December 31, 2010
5 240
Deferred tax liabilities at December 31, 2010
– 7 689
Net deferred tax balance at December 31, 2010
– 2 449

N OVA R T I S  G R O U P  A N N UA L  R E P O R T  2 0 1 1
222
12. DEFERRED TAX ASSETS AND LIABILITIES (CONTINUED)
A reversal of valuation allowance could occur when circumstances
make the realization of deferred taxes probable. This would result
in a decrease in the Group’s effective tax rate.
Deferred tax assets of USD 2.3 billion (2010: USD 2.3 billion)
and deferred tax liabilities of USD 6.5 billion (2010: USD 7.1 billion)
are expected to have an impact on current taxes payable after more
than twelve months.
At December 31, 2011, unremitted earnings of USD 51 billion
(2010: USD 45 billion) have been retained by subsidiary companies
for reinvestment. No provision is made for income taxes that would
be payable upon the distribution of these earnings. If these earnings
were remitted, an income tax charge could result based on the tax
statutes currently in effect.
2011
2010
USD millions
USD millions
Temporary differences on which no deferred 
tax has been provided as they are permanent in 
nature related to:
– Investments in subsidiaries
4 782
7 137
– Goodwill from acquisitions
– 25 089
– 24 711
The gross value of tax-loss carry-forwards that have, or have not,
been capitalized as deferred tax assets, with their expiry dates is as
follows:
Not capitalized
Capitalized
2011 total
USD millions
USD millions
USD millions
One year
81
2
83
Two years
171
4
175
Three years
175
38
213
Four years
72
29
101
Five years
63
100
163
More than five years
419
443
862
Total
981
616
1 597
Not capitalized
Capitalized
2010 total
USD millions
USD millions
USD millions
One year
155
1
156
Two years
67
4
71
Three years
159
8
167
Four years
159
18
177
Five years
58
158
216
More than five years
446
503
949
Total
1 044
692
1 736
Deferred tax assets related to taxable losses of relevant Group enti-
ties are recognized to the extent it is considered probable that
future taxable profits will be available against which such losses can
be utilized in the foreseeable future.
In 2011, USD 155 million (2010: USD 11 million) of tax-loss
carry-forwards expired.

223
Notes to the Novartis Group Consolidated Financial Statements
2 | G R O U P R E V I E W  
16 | H E A LT H C A R E P O R T FO L I O  
6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T  
138 | F I N A N C I A L R E P O R T
13. FINANCIAL ASSETS
2011
2010
USD millions
USD millions
Financial investments, long-term loans and
other investments
938
857
Loans to associated companies
1
Prepaid post-employment benefit plans
38
982
Total financial assets
976
1 840
Available-for-sale financial investments at December 31, 2011,
totaling USD 604 million (2010: USD 712 million) are valued at fair
value, while long-term loans and other investments of USD 334 mil-
lion (2010: USD 145 million) are valued at amortized cost or at cost.
In 2011, impairments on available-for-sale financial investments
amounted to USD 189 million (2010: USD 160 million). In 2011 no
reversal of impairments occurred (2010: USD 2 million). These
amounts were recorded in the consolidated income statement under
“Other expense” or “Other income”, respectively.
14. INVENTORIES
2011
2010
USD millions
USD millions
Raw material, consumables
930
931
Finished products
5 000
5 162
Total inventories
5 930
6 093
The following summarizes movements in inventory write-downs
deducted from inventory categories. Reversals of inventory provi-
sions mainly result from the reassessment of inventory values man-
ufactured prior to regulatory approval but for which approval was
subsequently received:
2011
2010
USD millions
USD millions
January 1
– 879
– 653
Impact of business combinations
– 101
Inventory write-downs charged to the 
consolidated income statement
– 1 554
– 1 106
Utilization of inventory provisions
921
593
Reversal of inventory provisions
738
396
Currency translation effects
33
– 8
December 31
– 741
– 879

N OVA R T I S  G R O U P  A N N UA L  R E P O R T  2 0 1 1
224
15. TRADE RECEIVABLES
2011
2010
USD millions
USD millions
Total gross trade receivables
10 542
10 094
Provisions for doubtful trade receivables
– 219
– 221
Total trade receivables, net
10 323
9 873
The following table summarizes the movement in the provision for
doubtful trade receivables:
2011
2010
USD millions
USD millions
January 1
– 221
– 143
Impact of business combinations
– 9
– 56
Provisions for doubtful trade receivables charged 
to the consolidated income statement
– 116
– 76
Utilization or reversal of provisions for doubtful 
trade receivables
121
56
Currency translation effects
6
– 2
December 31
– 219
– 221
The following sets forth details of the age of trade receivables that
are not overdue as specified in the payment terms and conditions
established with Novartis customers as well as an analysis of over-
due amounts and related provisions for doubtful trade receivables:
2011
2010
USD millions
USD millions
Not overdue
8 967
8 684
Past due for not more than one month
498
366
Past due for more than one month 
but less than three months
295
320
Past due for more than three months 
but less than six months
249
217
Past due for more than six months 
but less than one year
228
208
Past due for more than one year
305
299
Provisions for doubtful trade receivables
– 219
– 221
Total trade receivables, net
10 323
9 873
Provisions for doubtful trade receivables are established based
upon the difference between the receivable value and the estimated
net collectible amount. Novartis establishes provisions for doubtful
trade receivables based on historical loss experience. Significant
financial difficulties of a customer, such as probability of bank-
ruptcy or financial reorganization or default/delinquency in pay-
ments are considered indicators that recovery of trade receivables
are doubtful.
Trade receivable balances include sales to government-sup-
ported healthcare systems. Novartis  continues to monitor sover-
eign debt issues and economic conditions in Greece, Italy, Spain,
Portugal and other countries in Europe and evaluates accounts
receivable in these countries for potential collection risks. Deterio-
rating credit and economic conditions and other factors in these
countries have resulted in, and may continue to result in an
increase in the average length of time that it takes to collect these
accounts receivable and may require Novartis to re-evaluate the
collectability of these receivables in future periods.
Novartis does not expect to write off trade receivable amounts
that are not past due nor unprovided for. The Group holds security
amounting to USD 36 million as collateral for certain trade receiv-
ables.
Trade receivables include amounts denominated in the follow-
ing major currencies:
2011
2010
Currency
USD millions
USD millions
CHF
288
230
EUR
2 636
2 108
GBP
139
168
JPY
1 929
1 494
USD
2 865
3 888
Other
2 466
1 985
Total trade receivables, net
10 323
9 873
During 2011, Novartis entered into several significant irrevocable
factoring arrangements. As a result USD 538 million of trade receiv-
ables have been sold and derecognized.

225
Notes to the Novartis Group Consolidated Financial Statements
2 | G R O U P R E V I E W  
16 | H E A LT H C A R E P O R T FO L I O  
6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T  
138 | F I N A N C I A L R E P O R T
16. CASH, MARKETABLE SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS
The following tables show the contract or underlying principal
amounts and fair values of derivative financial instruments ana-
lyzed by type of contract at December 31, 2011 and 2010. Contract
or underlying principal amounts indicate the volume of business
outstanding at the consolidated balance sheet date and do not rep-
resent amounts at risk. The fair values are determined by reference
to market prices or standard pricing models that used observable
market inputs at December 31, 2011 and 2010.
DERIVATIVE FINANCIAL INSTRUMENTS
Contract or underlying
principal amount
Positive fair values
Negative fair values
2011
2010
2011
2010
2011
2010
USD millions
USD millions
USD millions
USD millions
USD millions
USD millions
Currency related instruments
Forward foreign exchange rate contracts
6 456
4 814
105
38
– 12
– 44
Over-the-Counter currency options
2 102
4 000
13
3
– 18
Total of currency related instruments
8 558
8 814
118
41
– 30
– 44
Interest rate related instruments
Interest rate swaps
61
1
Total of interest rate related instruments
61
1
Total derivative financial instruments included in marketable securities 
and in current financial debts
8 558
8 875
118
42
– 30
– 44
The following table shows by currency contract or underlying principal amount the derivative financial instruments at December 31, 2011
and 2010:
EUR
USD
JPY
Other
Total
December 31, 2011
USD millions
USD millions
USD millions
USD millions
USD millions
Currency related instruments
Forward foreign exchange rate contracts
3 706
1 746
255
749
6 456
Over-the-Counter currency options
2 000
102
2 102
Total of currency related instruments
3 706
3 746
255
851
8 558
Total derivative financial instruments
3 706
3 746
255
851
8 558
EUR
USD
JPY
Other
Total
December 31, 2010
USD millions
USD millions
USD millions
USD millions
USD millions
Currency related instruments
Forward foreign exchange rate contracts
2 039
1 776
286
713
4 814
Over-the-Counter currency options
4 000
4 000
Total of currency related instruments
2 039
5 776
286
713
8 814
Interest rate related instruments
Interest rate swaps
61
61
Total of interest rate related instruments
61
61
Total derivative financial instruments
2 039
5 776
347
713
8 875

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226
16. CASH, MARKETABLE SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
DERIVATIVE FINANCIAL INSTRUMENTS EFFECTIVE FOR HEDGE
ACCOUNTING PURPOSES
At the end of 2011 and 2010 there were no open hedging instru-
ments for anticipated transactions.
MARKETABLE SECURITIES, TIME DEPOSITS AND DERIVATIVE FINANCIAL
INSTRUMENTS
2011
2010
USD millions
USD millions
Available-for-sale marketable securities
Debt securities
1 131
2 596
Equity securities
73
106
Fund investments
32
55
Total available-for-sale marketable securities
1 236
2 757
Derivative financial instruments
118
42
Accrued interest on debt securities
12
16
Total marketable securities, time deposits 
and derivative financial instruments
1 366
2 815
Debt securities and time deposits are denominated in USD except
for debt securities of USD 694 million in CHF (2010: USD 580 mil-
lion) and USD 26 million in EUR (2010: USD 176 million) respec-
tively.
FAIR VALUE BY HIERARCHY
As required by IFRS, financial assets and liabilities recorded at fair
value in the consolidated financial statements are categorized based
upon the level of judgment associated with the inputs used to meas-
ure their fair value. The IFRS hierarchical levels, based on an increas-
ing amount of subjectivity associated with the inputs to derive fair
valuation for these assets and liabilities, are as follows:
Level 1 – Inputs are unadjusted and use quoted prices in active
markets for identical assets or liabilities at the measurement date.
The types of assets carried at level 1 fair value are equity and
debt securities listed in active markets.
Level 2 – Inputs other than quoted prices included within level 1
that are observable for the asset or liability, either directly or indirectly.
These inputs are derived principally from, or corroborated by, observ-
able market data by correlation or other means at the measurement
date and for the duration of the instruments’ anticipated life.
The assets generally included in this fair value hierarchy are
time deposits, foreign exchange and interest rate derivatives and
certain investment funds. Foreign exchange derivatives and interest
rate derivatives are valued using corroborated market data. The lia-
bilities generally included in this fair value hierarchy consist of for-
eign exchange derivatives and options on equity securities.
Level 3 – Inputs that are unobservable for the asset or liability.
These inputs reflect the Group’s best estimate of what market par-
ticipants would use in pricing the asset or liability at the measure-
ment date. Consideration is given to the risk inherent in the valua-
tion techniques and the risk inherent in the inputs to the models.
The assets generally included in this fair value hierarchy are var-
ious investments in hedge funds and unquoted equity security
investments of the Novartis Venture Funds investment activities.
There were no liabilities carried at fair value in this category.

227
Notes to the Novartis Group Consolidated Financial Statements
2 | G R O U P R E V I E W  
16 | H E A LT H C A R E P O R T FO L I O  
6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T  
138 | F I N A N C I A L R E P O R T
Valued at
Level 1
Level 2
Level 3
amortized cost
Total
2011
USD millions
USD millions
USD millions
USD millions
USD millions
Available-for-sale marketable securities
Debt securities
1 103
28
1 131
Equity securities
53
20
73
Fund investments
32
32
Total available-for-sale marketable securities
1 156
28
52
1 236
Derivative financial instruments
118
118
Accrued interest on debt securities
12
12
Total marketable securities, time deposits and derivative financial instruments
1 156
146
52
12
1 366
Financial investments and long-term loans
Available-for-sale financial investments
261
331
592
Fund investments
12
12
Long-term loans and receivables, advances, security deposits
334
334
Total financial investments and long-term loans
261
343
334
938
Financial liabilities
Derivative financial instruments
– 30
– 30
Total financial liabilities at fair value
– 30
– 30
Valued at
Level 1
Level 2
Level 3
amortized cost
Total
2010
USD millions
USD millions
USD millions
USD millions
USD millions
Available-for-sale marketable securities
Debt securities
1 285
1311
2 596
Equity securities
86
20
106
Fund investments
55
55
Total available-for-sale marketable securities
1 371
1311
75
2 757
Derivative financial instruments
42
42
Accrued interest on debt securities
16
16
Total marketable securities, time deposits and derivative financial instruments
1 371
1 353
75
16
2 815
Financial investments and long-term loans
Available-for-sale financial investments
352
348
700
Fund investments
12
12
Loans to associated companies
1
1
Long-term loans and receivables, advances, security deposits
145
145
Total financial investments and long-term loans
352
360
146
858
Financial liabilities
Derivative financial instruments
– 44
– 44
Total financial liabilities at fair value
– 44
– 44
The analysis above includes all financial instruments including those measured at amortized cost or at cost.

N OVA R T I S  G R O U P  A N N UA L  R E P O R T  2 0 1 1
228
16. CASH, MARKETABLE SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
The change in carrying values associated with level 3 financial instruments using significant unobservable inputs during the year
ended December 31 are set forth below:
Available-
for-sale
Equity
Fund
financial
securities
investments
investments
Total
2011
USD millions
USD millions
USD millions
USD millions
January 1
20
67
348
435
Gains recognized in the consolidated income statement
1
23
24
Impairments and amortizations
– 3
– 24
– 27
Gains (losses) recognized in the consolidated statement of comprehensive income
1
2
– 7
– 4
Purchases
74
74
Redemptions
– 24
– 24
Proceeds from sales
– 1
– 82
– 83
Currency translation effects
1
– 1
December 31
20
44
331
395
Total of gains and impairments, net recognized in the consolidated income
statement for assets held at December 31, 2011
– 2
– 1
– 3
Available-
for-sale
Equity
Fund
financial
securities
investments
investments
Total
2010
USD millions
USD millions
USD millions
USD millions
January 1
55
107
347
509
Impact of business combinations
6
6
Gains recognized in the consolidated income statement
1
7
4
12
Impairments and amortizations
– 4
– 42
– 46
Losses recognized in the consolidated statement of comprehensive income
– 5
– 5
Purchases
70
70
Redemptions
– 48
– 48
Proceeds on sales
– 36
– 36
– 72
Currency translation effects
4
5
9
December 31
20
67
348
435
Total of gains and impairments, net recognized in the consolidated income
statement for assets held at December 31, 2010
3
– 36
– 33
If the pricing parameters for the level 3 input were to change for equity securities and fund investments by 5% and for available-for-sale
financial investments by 10% positively or negatively, respectively, this would change the amounts recorded in the consolidated state-
ment of comprehensive income by USD 3 million or USD 33 million, respectively (2010: USD 4 million and USD 35 million).

229
Notes to the Novartis Group Consolidated Financial Statements
2 | G R O U P R E V I E W  
16 | H E A LT H C A R E P O R T FO L I O  
6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T  
138 | F I N A N C I A L R E P O R T
MARKET RISK
Novartis is exposed to market risk, primarily related to foreign cur-
rency exchange rates, interest rates and the market value of the
investments of liquid funds. The Group actively monitors these
exposures. To manage the volatility relating to these exposures, the
Group enters into a variety of derivative financial instruments. The
Group’s objective is to reduce, where it deems appropriate to do so,
fluctuations in earnings and cash flows associated with changes in
interest rates, foreign currency exchange rates and market rates of
investments of liquid funds and of the currency exposure of certain
net investments in foreign subsidiaries. It is the Group’s policy and
practice to use derivative financial instruments to manage expo-
sures and to enhance the yield on the investment of liquid funds. It
does not enter any financial transactions containing a risk that can-
not be quantified at the time the transaction is concluded. In addi-
tion, it does not sell short assets it does not have, or does not know
it will have, in the future. The Group only sells existing assets or
enters into transactions and future transactions (in the case of
anticipatory hedges) that it confidently expects it will have in the
future, based on past experience. In the case of liquid funds, the
Group writes call options on assets it has or it writes put options on
positions it wants to acquire and has the liquidity to acquire. The
Group expects that any loss in value for these instruments gener-
ally would be offset by increases in the value of the underlying
transactions.
FOREIGN CURRENCY EXCHANGE RATE RISK
The Group uses the USD as its reporting currency. As a result, the
Group is exposed to foreign currency exchange movements, prima-
rily in European, Japanese and other Asian and Latin American cur-

231
Notes to the Novartis Group Consolidated Financial Statements
2 | G R O U P R E V I E W  
16 | H E A LT H C A R E P O R T FO L I O  
6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T  
138 | F I N A N C I A L R E P O R T
Due later than 
Due later than
Due later than 
Due or due 
one month 
three months 
one year 
within 
but less than 
but less than 
but less than 
Due after 
one month 
three months
one year
five years
five years 
Total
December 31, 2010
USD millions
USD millions
USD millions
USD millions
USD millions
USD millions
Current assets
Marketable securities
1
593
1 441
722
2 757
Derivative financial instruments and accrued interest 
on derivative financial instruments
14
33
11
58
Cash and cash equivalents
5 319
5 319
Total current assets
5 334
33
604
1 441
722
8 134
Non-current liabilities
Financial debts
8 399
5 961
14 360
Total non-current liabilities
8 399
5 961
14 360
Current liabilities
Financial debts
5 480
2 093
1 010
8 583
Derivative financial instruments
23
5
16
44
Total current liabilities
5 503
2 098
1 026
8 627
Net debt
– 169
– 2 065
– 422
– 6 958
– 5 239
– 14 853
The consolidated balance sheet amounts of financial liabilities included in the above analysis are not materially different to the contrac-
tual amounts due on maturity. The positive and negative fair values on derivative financial instruments represent the net contractual
amounts to be exchanged at maturity.
Cash and cash equivalents at December 31, 2011 totaled USD 3.7 billion (2010: USD 5.3 billion) and include current accounts of
USD 1.9 billion (2010: USD 2.0 billion) and deposits and short-term investments with an initial maturity of less than three months and
Euro-commercial papers of USD 1.8 billion (2010: USD 3.3 billion). This amount contains USD 74 million (2010: nil) which covers a guar-
antee and so it is restricted in use.
The Group’s contractual undiscounted potential cash flows from derivative financial instruments to be settled on a gross basis are as
follows:
Due later than 
Due later than
Due later than 
Due or due 
one month 
three months 
one year 
within 
but less than 
but less than 
but less than 
one month 
three months
one year
five years
Total
December 31, 2011
USD millions
USD millions
USD millions
USD millions
USD millions
Derivative financial instruments and accrued interest on derivative 
financial instruments
Potential outflows in various currencies
– 4 315
– 738
– 1 208
– 6 261
Potential inflows in various currencies
4 366
738
1 241
6 345
Due later than 
Due later than
Due later than 
Due or due 
one month 
three months 
one year 
within 
but less than 
but less than 
but less than 
one month 
three months
one year
five years
Total
December 31, 2010
USD millions
USD millions
USD millions
USD millions
USD millions
Derivative financial instruments and accrued interest on derivative 
financial instruments
Potential outflows in various currencies
– 1 842
– 467
– 935
– 3 244
Potential inflows in various currencies
1 830
485
928
3 243

N OVA R T I S  G R O U P  A N N UA L  R E P O R T  2 0 1 1
232
16. CASH, MARKETABLE SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
Other contractual liabilities, which are not part of management’s monitoring of the net debt or liquidity consist of the following items:
Due later than 
Due later than
Due later than 
Due or due 
one month 
three months 
one year 
within 
but less than 
but less than 
but less than 
Due after 
one month 
three months
one year
five years
five years 
Total
December 31, 2011
USD millions
USD millions
USD millions
USD millions
USD millions
USD millions
Contractual interest on non-current liabilities
– 236
– 247
– 1 410
– 637
– 2 530
Trade payables
– 4 989
– 4 989
Due later than 
Due later than
Due later than 
Due or due 
one month 
three months 
one year 
within 
but less than 
but less than 
but less than 
Due after 
one month 
three months
one year
five years
five years 
Total
December 31, 2010
USD millions
USD millions
USD millions
USD millions
USD millions
USD millions
Contractual interest on non-current liabilities
– 236
– 261
– 1 694
– 835
– 3 026
Trade payables
– 4 788
– 4 788
CAPITAL RISK MANAGEMENT
Novartis strives to maintain strong debt ratings. In managing its
capital, Novartis focuses on a sound debt/equity ratio. Credit agen-
cies in 2011 maintained their ratings for Novartis. Moody’s rated
the Group as Aa2 for long-term maturities and P-1 for short-term
maturities and Standard & Poor’s had a rating of AA- for long-term
and A-1+ for short-term maturities. Fitch had a long-term rating of
AA and a short-term rating of F1+.
The 2011 year-end debt/equity ratio decreased to 0.31:1 from
0.33:1 in 2010 principally due to less current financial debt being
outstanding under the commercial paper program.
VALUE AT RISK
The Group uses a value at risk (VAR) computation to estimate the
potential ten-day loss in the fair value of its financial instruments.
A 10-day period is used because of an assumption that not all
positions could be undone in one day given the size of the posi-
tions. The VAR computation includes the Group’s financial debt,
short-term and long-term investments, foreign currency forwards,
swaps and options as well as anticipated transactions. Foreign cur-
rency trade payables and receivables as well as net investments in
foreign subsidiaries are included in the computation.
The VAR estimates are made assuming normal market condi-
tions, using a 95% confidence interval. The Group uses a “Delta
Normal” model to determine the observed inter-relationships
between movements in interest rates, stock markets and various
currencies. These inter-relationships are determined by observing
interest rate, stock market movements and forward foreign cur-
rency rate movements over a 60 day period for the calculation of
VAR amounts.

233
Notes to the Novartis Group Consolidated Financial Statements
2 | G R O U P R E V I E W  
16 | H E A LT H C A R E P O R T FO L I O  
6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T  
138 | F I N A N C I A L R E P O R T
The estimated potential 10-day loss in pre-tax income from the
Group’s foreign currency instruments, the estimated potential 10-
day loss of its equity holdings, and the estimated potential 10-day
loss in fair value of its interest rate sensitive instruments (primarily
financial debt and investments of liquid funds under normal mar-
ket conditions) as calculated in the VAR model are the following:
Dec 31, 2011
Dec 31, 2010
USD millions
USD millions
All financial instruments
235
311
Analyzed by components:
Instruments sensitive to foreign currency 
exchange rates
145
193
Instruments sensitive to equity market movements
56
27
Instruments sensitive to interest rates
102
219
The average, high, and low VAR amounts are as follows:
Average
High
Low
2011
USD millions
USD millions
USD millions
All financial instruments
214
281
180
Analyzed by components:
Instruments sensitive to foreign 
currency exchange rates
98
219
50
Instruments sensitive to equity 
market movements
49
74
28
Instruments sensitive to interest rates
154
190
96
Average
High
Low
2010
USD millions
USD millions
USD millions
All financial instruments
267
319
139
Analyzed by components:
Instruments sensitive to foreign 
currency exchange rates
192
271
98
Instruments sensitive to equity 
market movements
49
76
27
Instruments sensitive to interest rates
164
219
70
The VAR computation is a risk analysis tool designed to statistically
estimate the maximum potential ten day loss from adverse move-
ments in foreign currency exchange rates, equity prices and inter-
est rates under normal market conditions. The computation does
not purport to represent actual losses in fair value on earnings to
be incurred by the Group, nor does it consider the effect of favor-
able changes in market rates. The Group cannot predict actual
future movements in such market rates and it does not claim that
these VAR results are indicative of future movements in such mar-
ket rates or to be representative of any actual impact that future
changes in market rates may have on the Group’s future results of
operations or financial position.
In addition to these VAR analyses, the Group uses stress testing
techniques that aim to reflect a worst case scenario on the finan-
cial assets monitored by Group Treasury. For these calculations, the
Group uses the worst movements during a period of six months
over the past 20 years in each category. For 2011 and 2010, the
worst case loss scenario was configured as follows:
Dec 31, 2011
Dec 31, 2010
USD millions
USD millions
All financial instruments
406
406
Analyzed by components:
Instruments sensitive to foreign currency 
exchange rates
328
286
Instruments sensitive to equity market movements
31
59
Instruments sensitive to interest rates
47
62
In the Group’s risk analysis, Novartis considered this worst case
scenario acceptable as it could reduce income, but would not
endanger the solvency or the investment grade credit standing of
the Group. While it is highly unlikely that all worst case fluctuations
would happen simultaneously, as shown in the model, the actual
market can of course produce bigger movements in the future than
it has historically. Additionally, in such a worst case environment,
management actions could further mitigate the Group’s exposure.

N OVA R T I S  G R O U P  A N N UA L  R E P O R T  2 0 1 1
234
17. OTHER CURRENT ASSETS
2011
2010
USD millions
USD millions
Withholding tax recoverable
173
103
Prepaid expenses
– Third parties
694
735
– Associated companies
12
7
Other receivables
– Third parties
1 864
1 735
– Associated companies
13
5
Total other current assets
2 756
2 585
18. DETAILS OF SHARES AND SHARE CAPITAL MOVEMENTS
Number of shares 1
Movement
Movement
Dec 31, 2009
in year
Dec 31, 2010
in year
Dec 31, 2011
Total Novartis shares
2 637 623 000
2 637 623 000
108 000 000
2 745 623 000
Total treasury shares
– 363 269 649
15 091 827
– 348 177 822
9 248 679
– 338 929 143
Total outstanding shares
2 274 353 351
15 091 827
2 289 445 178
117 248 679
2 406 693 857
USD millions
USD millions
USD millions
USD millions
USD millions
Share capital
957
957
59
1 016
Treasury shares
– 132
7
– 125
4
– 121
Outstanding share capital
825
7
832
63
895
1All shares are registered, authorized, issued and fully paid. All are voting shares and, except for 146 273 240 treasury shares at December 31, 2011 (2010: 159 381 837) are dividend bearing.
In 2011 an amount of 54.7 million shares net were purchased
(2010: sales of 8.4 million shares). Out of these, 39.4 million shares
(2010: nil) were acquired under the 2nd line buy-back program
with the intention of cancellation, 20.4 million shares (2010: 0.4
million shares) were purchased on the 1st trading line on the Swiss
stock exchange with the intention of retaining in Group Treasury
and 5.1 million shares (2010: 8.8 million shares) were sold. Fur-
ther, 7.2 million shares (2010: 6.7 million shares) were transferred
to associates as part of the equity-based compensation and 56.7
million shares were used for the acquisition of the outstanding
Alcon, Inc. non-controlling interests. Accordingly, the net reduction
in treasury shares amounted to 9.2 million.
Following the Extraordinary General Meeting of Novartis AG on
April 8, 2011, 108 million new Novartis shares were issued and
these, together with the 56.7 million treasury shares, were
exchanged for the outstanding interests in Alcon, Inc., which was
then merged into Novartis AG on the same day.
There are outstanding written call options on Novartis shares of
35 million originally issued as part of the share-based compensa-
tion of associates. The market maker has acquired these options
but they have not yet been exercised. The weighted average exer-
cise price of these options is USD 51.35 and they have contractual
lives of up to 10 years.

235
Notes to the Novartis Group Consolidated Financial Statements
2 | G R O U P R E V I E W  
16 | H E A LT H C A R E P O R T FO L I O  
6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T  
138 | F I N A N C I A L R E P O R T
19. NON-CURRENT FINANCIAL DEBTS
2011
2010
USD millions
USD millions
Straight bonds
13 483
13 512
Liabilities to banks and other financial institutions 1
1 146
942
Finance lease obligations
4
4
Total (including current portion of non-current 
financial debt)
14 633
14 458
Less current portion of non-current financial debt
– 778
– 98
Total non-current financial debts
13 855
14 360
Straight bonds
3.625% CHF 800 million bond 2008/2015 
of Novartis AG, Basel, Switzerland,
issued at 100.35%
844
842
3.5% CHF 700 million bond 2008/2012
of Novartis Securities Investment Ltd.,
Hamilton, Bermuda, issued at 100.32%
744
743
5.125% USD 3 000 million bond 2009/2019
of Novartis Securities Investment Ltd.,
Hamilton, Bermuda, issued at 99.822%
2986
2 984
4.125% USD 2 000 million bond 2009/2014
of Novartis Capital Corporation,
New York, United States, issued at 99.897%
1996
1 994
4.25% EUR 1 500 million bond 2009/2016 
of Novartis Finance S.A., 
Luxembourg, Luxembourg, issued at 99.757%
1935
1 978
1.9% USD 2 000 million bond 2010/2013 
of Novartis Capital Corporation, 
New York, United States, issued at 99.867%
1998
1 996
2.9% USD 2 000 million bond 2010/2015 
of Novartis Capital Corporation, 
New York, United States, issued at 99.522%
1990
1 986
4.4% USD 1 000 million bond 2010/2020 
of Novartis Capital Corporation., 
New York, United States, issued at 99.237%
990
989
Total straight bonds
13 483
13 512
1Average interest rate 0.9% (2010: 1.6%)
2011
2010
USD millions
USD millions
Breakdown by maturity
2011
98
2012
778
785
2013
2 029
2 023
2014
2 789
2 750
2015
3 108
2 841
2016
1 948
1 983
After 2016
3 981
3 978
Total
14 633
14 458
2011
2010
USD millions
USD millions
Breakdown by currency
USD
9 962
9 953
EUR
2 042
2 104
JPY
1 031
798
CHF
1 589
1 584
Others
9
19
Total
14 633
14 458
2011
2011
2010
2010
Balance sheet
Fair values
Balance sheet
Fair values
Fair value comparison
USD millions
USD millions
USD millions
USD millions
Straight bonds
13 483
14 794
13 512
14 350
Others
1 150
1 150
946
946
Total
14 633
15 944
14 458
15 296
Collateralized non-current financial debt 
2011
2010
and pledged assets
USD millions
USD millions
Total amount of collateralized non-current 
financial debts
7
30
Total net book value of property, plant & equipment 
pledged as collateral for non-current financial debts
100
108
The Group’s collateralized non-current financial debt consists of
loan facilities at usual market conditions.
The percentage of fixed rate financial debt to total financial debt
was 72% at December 31, 2011, and 63% at the end of 2010.
Financial debts, including current financial debts, contain only
general default covenants. The Group is in compliance with these
covenants.
The average interest rate on total financial debt in 2011 was
2.7% (2010: 3.1%).

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236
20. PROVISIONS AND OTHER NON-CURRENT LIABILITIES
2011
2010
USD millions
USD millions
Accrued liability for employee benefits:
– Defined benefit pension plans
2 991
2 317
– Other long-term employee benefits
and deferred compensation
600
461
– Other post-employment benefits
1 098
1 057
Environmental provisions
1 059
1 066
Provisions for product liabilities 
and other legal matters
777
693
Contingent consideration
482
586
Other non-current liabilities
785
662
Total
7 792
6 842
PRODUCT LIABILITY PROVISIONS
For the Group’s pharmaceutical products, sufficient product liabil-
ity insurance is not available. In connection with potential product
liability exposures for these products the Group establishes provi-
sions for estimated obligations for claims and related legal defense
costs. The provisions are based on management’s judgment, advice
from legal counsel and actuarially determined estimates. Actual lia-
bilities, however, could substantially exceed the provisions that
Novartis has put in place. Novartis believes that its insurance cov-
erage and provisions are reasonable and its provisions are the best
estimate in light of its business and the risk to which it is subject.
The largest portion of product liability risk provisions has been
determined taking into consideration factors such as past experi-
ence, number and amount of claims reported, estimates of claims
incurred but not reported, the cost of defending claims and other
assumptions. As actual experience becomes known the Group
refines and adjusts its product liability estimates. If any of the
assumptions used in these calculations turn out to be incorrect or
require material adjustment, there could be a material difference
between the amount of provisions that have been recorded and the
actual liability. At December 31, 2011, the discount rates used to
calculate the provision are based on government bond rates and
vary by payment duration and geography (US and non-US) between
0.9 % and 1.8 % (2010: between 2.2% and 2.5%). The consolidated
income statement effect of a 1% increase or decrease in the dis-
count rate is USD 25 million (2010: USD 26 million) income and
USD 26 million expense (2010: USD 28 million), respectively.
ENVIRONMENTAL PROVISIONS
The material components of the environmental provisions consist
of costs to sufficiently clean and refurbish contaminated sites to
the extent necessary and to treat and where necessary continue
surveillance at sites where the environmental exposure is less sig-
nificant. The provision recorded at December 31, 2011 totals USD
1.1 billion (2010: USD 1.1 billion) of which USD 59 million (2010:
USD 60 million) is included in current liabilities. USD 861 million
(2010: USD 875 million) is provided for remediation at third party
sites and USD 257 million (2010: USD 251 million) for remediation
at owned facilities.
A substantial portion of the environmental provision relates to
the remediation of Basel regional landfills in the adjacent border
areas in Switzerland, Germany and France following the internal
and external investigations completed during 2007 and the subse-
quent creation of an environmental remediation provision.
In the US, Novartis has been named under federal legislation
(the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended) as a potentially responsible party
(PRP) in respect of certain sites. Novartis actively participates in, or
monitors, the clean-up activities at the sites in which it is a PRP. The
provision takes into consideration the number of other PRPs at
each site and the identity and financial position of such parties in
light of the joint and several nature of the liability.
The requirement in the future for Novartis ultimately to take
action to correct the effects on the environment of prior disposal or
release of chemical substances by Novartis or other parties, and its
costs, pursuant to environmental laws and regulations, is inherently
difficult to estimate. The Novartis future remediation expenses are
affected by a number of uncertainties which include, but are not
limited to, the method and extent of remediation, the percentage of
material attributable to Novartis at the remediation sites relative to
that attributable to other parties, the financial capabilities of the
other potentially responsible parties and the timing of expected
expenditures. Novartis believes that its total provisions for environ-
mental matters are adequate based upon currently available infor-
mation. However, given the inherent difficulties in estimating liabil-
ities in this area, Novartis may incur additional costs beyond the
amounts provided. Management believes that such additional
amounts, if any, would not be material to the Group’s financial con-
dition but could be material to the results of operations or cash
flows in a given period.

237
Notes to the Novartis Group Consolidated Financial Statements
2 | G R O U P R E V I E W  
16 | H E A LT H C A R E P O R T FO L I O  
6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T  
138 | F I N A N C I A L R E P O R T
The following table shows the movements in the environmental
liability provisions during 2011 and 2010:
2011
2010
USD millions
USD millions
January 1
1 126
1 010
Cash payments
– 29
– 20
Releases
– 8
– 2
Interest expense arising from discounting provisions
29
39
Currency translation effects
99
December 31
1 118
1 126
Less current liability
– 59
– 60
Non-current environmental liability provisions
at December 31
1 059
1 066
The expected timing of the related cash outflows as of December
31, 2011 is currently projected as follows:
Expected 
cash outflows
USD millions
Due within two years
167
Due later than two years, but less than five years
330
Due later than five years but less than ten years
506
Due after ten years
115
Total environmental liability provisions
1 118
LEGAL MATTERS
A number of Novartis subsidiaries are, and will likely continue to be,
subject to various legal proceedings that arise from time to time,
including proceedings regarding product liability, commercial dis-
putes, employment and wrongful discharge, antitrust, securities,
sales and marketing practices, health and safety, environmental,
tax, privacy, and intellectual property matters. As a result, the Group
may become subject to substantial liabilities that may not be cov-
ered by insurance and could affect our business and reputation.
While Novartis does not believe that any of these legal proceedings
will have a material adverse effect on its financial position, litigation
is inherently unpredictable and large verdicts sometimes occur. As
a consequence, Novartis may in the future incur judgments or enter
into settlements of claims that could have a material adverse effect
on its results of operations or cash flows.
Governments and regulatory authorities have been stepping up
their compliance and law enforcement activities in recent years in
key areas, including corruption, marketing practices, insider trad-
ing, antitrust and trade restrictions. Responding to such investiga-
tions is costly and a significant diversion of management’s atten-
tion from our business. In addition, such investigations may affect
our reputation and create a risk of potential exclusion from govern-
ment reimbursement programs in the US and other countries.
These factors have contributed to decisions by us and other com-
panies in our industry to enter into settlement agreements with gov-
ernmental authorities around the world. Those settlements have
involved and may continue to involve large cash payments, includ-
ing the potential repayment of amounts allegedly obtained improp-
erly and penalties up to treble damages. In addition, settlements of
healthcare fraud cases typically involve corporate integrity agree-
ments which are intended to regulate company behavior for a
period of years. Also, matters underlying governmental investiga-
tions and settlements may be the subject of separate private litiga-
tion.
Below is a summary of significant legal proceedings to which
Novartis or its subsidiaries are a party or were a party and which
were concluded in 2011.
GOVERNMENTAL INVESTIGATIONS
SDNY INVESTIGATION
In the fourth quarter of 2011, Novartis Pharmaceuticals Corpora-
tion (NPC) received a subpoena from the US Attorney’s Office
(USAO) for the Southern District of New York (SDNY) requesting the
production of documents relating to marketing practices, including
the remuneration of healthcare providers in connection with three
NPC products (Lotrel, Starlix and Valturna). NPC is cooperating with
the investigation which is civil and criminal in nature.
ALCON INVESTIGATION
In the third quarter of 2011, Alcon Laboratories Inc. (Alcon)
received a subpoena from the US Department of Health & Human
Services relating to an investigation into allegations of healthcare
fraud. The subpoena requests the production of documents relat-
ing to marketing practices, including the remuneration of health-
care providers in connection with certain Alcon products (Vigamox,
Nevanac, Omnipred, Econopred; surgical equipment). Alcon is coop-
erating with the investigation which is civil in nature
WDNY INVESTIGATION
In 2010, NPC became aware of an investigation by the USAO for the
Western District of New York (WDNY) into informed consent issues
relating to clinical trials in China and into marketing practices,
including the remuneration of healthcare providers in connection
with a number of Novartis products. NPC is cooperating with the
investigation which is civil in nature.
EC DAWN RAID AT SANDOZ FRANCE
In 2009, the European Commission (EC), together with the French
competition authority, searched the offices of Sandoz S.A.S. in
France (Sandoz France), alleging that Sandoz France entered into
anti-competitive price coordination practices with other generic
pharmaceutical companies and via the French trade association for
generic pharmaceutical companies. Sandoz France is cooperating
with the EC and the French authorities. No follow-up requests have
been received from the EC so far.

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20. PROVISIONS AND OTHER NON-CURRENT LIABILITIES (CONTINUED)
EC DAWN RAID AT SANDOZ NETHERLANDS AND SANDOZ GERMANY
In 2008, the EC conducted a dawn raid at Sandoz’ offices in
Holzkirchen, Germany, which was part of the EC sector inquiry. On
July 6, 2010, the EC, together with the Dutch and German compe-
tition authorities, conducted a follow-up dawn raid at the Dutch and
German offices of Sandoz. The EC’s investigation focuses on alle-
gations that Sandoz and/or its affiliates may have engaged in anti-
competitive practices with respect to Fentanyl or other products in
coordination with other pharmaceutical companies since 2005. On
October 7, 2011, the EC informed Sandoz that it will formally initi-
ate proceedings removing the national competition authorities’
competence to investigate this case. The EC’s decision was made
public in the fourth quarter of 2011. Sandoz is cooperating with the
EC.
PRODUCT LIABILITY MATTERS
Zometa/Aredia product liability litigation
NPC together with other Novartis subsidiaries are defendants in
more than 720 cases brought in US courts in which plaintiffs claim
to have experienced osteonecrosis of the jaw after treatment with
Zometa or Aredia, which are used to treat patients whose cancer has
spread to the bones. There were four jury trials so far. The first trial
began in Montana state court in October 2009 and resulted in a
plaintiff’s verdict which NPC appealed to the Montana Supreme
Court. On December 30, 2010, the Montana Supreme Court
affirmed the trial court’s verdict. On March 30, 2011, NPC filed a
petition for review with the US Supreme Court. On May 31, 2011,
NPC was informed that the US Supreme Court decided not to take
this case. The second trial took place in September and October
2010 in a New Jersey state court and resulted in a defense verdict
in favor of NPC. This verdict is currently on appeal. The third trial
took place in November 2010 in the US District Court for the Mid-
dle District of North Carolina and resulted in a plaintiffs’ verdict.
NPC filed an appeal against this verdict which is pending. The
fourth trial took place in May 2011 in the US District Court for the
Eastern District of New York and resulted in a defense verdict in
favor of NPC. This verdict is also currently on appeal. Multiple trials
are currently scheduled throughout the first half of 2012. The first
trial began in the Western District of Kentucky on January 9, 2012.
Hormone Replacement Therapy product liability litigation
NPC and other Novartis subsidiaries are defendants, along with var-
ious other pharmaceutical companies, in more than 60 cases
brought in US courts in which plaintiffs claim to have been injured
by hormone replacement therapy products.
Elidel® product liability litigation
NPC and other Novartis subsidiaries are defendants in more than
20 cases brought in US courts in which plaintiffs claim to have
experienced injuries, mainly various types of cancer, after having
been treated with Elidel®, a medicine for atopic dermatitis.
OTHER MATTERS
Average Wholesale Price litigation
Claims have been brought against various pharmaceutical compa-
nies, including certain Sandoz entities and NPC, alleging that they
fraudulently overstated the Average Wholesale Price (AWP) and
“best price”, respectively, which are, or have been, used by the US
federal and state governments in the calculation of Medicare reim-
bursements and Medicaid rebates.
In the third quarter of 2011, the US Department of Justice (DoJ)
approved an agreement to settle the litigation brought by the State
of Texas and the relator Ven-A-Care of the Florida Keys (VAC) as well
as claims of the federal government relating to Texas against sev-
eral Sandoz entities. The settlement amount of USD 66 million,
which had already been fully provisioned during 2011, was paid in
the third quarter of 2011 and the case has been dismissed.
In the second quarter of 2011, Sandoz Inc. (Sandoz) reached an
agreement in principle to settle with the relator VAC the pending
AWP action brought on behalf of the US Government as well as the
AWP cases brought by the States of California and Florida for a total
amount of USD 150 million. On November 3, 2011, the written set-
tlement agreement was executed by all parties and the payment of
the settlement amount, which had been fully provisioned for dur-
ing 2011, was made in the fourth quarter of 2011.
A bench trial against Sandoz in Mississippi chancery court
ended on April 15, 2011. On September 2, 2011, the court ren-
dered judgment in favor of Sandoz on the false claims provisions
but against Sandoz on the other causes of action and awarded
plaintiff a total of USD 38.2 million (USD 23.7 million in compen-
satory damages, USD 2.7 million in civil penalties and USD 11.8
million in punitive damages). On October 4, 2011, the court granted
Sandoz’ post-judgment motion to strike the punitive damage
award. An evidentiary hearing will now take place in order to deter-
mine whether punitive damages are appropriate and, if so, in what
amount punitive damages should be awarded.
Further, Sandoz was a defendant in a trial in Alabama in 2009.
The jury rendered a verdict against it and awarded compensatory
damages of USD 28 million and punitive damages of USD 50 mil-
lion. Sandoz appealed the verdict to the Supreme Court of Alabama
in January 2010. A decision is still outstanding.

239
Notes to the Novartis Group Consolidated Financial Statements
2 | G R O U P R E V I E W  
16 | H E A LT H C A R E P O R T FO L I O  
6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T  
138 | F I N A N C I A L R E P O R T
A further trial involving Sandoz took place in Kentucky in June
2009. The jury rendered a verdict against Sandoz and imposed
USD 16 million in compensatory damages, and the Court awarded
USD 13.6 million in penalties, which were subsequently reduced to
USD 11.2 million. Sandoz appealed this verdict in March 2010. A
decision is still outstanding.
On October 12, 2011, plaintiffs offered to settle the New York
City, New York Counties, Erie, Oswego, Schenectady and Iowa cases
for USD 25 million. Sandoz has agreed in principle and the terms
of the settlement are currently being negotiated with plaintiffs. The
settlement amount was fully provisioned for in the fourth quarter of
2011.
Wage and Hour litigation
Certain pharmaceutical sales representatives filed suit in a state
court in California and in the US District Court for the SDNY against
NPC alleging that NPC violated wage and hour laws by misclassify-
ing the pharmaceutical sales representatives as “exempt” employ-
ees, and by failing to pay overtime compensation. These actions are
part of a number of lawsuits pending against pharmaceutical com-
panies that challenge the industry’s long-term practice of treating
pharmaceutical sales representatives as salaried employees. After
the California state court action had been removed to the US Dis-
trict Court for the Central District of California, these collective and
class action lawsuits were consolidated in the US District Court for
the SDNY for coordinated pre-trial proceedings. A class was certi-
fied. In January 2009, after the case had been bifurcated into a lia-
bility and a damages phase, the US District Court for the SDNY
granted NPC’s summary judgment motion holding that NPC’s
pharmaceutical sales representatives were not entitled to overtime
pay under the federal Fair Labor Standards Act and corresponding
state wage and hour laws. Plaintiffs appealed that judgment to the
US Court of Appeals for the Second Circuit (Second Circuit). Ami-
cus briefs supporting plaintiffs’ position were filed by the National
Employment Lawyers Association and by the US Department of
Labor, and the US Chamber of Commerce filed a brief in support of
NPC. On July 6, 2010, the Second Circuit vacated the judgment of
the lower court. On October 4, 2010, NPC filed its petition for a writ
of certiorari with the US Supreme Court. Amicus briefs in support
of NPC’s certiorari petition were filed on November 5, 2010, by the
US Chamber of Commerce and Pharmaceutical Research and Man-
ufacturers of America (PhRMA). On February 28, 2011, NPC was
informed that the US Supreme Court decided not to take this case.
The case has now been remanded to the US District Court for the
SDNY for pre-trial proceedings relating to damages.
Lucentis patent litigation
Novartis has been sued by and has sued MedImmune in several
European countries, including the United Kingdom, Germany,
Switzerland, France and the Netherlands. MedImmune alleges that
the sale of Lucentis in these countries infringes its patents and its
rights under its Supplementary Protection Certificates (SPC). In the
UK, a trial took place in May 2011. On July 5, 2011, the UK court
issued its decision and held that Novartis did not infringe MedIm-
mune’s patents and that MedImmune’s patents were invalid. Med-
Immune has filed an appeal against this decision. In Germany, the
infringement trial took place on October 18, 2011. On November
10, 2011, the German court ruled that the import and sale of Lucen-
tis infringes MedImmune’s patent and rights under its SPC in Ger-
many. This decision is being appealed.
CONCLUDED LEGAL MATTERS
Trileptal/Five products investigation
On September 30, 2010, NPC reached a global settlement in order
to bring to a close the USAO for the Eastern District of Pennsylva-
nia’s (EDPA) investigations into marketing practices and payments
made to healthcare providers in connection with Trileptal and in
connection with five other products, i.e. Diovan, Exforge, Sandostatin,
Tekturna and Zelnorm (Five Products). As part of the settlement,
NPC agreed to plead guilty to one misdemeanor violation of mis-
branding under the US Food, Drug and Cosmetic Act and to pay a
fine of USD 185 million for Trileptal. NPC also resolved civil allega-
tions under the False Claims Act relating to Trileptal and the Five
Products and agreed to pay USD 237.5 million. As the fine was for-
mally imposed on NPC at the sentencing hearing in the US District
Court for the EDPA on January 28, 2011, and payment of the total
overall settlement amount of USD 422.5 million, which had been
fully provisioned for in 2010, has been completed in the first quar-
ter of 2011, these investigations are closed now.
Alcon minority shareholder litigation
Beginning on January 7, 2010, shareholder class action complaints
relating to the Alcon transactions announced on January 4, 2010,
were filed against Novartis AG and others by minority shareholders
of Alcon, Inc. These actions were filed in the US Federal District
Courts for the SDNY, Eastern District of New York (EDNY) and the
Northern District of Texas (NDTX) and in several Texas state courts.
The case in the EDNY was voluntarily dismissed without prejudice
by the plaintiffs on March 18, 2010. The case in the NDTX was
transferred to the SDNY and formally consolidated with the actions
pending there on June 25, 2010. In the SDNY, Novartis AG’s motion
to dismiss all cases pending there based on the doctrine of forum
non conveniens (FNC) was granted on May 24, 2010, and the case
was formally dismissed on July 2, 2010. On July 14, 2010, plaintiffs
appealed this decision to the Second Circuit. On January 5, 2011,
plaintiffs moved to dismiss this appeal. On January 6, 2011, the
Second Circuit granted plaintiffs’ motion and dismissed this appeal.
The actions pending in Texas state courts were consolidated for pre-

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240
20. PROVISIONS AND OTHER NON-CURRENT LIABILITIES (CONTINUED)
trial proceedings in a Multi District Litigation on April 16, 2010.
Novartis AG’s motion to dismiss the consolidated Texas state court
actions based on FNC was filed on June 30, 2010. On November 17,
2010, Novartis AG’s motion was granted and all Texas state court
class actions were dismissed. On December 17, 2010, plaintiffs
appealed this decision to the Texas Fifth District Court of Appeals.
On March 21, 2011, upon a motion made by plaintiffs, the Texas
Fifth District Court of Appeals dismissed the appeal. The dismissals
of both the federal and Texas state class actions based on FNC are
final after plaintiffs dismissed their appeals. The case, therefore, is
concluded.
Zelnorm product liability litigation
NPC together with other Novartis subsidiaries are currently defend-
ing against product liability lawsuits brought in US courts in which
plaintiffs claim to have experienced cardiovascular injuries after
having been treated with Zelnorm, a medicine for irritable bowel
syndrome and chronic constipation. In the third quarter of 2011,
NPC finalized the previously disclosed group settlement agreement
with 122 plaintiffs. The finalization of this group settlement along-
side other settlements and dismissals in the fourth quarter of 2011
brought the current caseload in the US down from 154 to 2 active
cases.
The following table shows the movements in the legal and prod-
uct liability provisions during 2011 and 2010:
2011
2010
USD millions
USD millions
January 1
1 384
1 542
Impact of business combinations
15
Cash payments
– 772
– 669
Releases of provisions
– 16
– 53
Additions to provisions
584
541
Currency translation effects
2
8
December 31
1 182
1 384
Less current liability
– 405
– 691
Non-current legal and product liability
provisions at December 31
777
693
Novartis believes that its total provisions for legal and product lia-
bility matters are adequate based upon currently available infor-
mation. However, given the inherent difficulties in estimating liabil-
ities, it cannot be guaranteed that additional costs will not be
incurred beyond the amounts provided.

241
Notes to the Novartis Group Consolidated Financial Statements
2 | G R O U P R E V I E W  
16 | H E A LT H C A R E P O R T FO L I O  
6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T  
138 | F I N A N C I A L R E P O R T
21. CURRENT FINANCIAL DEBT
2011
2010
USD millions
USD millions
Interest bearing accounts of associates
1 357
1 321
Other bank and financial debt
2 053
2 195
Commercial paper
2 156
4 969
Current portion of non-current financial debt
778
98
Fair value of derivative financial instruments
30
44
Total current financial debt
6 374
8 627
The consolidated balance sheet values of current financial debt,
other than the current portion of non-current financial debt,
approximate the estimated fair value due to the short-term nature
of these instruments.
The weighted average interest rate on the bank and other cur-
rent financial debt (including employee deposits from the compen-
sation of associates employed by Swiss entities) was 1.7% in 2011
and 2.0% in 2010.
22. PROVISIONS AND OTHER CURRENT LIABILITIES
2011
2010
USD millions
USD millions
Taxes other than income taxes
578
556
Restructuring provisions
349
241
Accrued expenses for goods and services 
received but not invoiced
678
731
Provisions for royalties
443
327
Provisions for revenue deductions
3 742
3 097
Provisions for compensation and benefits 
including social security
2 116
2 058
Environmental liabilities
59
60
Deferred income relating to government grants
70
79
Provision for legal matters
405
691
Accrued share-based payments
217
200
Other payables
1 422
1 493
Total provisions and other current liabilities
10 079
9 533
Provisions are based upon management’s best estimate and
adjusted for actual experience. Such adjustments to the historic
estimates have not been material.
PROVISION FOR DEDUCTIONS FROM REVENUE
Deductions from revenue are reported as a reduction of revenue.
They include rebates, discounts, incentives to retail customers, gov-
ernment agencies, wholesalers, health insurance companies and
managed care organizations. These deductions represent estimates
of the related obligations, requiring the use of judgment when esti-
mating the effect of these sales deductions. The following table
shows the movement of the provision for deductions from revenue:
2011
2010
USD millions
USD millions
January 1
3 097
2 094
Impact of business combinations
379
Additions
11 713
8 752
Payments/utilizations
– 10 749
– 8 172
Changes in offset against gross trade 
receivables
– 227
68
Currency translation effects
– 92
– 24
December 31
3 742
3 097

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242
22. PROVISIONS AND OTHER CURRENT LIABILITIES (CONTINUED)
RESTRUCTURING PROVISIONS
Termination
costs of 
Other third
associates
party costs
Total
USD millions
USD millions
USD millions
January 1, 2010
91
6
97
Additions
225
36
261
Cash payments
– 81
– 12
– 93
Releases
– 9
– 9
– 18
Currency translation effects
– 5
– 1
– 6
December 31, 2010
221
20
241
Additions
299
47
346
Cash payments
– 189
– 14
– 203
Releases
– 33
– 4
– 37
Currency translation effects
2
2
December 31, 2011
300
49
349
In 2011, there were additions to provisions of USD 151 million in
the Pharmaceuticals Division in conjunction with the transfer, out-
sourcing, closure of selected research operations, as well as simpli-
fying and streamlining of certain development and support func-
tions. The charges comprised termination costs of associates of
USD 139 million and other third party costs of USD 12 million. In
total, approximately 1 000 associates were affected by this restruc-
turing plan, though none of them had left the Group as of Decem-
ber 31, 2011. It is anticipated that most or all of these associates
will leave the Group within the next twelve months.
Also in 2011, additions to provisions were made in conjunction
with the integration of Alcon. The charges comprised termination
costs of associates of USD 47 million and other third party costs of
USD 15 million. In total, approximately 300 associates were
affected by the various restructuring plans. Approximately 100
associates had left the Group as of December 31, 2011. It is antic-
ipated that the remainder of these associates will leave the Group
within the next twelve months.
The Group-wide review of its manufacturing sites led to addi-
tions in restructuring provisions of USD 79 million in 2011 related
to the restructuring of the manufacturing and chemical operations,
mainly in Switzerland, United Kingdom, US, Italy and Puerto Rico.
The charges comprised termination costs of associates of USD 77
million and other third party costs of USD 2 million. As of Decem-
ber 31, 2011, 200 of the approximately 1 000 associates affected
by the restructuring plans have left the Group and the remaining
associates will leave the Group when their respective activity is
transferred to other sites.
Various Group initiatives to further simplify the organization led
to restructuring charges of USD 54 million, mainly in Italy and
Switzerland. The charges comprised termination costs of associ-
ates of USD 36 million and other third party costs of USD 18 mil-
lion. In total, approximately 300 associates were affected by the var-
ious restructuring plans, of which 100 had left the Group as of
December 31, 2011. It is anticipated that the remainder of these
associates will leave the Group within the next twelve months.
In 2010, additions to provisions of USD 89 million were incurred
in conjunction with the adjustment of the field force structures to
better support the portfolio of the primary care and neuroscience
medicines business within the Pharmaceuticals Division in the
United States. The charges comprised termination costs of associ-
ates of USD 78 million and other third party costs of USD 11 mil-
lion. In total, approximately 1 400 associates were affected by the
various restructuring plans, all of whom had left the Group as of
December 31, 2011.
Also in 2010, additions to provisions of USD 44 million were
incurred in conjunction with the consolidation of regional units of
the primary care medicines business and the integration of a
research entity within the Pharmaceuticals Division in the United
States. The charges comprised termination costs of associates of
USD 44 million. In total, 383 associates were affected by the vari-
ous restructuring plans, all of whom had left the Group as of
December 31, 2010.
Additions to provisions of USD 62 million were incurred in 2010
in conjunction with the restructuring of the technical and commer-
cial operations of the Vaccines and Diagnostics Division in England,
France, Germany, Italy and the United States. The charges com-
prised termination costs of associates of USD 46 million and other
third party costs of USD 16 million. As of December 31, 2011, it is
anticipated that all associates will have left the Group in the first
quarter 2012.
2010 also saw additions to provisions of USD 66 million which
were incurred in conjunction with the restructuring of the commer-
cial operations of the Sandoz Division in Germany. The charges
comprised termination costs of associates of USD 57 million and
other third party costs of USD 9 million. As of December 31, 2011,
it is anticipated that all associates will have left the Group in the first
quarter 2012.
The releases to income in 2011 and 2010 of USD 37 million
and USD 18 million, respectively, were mainly due to settlement of
liabilities at lower amounts than originally anticipated, which in
2011 were principally due to provisions made in relation with prior
years restructuring initiatives. Other third party costs are mainly
associated with lease and other obligations due to the abandon-
ment of certain facilities.

243
Notes to the Novartis Group Consolidated Financial Statements
2 | G R O U P R E V I E W  
16 | H E A LT H C A R E P O R T FO L I O  
6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T  
138 | F I N A N C I A L R E P O R T
23. DETAILS TO THE CONSOLIDATED CASH FLOW STATEMENTS
23.1) REVERSAL OF NON-CASH ITEMS
2011
2010
USD millions
USD millions
Taxes
1 528
1 733
Depreciation, amortization and impairments on
Property, plant & equipment
2 141
1 373
Intangible assets
3 647
2 046
Financial assets
192
158
Income from associated companies
– 528
– 804
Gains on disposal of property, plant & equipment, 
intangible, financial and other non-current assets, net
– 518
– 429
Equity-settled compensation expense
790
655
Change in provisions and other non-current liabilities
1 295
802
Net financial income
753
628
Total reversal of non-cash items
9 300
6 162
23.2) CASH FLOWS FROM CHANGES IN WORKING CAPITAL AND OTHER 
OPERATING ITEMS INCLUDED IN OPERATING CASH FLOW
2011
2010
USD millions
USD millions
Change in inventories
45
965
Change in trade receivables
– 732
26
Change in trade payables
195
490
Change in other net current assets and other 
operating cash flow items
379
281
Total
– 113
1 762
23.3) CASH FLOW ARISING FROM ACQUISITIONS AND DIVESTMENTS OF BUSINESSES
The following is a summary of the cash flow impact of acquisitions and divestments of businesses:
2011
2011
2010
Acquisitions
Divestments
Acquisitions
USD millions
USD millions
USD millions
Property, plant & equipment
– 66
16
– 1 419
Currently marketed products
– 101
– 10 561
Marketing know-how
– 5 960
Alcon brand name
– 2 980
Acquired research & development
– 7
– 1 418
Technologies
– 3
– 5 460
Software and other intangible assets
– 1
– 44
Financial and other assets including deferred tax assets
– 7
– 904
Inventories
– 15
8
– 1 112
Trade accounts receivables and other current assets
– 52
5
– 1 696
Marketable securities and cash
– 186
1
– 3 130
Long-term and short-term financial debts
384
Trade payables and other liabilities including deferred tax liabilities
66
– 7
6 626
Net identifiable assets acquired or divested
– 372
23
– 27 674
Acquired / divested liquidity
63
– 1
2 176
Non-controlling interest
19
6 338
Fair value of previously held equity interests
10 320
Sub-total
– 290
22
– 8 840
Goodwill
– 303
– 17 986
Deferred consideration
2
160
Net cash flow
– 591
22
– 26 666
Note 2 provides further information regarding acquisitions and divestments of businesses. All acquisitions were for cash.

N OVA R T I S  G R O U P  A N N UA L  R E P O R T  2 0 1 1
244
24. ACQUISITIONS OF BUSINESSES
ASSETS AND LIABILITIES ARISING FROM ACQUISITIONS
2011
2010
Fair value
USD millions
USD millions
Property, plant & equipment
66
1 419
Currently marketed products
101
10 561
Marketing know-how
5 960
Alcon brand name
2 980
Acquired research & development
7
1 418
Technologies
3
5 460
Software and other intangible assets
1
44
Financial and other assets including deferred tax assets
7
904
Inventories
15
1 112
Trade accounts receivable and other current assets (net of provisions for doubtful trade receivables of USD 56 m in 2010)
52
1 696
Marketable securities and cash
186
3 130
Long-term and short-term financial debts
– 384
Trade payables and other liabilities including deferred tax liabilities
– 66
– 6 626
Net identifiable assets acquired
372
27 674
Acquired liquidity
– 63
– 2 176
Non-controlling interest
– 19
– 6 338
Goodwill
303
17 986
Net assets recognized as a result of business combinations
593
37 146
Note 2 provides details on all the significant acquisition of businesses. The 2011 and 2010 goodwill arising out of the acquisitions reflects
mainly the value of expected synergies, future products and the acquired assembled workforce.
The following table provides a summary of the final acquisition accounting for Alcon, Inc. as at August 25, 2010:
USD
USD
billions
billions
Purchase price for acquiring initial 25% of Alcon
10.4
Purchase price for additional 52% of Alcon
28.3
Total purchase price
38.7
Equity adjustments since acquiring the initial 25% interest
– 0.4
Revaluation gain on initial 25% interest
0.4
Investment value on date of change of majority ownership
38.7
Net assets reported by Alcon (excluding its goodwill but
including any US GAAP/IFRS differences)
5.9
Estimated fair value adjustments
– property, plant and equipment
0.1
– intangible assets
24.5
– inventory
0.5
– other liabilities
– 0.1
– deferred tax liabilities
– 3.8
Fair value of net assets acquired at December 31, 2010
27.1
Less value attributed to 23% non-controlling interest
– 6.3
Goodwill  at December 31, 2010
17.9
Increase in goodwill due to reduction in fair value of net assets after final adjustment to acquisition accounting in 2011
0.1
Final goodwill at December 31, 2011
18.0

N OVA R T I S  G R O U P  A N N UA L  R E P O R T  2 0 1 1
246
25. POST-EMPLOYMENT BENEFITS OF ASSOCIATES (CONTINUED)
The net periodic benefit cost recorded in the consolidated income statement consists of the following components:
Other post-employment
Pension plans
benefit plans
2011
2010
2011
2010
USD millions
USD millions
USD millions
USD millions
Components of net periodic benefit cost
Service cost
423
350
60
58
Interest cost
732
667
60
45
Expected return on plan assets
– 909
– 778
– 15
– 5
Recognized past service cost
3
2
– 5
– 5
Curtailment and settlement losses/(gains)
18
– 270
Net periodic benefit cost/(income)
267
– 29
100
93
The following table shows the principal actuarial weighted average assumptions used for calculating defined benefit plans and other post-
employment benefits of associates:
Other post-employment
Pension plans
benefit plans
2011
2010
2011
2010
%
%
%
%
Weighted average assumptions used to determine benefit obligations at December 31
Discount rate
3.2%
3.5%
4.3%
5.3%
Expected rate of salary increase
3.3%
3.5%
Current average life expectancy for a 65-year-old male/female
20/22 years
19/22 years
20/22 years
19/21 years
Weighted average expected return on assets for the period
4.6%
4.6%
The following table shows a five-year summary reflecting the funding of defined benefit pensions and the impact of historical deviations
between expected and actual return on plan assets and experience adjustments on defined benefit pension obligations.
2011
2010
2009
2008
2007
USD millions
USD millions
USD millions
USD millions
USD millions
Plan assets
18 826
19 265
17 611
16 065
18 355
Defined benefit obligations
– 21 730
– 20 568
– 18 009
– 17 643
– 17 105
(Deficit)/Surplus
– 2 904
– 1 303
– 398
– 1 578
1 250
Differences between expected and actual return on plan assets
– 1 038
– 164
981
– 3 006
4
Experience adjustments on defined benefit obligation
18
26
12
– 72
– 279
The following table shows the weighted average asset allocation of funded defined benefit pension plans at December 31, 2011 and 2010:
Pension plans
Long-term 
2011
2010
target %
%
%
Equity securities
15–40
25
31
Debt securities
45–70
49
43
Real estate
0–15
13
12
Cash and other investments
0–15
13
14
Total
100
100

247
Notes to the Novartis Group Consolidated Financial Statements
2 | G R O U P R E V I E W  
16 | H E A LT H C A R E P O R T FO L I O  
6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T  
138 | F I N A N C I A L R E P O R T
Strategic pension plan asset allocations are determined with the
objective of achieving an investment return which, together with the
contributions paid, is sufficient to maintain reasonable control over
the various funding risks of the plans. Based upon the market and
economic environments, actual asset allocations may periodically
be permitted to deviate from policy targets. Expected return
assumptions are reviewed periodically and are based on each
plan’s strategic asset mix. Factors considered in the estimate of the
expected return are the risk free interest rate together with risk pre-
miums on the assets of each pension plan.
The expected future cash flows in respect of pension and other
post-employment benefit plans at December 31, 2011 were as fol-
lows:
Other post-
employment
Pension plans
benefit plans
USD millions
USD millions
Novartis Group contributions
2012 (estimated)
455
40
Expected future benefit payments
2012
1 258
51
2013
1 264
53
2014
1 273
56
2015
1 285
59
2016
1 288
62
2017–2021
6 476
363
The healthcare cost trend rate assumptions for other post-employ-
ment benefits are as follows:
Healthcare cost trend rate assumptions used
2011
2010
Healthcare cost trend rate assumed for next year
7.7%
7.9%
Rate to which the cost trend rate is assumed 
to decline
5.0%
5.0%
Year that the rate reaches the ultimate trend rate
2020
2019
A one percentage point change in the assumed healthcare cost
trend rates compared to those used for 2011 would have had the
following effects:
1% point
1% point
increase 
decrease
USD millions
USD millions
Effects on total of service and interest 
cost components
16
– 13
Effect on post-employment benefit obligations
196
– 159
The number of Novartis AG shares held by pension and similar
benefit funds at December 31, 2011 was 19.8 million shares with
a market value of USD 1.1 billion (2010: 19.8 million shares with 
a market value of USD 1.2 billion). 
DEFINED CONTRIBUTION PLANS
In many Group companies associates are covered by defined con-
tribution plans and other long-term benefits. Contributions charged
to the 2011 consolidated income statement for the defined contri-
bution plans were USD 337 million (2010: USD 269 million).
26. EQUITY-BASED PARTICIPATION PLANS OF ASSOCIATES
The expense recorded in the consolidated income statement
spreads the cost of each grant equally over the vesting period.
Assumptions are made concerning the forfeiture rate which is
adjusted during the vesting period so that at the end of the vesting
period there is only a charge for vested amounts. The expense
related to all Novartis equity plans and Alcon, Inc., equity plans
granted to associates prior to the merger in the 2011 consolidated
income statement was USD 1 billion (2010: USD 841 million)
resulting in a total carrying amount for liabilities arising from share-
based payment transactions of USD 217 million (2010: USD 200
million).
Equity-based participation plans can be separated into the fol-
lowing plans.
NOVARTIS EQUITY PLAN “SELECT”
The equity plan “Select” is a global equity incentive plan under
which all associates, including Executive Committee members, may
annually be eligible for a grant, which is capped at 200% of target.
The equity-based long-term incentive is subject to the achievement
of predetermined business and individual performance objectives
at grant. No awards are granted for performance ratings below a
certain threshold. 
The Equity Plan “Select” allows its participants to choose the
form of their equity compensation in restricted shares (or, in some
jurisdictions, restricted share units (RSUs), tradable share options,
or a combination of both, with a vesting period of three years.

N OVA R T I S  G R O U P  A N N UA L  R E P O R T  2 0 1 1
248
26. EQUITY-BASED PARTICIPATION PLANS OF ASSOCIATES (CONTINUED)
In some jurisdictions, RSUs are granted rather than shares. Each
RSU is equivalent in value to one Novartis share and is converted
into one share at the vesting date. RSUs do not carry any voting or
dividend rights, except for the US where employees receive a divi-
dend equivalent for the 2009 and 2010 grants during the vesting
period. Each restricted share is entitled to voting rights and pay-
ment of dividends during the vesting period.
Tradable share options expire on their 10th anniversary from
grant date. Each tradable share option granted to associates enti-
tles the holder to purchase after vesting (and before the 10th
anniversary from grant date) one Novartis share at a stated exercise
price that equals the closing market price of the underlying share
at the grant date (January 19, 2011). 
If a participant leaves Novartis, for reasons other than retire-
ment, disability or death, unvested shares, RSUs and share options
are forfeited, unless determined otherwise by the Compensation
Committee (for example, in connection with a reorganization or
divestment).
NOVARTIS EQUITY PLAN “SELECT” OUTSIDE NORTH AMERICA
Directors, executives and other selected associates of Group com-
panies (collectively, the “Participants”) may receive equity awards.
The vesting period for the plan is three years except Switzerland
which had until 2010 a vesting period of two years that will be
increased to three years as of the 2011 performance onwards.
The expense recorded in the 2011 consolidated income state-
ment relating to both shares and share options under this plan
amounted to USD 158 million (2010: USD 149 million). Partici-
pants in this plan were granted a total of 2.2 million units at CHF
54.70 (2010: 2.3 million units at CHF 55.85).
The following table shows the assumptions on which the valua-
tion of share options granted during the period was based:
Novartis Equity Plan “Select”
outside North America
2011
2010
Valuation date
January 19, 2011
January 19, 2010
Expiration date
January 19, 2021
January 17, 2020
Closing share price on grant date
CHF 54.70
CHF 55.85
Exercise price
CHF 54.70
CHF 55.85
Implied bid volatility
14.90%
16.00%
Expected dividend yield
4.82%
4.74%
Interest rate
2.06%
2.29%
Market value of option at grant date
CHF 5.06
CHF 6.13
The following table shows the activity associated with the share
options during the period. The weighted average prices in the table
below are translated from Swiss Francs into USD at historical rates
for the granted, sold, and forfeited or expired figures. The year-end
prices are translated using the corresponding year-end rates.
2011
2010
Weighted
Weighted
average 
average 
Options
exercise 
Options
exercise 
(millions)
price (USD)
(millions)
price (USD)
Options outstanding at January 1
34.7
52.3
32.9
51.6
Granted
5.7
57.0
9.9
54.5
Sold or exercised
– 3.9
46.4
– 6.0
52.4
Forfeited or expired
– 1.0
56.6
– 2.1
51.4
Outstanding at December 31
35.5
53.5
34.7
52.3
Exercisable at December 31
22.2
52.4
18.2
53.6
All share options were granted at an exercise price which was equal
to the market price of the Group’s shares at the grant date and
between 2000 and 2003 was greater than the market price of the
Group’s shares at the grant date. The weighted average exercise
price during the period the options were sold or exercised in 2011
was USD 46.4. The weighted average share price at the dates of
exercise was USD 49.0.
The following table summarizes information about share
options outstanding at December 31, 2011:
Options outstanding
Average
Weighted
Number
remaining
average
Range of 
outstanding
contractual
exercise
exercice prices (USD)
(millions)
life (years)
price (USD)
30–34
0.6
0.2
34.8
35–39
40–44
45–49
9.3
5.6
46.9
50–54
11.2
7.0
54.4
55–59
14.4
6.7
57.9
Total
35.5
6.4
53.5
NOVARTIS EQUITY PLAN “SELECT” FOR NORTH AMERICA
The plan provides for equity awards to North American based Direc-
tors, executives and other selected associates. The terms and con-
ditions of the Novartis Equity Plan “Select” for North America are
substantially equivalent to the Novartis Equity Plan “Select” out-
side North America. Share options in this plan have only been trad-
able since 2004. 
The expense recorded in the 2011 consolidated income state-
ment relating to both shares and share options under this plan
amounted to USD 263 million (2010: USD 237 million). Partici-
pants in this plan were granted a total of 4.1 million units at USD
57.07 (2010: 3.5 million units at USD 53.70).

249
Notes to the Novartis Group Consolidated Financial Statements
2 | G R O U P R E V I E W  
16 | H E A LT H C A R E P O R T FO L I O  
6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T  
138 | F I N A N C I A L R E P O R T
The following table shows the assumptions on which the valua-
tion of share options granted during the period was based:
Novartis Equity Plan “Select”
for North America
2011
2010
Valuation date
January 19, 2011
January 19, 2010
Expiration date
January 19, 2021
January 17, 2020
Closing ADS price on grant date
USD 57.07
USD 53.70
Exercise price
USD 57.07
USD 53.70
Implied bid volatility
13.80%
14.60%
Expected dividend yield
4.83%
4.96%
Interest rate
3.50%
3.90%
Market value of option at grant date
USD 5.94
USD 6.47
The following table shows the activity associated with the share
options during the period:
2011
2010
Weighted
Weighted
ADS
average 
ADS
average 
options
exercise 
options
exercise 
(millions)
price (USD)
(millions)
price (USD)
Options outstanding at January 1
60.0
51.1
59.3
50.2
Granted
11.8
57.1
15.7
53.7
Sold or exercised
– 10.2
52.2
– 10.3
49.5
Forfeited or expired
– 3.1
51.6
– 4.7
51.7
Outstanding at December 31
58.5
52.1
60.0
51.1
Exercisable at December 31
19.6
52.6
20.2
50.1
All share options were granted at an exercise price which was equal
to the market price of the American Depositary Shares (ADSs) at the
grant date. The weighted average exercise price during the period
the share options were sold or exercised in 2011 was USD 52.2.
The weighted average share price at the dates of exercise was USD
59.4. 
The following table summarizes information about ADS options
outstanding at December 31, 2011:
ADS options outstanding
Average
Weighted
Number
remaining
average
Range of 
outstanding
contractual
exercise
exercice prices (USD)
(millions)
life (years)
price (USD)
35–39
2.5
0.9
36.5
40–44
45–49
19.1
6.2
46.6
50–54
15.4
7.4
53.9
55–59
21.5
7.3
57.6
Total
58.5
6.7
52.1
LONG-TERM PERFORMANCE PLAN
The Long-Term Performance Plan (LTPP) is an equity plan for key
executives designed to foster long-term commitment by aligning
the incentives of key executives to the performance of Novartis. The
LTPP is offered to selected executives, who are in key positions and
have a significant impact on the long-term success of Novartis and
is capped at 200% of target. The rewards are based on predeter-
mined rolling three year global performance objectives focused on
the Novartis Economic Value Added (NVA) measured annually. The
NVA is calculated based on Group operating income adjusted for
interest, taxes and cost of capital charge. The performance realiza-
tion of a plan cycle is obtained right after the end of the third plan
year by adding together the annual NVA realizations of all plan
years of the plan cycle. The performance ratio for a plan cycle is
obtained by dividing the performance realization for the plan cycle
with the performance target for the plan cycle, expressing the result
as a percentage. The LTPP only allows a payout when the actual
NVA exceeds predetermined target thresholds.
At the beginning of the performance period, plan participants
are allocated RSUs, which will be converted into Novartis shares
after the performance period.
At the end of the three-year performance period, the Compen-
sation Committee adjusts the number of RSUs earned based on
actual performance. RSUs are converted into unrestricted Novartis
shares without an additional vesting period. In the United States,
awards may also be delivered in cash under the US deferred com-
pensation plan.
The expense recorded in the 2011 income statement related to
this plan amounted to USD 40 million (2010: USD 32 million). On
January 19, 2011 a total of 0.4 million performance share units
(2010: 0.4 million performance share units) were granted to 127
key executives participating in this plan.
SPECIAL SHARE AWARDS
Selected associates may exceptionally receive special awards of
restricted shares or RSUs. These special Share Awards provide an
opportunity to reward outstanding achievements or exceptional
performance and aim at retaining key contributors. They are based
on a formal internal selection process, in which the individual per-
formance of each candidate is thoroughly assessed at several man-
agement levels. In addition, Special Share Awards may also be
granted to attract special expertise and new talents into the organ-
ization. These grants are consistent with the Novartis’ philosophy to
attract, retain and motivate best in class talents around the world.
Restricted special awards generally have a five-year vesting
period. If an associate leaves Novartis for reasons other than retire-
ment, disability or death, unvested shares or RSUs are generally for-
feited. Worldwide 597 associates at different levels in the organiza-
tion were awarded restricted shares in 2011. The expense recorded
for such special share awards in the 2011 income statement
amounted to USD 27 million (2010: USD 33 million). During 2011,
a total of 1.5 million restricted shares or RSUs (2010: 1.1 million

N OVA R T I S  G R O U P  A N N UA L  R E P O R T  2 0 1 1
250
26. EQUITY-BASED PARTICIPATION PLANS OF ASSOCIATES (CONTINUED)
restricted shares or RSUs) were granted to executives and selected
associates.
LEVERAGED SHARE SAVINGS PLANS
A number of associates in certain countries and certain key execu-
tives worldwide are encouraged to invest their Annual Incentive in
a share savings plan, which is capped at 200% of target. Under the
share savings plan, they will receive their annual incentive awards
fully or partially in Novartis shares in lieu of cash. As a reward for
their participation in the share savings plan, Novartis matches their
investments in shares after a holding period of 3 or 5 years. As a
rule, no shares are matched under these plans if an associate leaves
Novartis prior to expiration of the holding period for reasons other
than retirement, disability or death.
Novartis currently has three share savings plans:
– In Switzerland, the Employee Share Ownership Plan (ESOP) was
available to 11 997 associates. Participants within this plan may
choose to receive the incentive (i) 100% in shares, (ii) 50% in
shares and 50% in cash or (iii) 100% in cash. After expiration of
a three-year holding period of Novartis shares invested under
ESOP, each participant will receive one free matching share for
every two Novartis shares granted. A total of 5 454 associates
chose to receive shares under the ESOP for their performance in
2010.
– In the United Kingdom, 2 790 associates can invest up to 5% of
their monthly salary in shares (up to a maximum of GBP 125) and
also may be invited to invest all or part of their net annual incen-
tive in shares. Two invested shares are matched with one share
with a holding period of three years. During 2011, 1 870 associ-
ates elected to participate in this plan.
– Worldwide 26 key executives were invited to participate in a Lever-
aged Share Savings Plan based on their performance in 2010.
Instead of cash, their annual incentive was awarded in shares and
subject to a holding period of five years. At the end of the holding
period, Novartis will match the invested shares at a ratio of 1:1
(i.e. one share awarded for each invested share).
Associates may only participate in one of these plans in any given
year.
The expense recorded in the 2011 income statement related to
these plans amounted to USD 429 million (2010: USD 366 million).
During 2011, a total of 5.4 million shares (2010: 5.8 million shares)
were granted to participants of these plans.
SUMMARY OF NON-VESTED SHARE MOVEMENTS
The table below provides a summary of non-vested share move-
ments (restricted shares, RSUs and ADSs) for all plans:
2011
2010
Number
Number
of shares
Fair value in
of shares
Fair value in
in millions
USD millions
in millions
USD millions
Non-vested shares 
at January 1
17.7
1015.7
15.7
938.7
Granted
14.3
823.9
13.9
766.1
Vested
– 10.0
– 590.1
– 10.3
– 594.6
Forfeited
– 1.2
– 69.4
– 1.6
– 94.5
Non-vested shares 
at December 31
20.8
1 180.1
17.7
1 015.7
ALCON, INC., EQUITY PLANS GRANTED TO ASSOCIATES 
PRIOR TO THE MERGER
The expense recorded in the 2011 consolidated income statement
relating to equity-based compensation awards granted to Alcon,
Inc., associates prior to the merger on April 8, 2011 amounted to
USD 98 million (August 25 to December 31, 2010: USD 22 million).
Participants in those plans were granted 1.9 million restricted share
units (RSUs) during 2011 (from August 25 to December 31, 2010:
0.7 million converted Novartis RSUs).
CHANGE OF CONTROL PROVISIONS
Upon the change of majority ownership in Alcon, Inc., from Nestlé
to Novartis, Alcon equity-based compensation awards granted to
associates prior to January 1, 2009 vested immediately. However,
the vesting of similar awards granted after January 1, 2009 accel-
erates only if the respective participant’s employment with Novartis
subsidiaries is terminated without cause, or by the participant
under certain circumstances, within six months preceding or dur-
ing the two years following a change of control. At the completion
of the merger of Alcon, Inc., into Novartis, all awards outstanding
under the Alcon equity plans were converted to awards based upon
Novartis shares as defined in the Merger Agreement.
SHARE OPTIONS AND SHARE-SETTLED APPRECIATION RIGHTS
Share options entitle the recipient to purchase Novartis shares at
the closing market price of the former Alcon, Inc., share on the day
of grant divided by the conversion factor of 3.0727.
Share-settled appreciation rights (SSAR) entitle the participant
to receive, in the form of Novartis shares, the difference between the
values of the former Alcon, Inc., share at the date of grant, converted
into Novartis shares using the conversion factor of 3.0727, and the
Novartis share price at the date of exercise. Share options and
SSARs are exercisable upon satisfaction of the conditions set forth
in the respective award agreement, generally three years following
the date of grant.

251
Notes to the Novartis Group Consolidated Financial Statements
2 | G R O U P R E V I E W  
16 | H E A LT H C A R E P O R T FO L I O  
6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T  
138 | F I N A N C I A L R E P O R T
The compensation expense for equity awards was calculated on
a straight-line basis over the three-year vesting period of the appli-
cable equity awards, with acceleration of the expense for individu-
als meeting the requirements for retirement and under the change
of control provisions, as described above. There were no grants of
share options or SSARs under these plans in 2011 and 2010.
The following table shows the activity associated with the con-
verted Novartis share options and SSARs during 2011 and from
August 25 to December 31, 2010:
Weighted
Weighted
Number
average 
Number of
average 
of options
exercise 
SSARs
exercise 
(millions)
price (USD)
(millions)
price (USD)
Outstanding at August 25, 2010
13.6
22.3
14.7
37.5
Sold or exercised
– 3.9
22.9
– 3.0
42.8
Outstanding at December 31, 2010
9.7
22.0
11.7
36.3
Exercisable at December 31, 2010
9.1
21.6
6.2
43.3
Outstanding at January 1, 2011
9.7
22.0
11.7
36.3
Sold or exercised
– 5.2
20.7
– 3.3
41.8
Outstanding at December 31, 2011
4.5
23.5
8.4
34.2
Exercisable at December 31, 2011
4.0
22.9
3.3
43.4
RESTRICTED SHARE UNITS
Restricted Share Units (RSUs) entitle the recipient to receive a spec-
ified number of Novartis shares on the date of vesting. RSUs will
vest and become transferable upon satisfaction of the conditions
set forth in the restricted share unit award agreements, generally
three years following the grant date. Holders of RSUs have no vot-
ing rights and receive dividend equivalents prior to vesting.
The fair value of each RSU was estimated at the closing market
price on the day of grant. At the date of the merger on April 8, 2011,
the awards were converted into Novartis RSUs at a conversion fac-
tor of 3.0727. The compensation expense is recognized over the
required service period, generally three years following the day of
grant.
Until the merger on April 8, 2011, participants were granted 1.9
million converted Novartis RSUs (from August 25 to December 31,
2010: 0.7 million converted Novartis RSUs). The fair value of those
instruments amounted to USD 108 million. At December 31, 2011,
there were 5.0 million Novartis RSUs outstanding with a fair value
of USD 261 million.
27. RELATED PARTIES
GENENTECH/ROCHE
Novartis has two agreements with Genentech, Inc., USA, a subsidiary
of Roche Holdings AG which is indirectly included in the consoli-
dated financial statements using equity accounting since Novartis
holds 33.3% of the outstanding voting shares of Roche.
LUCENTIS
Novartis has licensed the exclusive rights to develop and market
Lucentis outside the US for indications related to diseases of the
eye. As part of this agreement, Novartis paid Genentech/Roche an
initial milestone and shared the cost for the subsequent develop-
ment by making additional milestone payments upon the achieve-
ment of certain clinical development points and product approval.
Novartis also pays royalties on the net sales of Lucentis products
outside the US. Lucentis sales of USD 2.0 billion (2010: USD 1.5 bil-
lion) have been recognized by Novartis.
XOLAIR
In February 2004, Novartis Pharma AG, Genentech, Inc., and Tanox,
Inc., finalized a three-party collaboration to govern the development
and commercialization of certain anti-IgE antibodies including
Xolair and TNX-901. Under this agreement, all three parties co-
developed Xolair. On August 2, 2007, Genentech, Inc. completed the
acquisition of Tanox, Inc. and has taken over its rights and obliga-
tions. Novartis and Genentech/Roche are co-promoting Xolair in the
US where Genentech/Roche records all sales. Novartis records
sales outside of the US.

N OVA R T I S  G R O U P  A N N UA L  R E P O R T  2 0 1 1
252
27. RELATED PARTIES (CONTINUED)
Novartis markets Xolair and records all sales and related costs
in Europe as well as co-promotion costs in the US. Genentech/
Roche and Novartis share the resulting profits from sales in the US,
Europe and other countries, according to agreed profit-sharing per-
centages. Novartis recognized total sales of Xolair of USD 478 mil-
lion (2010: USD 369 million) including sales to Genentech/Roche
for the US market.
The net expense for royalties, cost sharing and profit sharing
arising out of the Lucentis and Xolair agreements with Genentech/
Roche totaled USD 396 million (2010: USD 300 million).
Furthermore, Novartis has several patent license, supply and
distribution agreements with Roche and several Novartis entities
hold Roche bonds totaling USD 20 million (2010: USD 17 million).
IDENIX
Novartis Pharma AG entered into a collaboration agreement with
Idenix in May 2003 relating to the worldwide development and
commercialization of drug candidates and purchased approxi-
mately 54% of the common stock of Idenix. As Novartis had the
ability to exercise control, Idenix was fully consolidated. In August
2009, Novartis opted not to purchase shares that were issued pur-
suant to an underwritten offering and waived and amended certain
rights under the development and commercialization agreement.
As a result of this, the Novartis shareholding was diluted from the
pre-offering level of 53% to 47% and since September 1, 2009
Idenix has been accounted for according to the equity method.
Novartis has a license agreement with Idenix for Tyzeka/Sebivo
and may pay additional license fees and development expenses 
for drug candidates that Novartis may elect to license from Idenix.
The sales of Tyzeka/Sebivo totaled USD 114 million in 2011 (2010:
USD 95 million).
EXECUTIVE OFFICER AND NON-EXECUTIVE DIRECTOR COMPENSATION
During 2011, there were 12 Executive Committee members and Permanent Attendees (“Executive Officers”), including those who stepped
down (14 members in 2010 also including those who stepped down).
The total compensation for members of the Executive Committee and the 11 Non-Executive Directors (12 in 2010) using IFRS 2 rules
for accounting for equity-based compensation was as follows:
Executive Officers
Non-Executive Directors
Total
2011
2010
2011
2010
2011
2010
USD millions
USD millions
USD millions
USD millions
USD millions
USD millions
Short-term benefits
13.7
14.8
23.9
17.7
37.6
32.5
Post-employment benefits
1.9
1.3
0.2
0.2
2.1
1.5
Termination benefits
5.1
7.9
5.1
7.9
Equity-based compensation
53.3
63.6
16.0
69.3
63.6
Total
74.0
87.6
40.1
17.9
114.1
105.5
The annual incentive award, which is fully included in equity-based
compensation even when paid out in cash, is granted in January in
the year following the reporting period.
The above table excludes amounts for any grants made to any
of the current Executive Officers and non-Executive Directors by
Alcon, Inc., prior to its merger into Novartis AG on April 8, 2011,
since these were granted by this company’s independent Compen-
sation Committee.
The disclosures required by the Swiss Code of Obligations on
Board and Executive compensation are shown in note 12 to the
Novartis AG financial statements.
A non-executive director has options to acquire minor Group
assets at fair market values.

253
Notes to the Novartis Group Consolidated Financial Statements
2 | G R O U P R E V I E W  
16 | H E A LT H C A R E P O R T FO L I O  
6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T  
138 | F I N A N C I A L R E P O R T
28. COMMITMENTS AND CONTINGENCIES
LEASING COMMITMENTS
The Group has entered into various fixed term operational leases,
mainly for cars and real estate. As of December 31, 2011 the
Group’s commitments with respect to these leases were as follows:
2011
USD millions
2012
355
2013
270
2014
175
2015
124
2016
109
Thereafter
2 003
Total
3 036
Expense of current year
412
RESEARCH & DEVELOPMENT COMMITMENTS
The Group has entered into long-term research agreements with
various institutions which provide for potential milestone payments
and other payments by Novartis that may be capitalized. As of
December 31, 2011 the Group’s commitments to make payments
under those agreements were as follows:
Potential
Unconditional
milestone
commitments
payments 
2011
2011
Total 2011
USD millions
USD millions
USD millions
2012
105
282
387
2013
73
288
361
2014
53
377
430
2015
42
388
430
2016
39
172
211
Thereafter
31
1 146
1 177
Total
343
2 653
2 996
OTHER COMMITMENTS 
The Novartis Group entered into various purchase commitments
for services and materials as well as for equipment in the ordinary
course of business. These commitments are generally entered into
at current market prices and reflect normal business operations.
CONTINGENCIES
Group companies have to observe the laws, government orders and
regulations of the country in which they operate.
The Group’s potential environmental liability is assessed based
on a risk assessment and investigation of the various sites identi-
fied by the Group as at risk for environmental exposure. The
Group’s future remediation expenses are affected by a number of
uncertainties. These uncertainties include, but are not limited to,
the method and extent of remediation, the percentage of material
attributable to the Group at the remediation sites relative to that
attributable to other parties, and the financial capabilities of the
other potentially responsible parties.
A number of Group companies are currently involved in admin-
istrative proceedings, litigations and investigations arising out of
the normal conduct of their business. These litigations include
certain legal and product liability claims. Whilst provisions have
been made for probable losses that management deems to be
reasonable or appropriate there are uncertainties connected with
these estimates. Note 20 contains a more extensive discussion of
these matters.
In the opinion of management, however, the outcome of these
actions will not materially affect the Group’s financial position but
could be material to the results of operations or cash flow in a given
period.

N OVA R T I S  G R O U P  A N N UA L  R E P O R T  2 0 1 1
254
29. PRINCIPAL CURRENCY TRANSLATION RATES
2011
2010
USD
USD
Year-end exchange rates used for 
consolidated balance sheets:
1
CHF
1.064
1.063
1
EUR
1.294
1.324
1
GBP
1.543
1.552
100
JPY
1.289
1.227
2011
2010
USD
USD
Average of monthly exchange 
rates during the year used 
for consolidated income, 
other comprehensive income 
and cash flow statements:
1
CHF
1.130
0.961
1
EUR
1.392
1.327
1
GBP
1.603
1.546
100
JPY
1.255
1.141
30. EVENTS SUBSEQUENT TO THE DECEMBER 31, 2011 BALANCE SHEET DATE
DIVIDEND PROPOSAL FOR 2011 AND APPROVAL OF THE GROUP’S 2011 
CONSOLIDATED FINANCIAL STATEMENTS
On January 24, 2012, the Novartis AG Board of Directors proposed
the acceptance of the 2011 consolidated financial statements of
the Novartis Group for the approval by the Annual General Meeting
on February 23, 2012. Furthermore, on January 19, 2012, the
Board proposed a dividend of CHF 2.25 per share to be approved
at the Annual General Meeting on February 23, 2012. If approved,
total dividend payments would amount to approximately USD 5.8
billion.
US RESTRUCTURING
On January 13, 2012, Novartis announced a plan to restructure
Novartis Pharmaceuticals (NPC) in the US. This will result in the
reduction of approximately 1 960 positions and result in an excep-
tional charge of approximately USD 160 million to be recorded in
the first quarter of 2012.

255
Principal Group Subsidiaries and Associated Companies
2 | G R O U P R E V I E W  
16 | H E A LT H C A R E P O R T FO L I O  
6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T  
138 | F I N A N C I A L R E P O R T
Argentina
Novartis Argentina S.A., Buenos Aires
ARS 231.3 m
100

Alcon Laboratorios Argentina S.A., Buenos Aires
ARS 83.9 m
100

Sandoz S.A., Buenos Aires
ARS 131.8 m
100

Australia
Novartis Australia Pty Ltd., North Ryde, NSW
AUD 11.0 m
100

Novartis Pharmaceuticals Australia Pty Ltd., 
North Ryde, NSW
AUD 3.8 m
100

Alcon Laboratories (Australia) Pty Ltd., Frenchs Forest
AUD 2.6 m
100

Sandoz Pty Ltd., North Ryde, NSW
AUD 11.6 m
100

Novartis Consumer Health Australasia Pty Ltd., 
Melbourne, Victoria
AUD 7.6 m
100

Novartis Animal Health Australasia Pty Ltd., 
North Ryde, NSW
AUD 3.0 m
100

Austria
Novartis Austria GmbH, Vienna
EUR 1.0 m
100

Novartis Pharma GmbH, Vienna
EUR 1.1 m
100

Sandoz GmbH, Kundl
EUR 32.7 m
100

EBEWE Pharma Ges.m.b.H Nfg., Unterach am
Attersee
EUR 1.0 m
100

Novartis Animal Health GmbH, Kundl
EUR 37 000
100

Bangladesh
Novartis (Bangladesh) Limited, Dhaka
BDT 162.5 m
60

Belgium
N.V. Novartis Pharma S.A., Vilvoorde
EUR 7.1 m
100

S.A. Alcon-Couvreur N.V., Puurs
EUR 362.1 m
100

N.V. CIBA Vision Benelux S.A., Mechelen
EUR 62 000
100

N.V. Sandoz S.A., Vilvoorde
EUR 19.2 m
100

N.V. Novartis Consumer Health S.A., Vilvoorde
EUR 4.3 m
100

Bermuda
Triangle International Reinsurance Ltd., Hamilton
CHF 1.0 m
100

Novartis Securities Investment Ltd., Hamilton
CHF 30 000
100

Novartis International Pharmaceutical Ltd., Hamilton
CHF 20 000
100

Trinity River International Investments (Bermuda), Ltd.,
Hamilton
USD 12 000
100

Trinity River Insurance Co.Ltd., Hamilton
USD 370 000
100

Brazil
Novartis Biociências S.A., São Paulo
BRL 255.8 m
100

Alcon Laboratorios do Brasil Ltda., São Paulo
BRL 7.7 m
100

Sandoz do Brasil Indústria Farmacêutica Ltda., Cambé
BRL 190.0 m
100

Novartis Saúde Animal Ltda., São Paulo
BRL 50.7 m
100

Canada
Novartis Pharmaceuticals Canada Inc., Dorval/
Montreal
CAD 02
100

Alcon Canada Inc., Mississauga, Ontario
CAD 02
100

CIBA Vision Canada Inc., Mississauga, Ontario
CAD 1
100

Sandoz Canada Inc., Boucherville, Quebec
CAD 76.8 m
100

Novartis Consumer Health Canada Inc., 
Mississauga, Ontario
CAD 2
100

Novartis Animal Health Canada Inc., Charlottetown, 
Prince Edward Island
CAD 2
100

Chile
Novartis Chile S.A., Santiago de Chile
CLP 2.0 bn
100

Alcon Laboratorios Chile Limitada, Santiago de Chile
CLP 2.0 bn
100

China
Beijing Novartis Pharma Co., Ltd., Beijing
USD 30.0 m
100

Novartis Pharmaceuticals (HK) Limited, Hong Kong
HKD 200
100

China Novartis Institutes for BioMedical Research 
Co., Ltd., Shanghai
USD 108.0 m
100

Suzhou Novartis Pharma Technology Co. Ltd., 
Changshu
USD 97.4 m
100

Shanghai Novartis Trading Ltd., Shanghai
USD 2.45 m
100

Alcon (China) Ophthalmic Product Co., Ltd., Beijing
USD 2.2 m
100

Sandoz (China) Pharmaceutical Co., Ltd.,
Zhongshan
USD 22.0 m
100

Novartis Vaccines and Diagnostics (HK) Ltd., Hong Kong
HKD 80.0 m
100

Zhejiang Tianyuan Bio-Pharmaceutical Co., Ltd., 
Hangzhou
CNY 46.8 m
85

Shanghai Novartis Animal Health Co., Ltd., Shanghai
CHF 21.5 m
87

Colombia
Novartis de Colombia S.A., Santafé de Bogotá
COP 7.9 bn
100

Laboratorios Alcon de Colombia S.A., Bogotá
COP 20.9 m
100

Croatia
Sandoz d.o.o., Zagreb
HRK 25.6 m
100

Czech Republic
Novartis s.r.o., Prague
CZK 51.5 m
100

Sandoz s.r.o., Prague
CZK 44.7 m
100

Denmark
Novartis Healthcare A/S, Copenhagen
DKK 14.0 m
100

Sandoz A/S, Copenhagen
DKK 8.0 m
100

Ecuador
Novartis Ecuador S.A., Quito
USD 4.0 m
100

Egypt
Novartis Pharma S.A.E., Cairo
EGP 33.8 m
99

Finland
Novartis Finland Oy, Espoo
EUR 459 000
100

France
Novartis Groupe France S.A., Rueil-Malmaison
EUR 103.0 m
100

Novartis Pharma S.A.S., Rueil-Malmaison
EUR 43.4 m
100

Laboratoires Alcon S.A., Rueil-Malmaison
EUR 12.6 m
100

CIBA Vision S.A.S., Blagnac
EUR 1.8 m
100

Sandoz S.A.S., Levallois-Perret
EUR 5.0 m
100

Novartis Vaccines and Diagnostics S.A.S., Suresnes
EUR 1.5 m
100

Novartis Santé Familiale S.A.S., Rueil-Malmaison
EUR 21.9 m
100

Novartis Santé Animale S.A.S., Rueil-Malmaison
EUR 900 000
100

Germany
Novartis Deutschland GmbH, Wehr
EUR 155.5 m
100

Novartis Pharma GmbH, Nuremberg
EUR 25.6 m
100

Novartis Pharma Produktions GmbH, Wehr
EUR 2.0 m
100

Alcon Pharma GmbH, Freiburg
EUR 511 292
100

WaveLight GmbH, Erlangen
EUR 6.6 m
100

CIBA Vision GmbH, Grosswallstadt
EUR 15.4 m
100

CIBA Vision Vertriebs GmbH, Grossostheim
EUR 2.6 m
100

Sandoz International GmbH, Holzkirchen
EUR 100 000
100

Sandoz Pharmaceuticals GmbH, Holzkirchen
EUR 5.1 m
100

Sandoz Industrial Products GmbH, Frankfurt a. M.
EUR 2.6 m
100

1 A Pharma GmbH, Oberhaching
EUR 26 000
100

Salutas Pharma GmbH, Barleben
EUR 42.1 m
100

Hexal AG, Holzkirchen
EUR 93.7 m
100

Novartis Vaccines and Diagnostics GmbH, Marburg
EUR 5.0 m
100

Novartis Vaccines Vertriebs GmbH, Marburg
EUR 25 564
100

Novartis Consumer Health GmbH, Munich
EUR 14.6 m
100

N OVA R T I S  G R O U P  A N N UA L  R E P O R T  2 0 1 1
256
31. PRINCIPAL GROUP SUBSIDIARIES AND ASSOCIATED COMPANIES (CONTINUED)
Indonesia
PT Novartis Indonesia, Jakarta
IDR 7.7 bn
100

PT CIBA Vision Batam, Batam
IDR 11.9 bn
100

Ireland
Novartis Ireland Limited, Dublin
EUR 25 000
100

Novartis Ringaskiddy Limited, Ringaskiddy, 
County Cork
EUR 2.0 m
100

Alcon Laboratories Ireland Limited, Cork
EUR 541 251
100

Italy
Novartis Farma S.p.A., Origgio
EUR 18.2 m
100

Alcon Italia S.p.A., Milan
EUR 1.3 m
100

CIBA Vision S.r.l., Marcon
EUR 2.4 m
100

Sandoz S.p.A., Origgio
EUR 679 900
100

Sandoz Industrial Products S.p.A., Rovereto
EUR 2.6 m
100

Novartis Vaccines and Diagnostics S.r.l., Siena
EUR 41.5 m
100

Novartis Consumer Health S.p.A., Origgio
EUR 2.9 m
100

Japan
Novartis Holding Japan K.K., Tokyo
JPY 10.0 m
100

Novartis Pharma K.K., Tokyo
JPY 6.0 bn
100

Alcon Japan Ltd., Tokyo
JPY 500.0 m
100

CIBA Vision K.K., Tokyo
JPY 100.0 m
100

Sandoz K.K., Tokyo
JPY 100.0 m
100

Novartis Animal Health K.K., Tokyo
JPY 50.0 m
100

Luxembourg
Novartis Investments S.à r.l., Luxembourg City
USD 2.6 bn
100

Novartis Finance S.A., Luxembourg City
USD 100 000
100

Malaysia
Novartis Corporation (Malaysia) Sdn. Bhd., 
Kuala Lumpur
MYR 3.3 m
100

CIBA Vision Johor Sdn. Bhd., Gelang Patah
MYR 5.0 m
100

Mexico
Novartis Farmacéutica, S.A. de C.V., Mexico City
MXN 205.0 m
100

Alcon Laboratorios, S.A. de C.V., Mexico City
MXN 5.9 m
100

Sandoz S.A. de C.V., Mexico City
MXN 468.2 m
100

Netherlands
Novartis Netherlands B.V., Arnhem
EUR 1.4 m
100

Novartis Pharma B.V., Arnhem
EUR 4.5 m
100

Alcon Nederland B.V., Gorinchem
EUR 18 151
100

Sandoz B.V., Almere
EUR 907 570
100

Novartis Consumer Health B.V., Breda
EUR 23 830
100

New Zealand
Novartis New Zealand Ltd., Auckland
NZD 820 000
100

Norway
Novartis Norge AS, Oslo
NOK 1.5 m
100

Pakistan
Novartis Pharma (Pakistan) Limited, Karachi
PKR 24.8 m
99

Panama
Novartis Pharma (Logistics), Inc., Panama City
USD 10 000
100

Peru
Novartis Biosciences Peru S.A., Lima
PEN 6.1 m
100

Philippines
Novartis Healthcare Philippines, Inc., Makati/Manila
PHP 298.8 m
100

Poland
Novartis Poland Sp. z o.o., Warszawa
PLN 44.2 m
100

Alcon Polska Sp. z o.o., Warszawa
PLN 750 000
100

Sandoz Polska Sp. z o.o., Warszawa
PLN 25.6 m
100

Lek S.A., Strykow
PLN 11.4 m
100

Portugal
Novartis Portugal SGPS Lda., Sintra
EUR 500 000
100

Novartis Farma-Produtos Farmacêuticos S.A., 
Sintra
EUR 2.4 m
100

Alcon Portugal-Produtos e Equipamentos 
Oftalmologicos Lda., Paco d’Arcos
EUR 4.1 m
100

Sandoz Farmaceutica Lda., Sintra
EUR 5.0 m
100

Novartis Consumer Health-Produtos 
Farmacêuticos e Nutrição Lda., Lisbon
EUR 100 000
100

Puerto Rico
Ex-Lax, Inc., Humacao
USD 10 000
100

Alcon (Puerto Rico) Inc., Catano
USD 100
100

CIBA Vision Puerto Rico, Inc., Cidra
USD 1 000
100

Romania
Sandoz S.R.L., Targu-Mures
RON 105.2 m
100

Russian Federation
Novartis Pharma LLC, Moscow
RUR 20.0 m
100

Alcon Farmacevtika LLC, Moscow
RUR 44.1 m
100

ZAO Sandoz, Moscow
RUR 57.4 m
100

Novartis Neva LLC, St. Petersburg
RUR 250.0 m
100

Novartis Consumer Health LLC, Moscow
RUR 80.0 m
100

Saudi Arabia
Saudi Pharmaceutical Distribution Co. Ltd., Riyadh
SAR 26.8 m
75

Singapore
Novartis (Singapore) Pte Ltd, Singapore
SGD 100 000
100

Novartis Singapore Pharmaceutical Manufacturing 
Pte Ltd., Singapore
SGD 45.0 m
100

Novartis Asia Pacific Pharmaceuticals Pte Ltd., 
Singapore
SGD 1.0 m
100

Novartis Institute for Tropical Diseases Pte Ltd., 
Singapore
SGD 2 004
100

Alcon Singapore Manufacturing Pte Ltd., Singapore
SGD 101 000
100

CIBA Vision (Singapore) Pte Ltd, Singapore
SGD 400 000
100

CIBA Vision Asian Manufacturing 
and Logistics Pte Ltd., Singapore
SGD 1.0 m
100

Slovakia
Novartis Slovakia s.r.o., Bratislava
EUR 2.0 m
100

Slovenia
Lek Pharmaceuticals d.d., Ljubljana
EUR 48.4 m
100

Sandoz Pharmaceuticals d.d., Ljubljana
EUR 1.5 m
100

South Africa
Novartis South Africa (Pty) Ltd., Kempton Park
ZAR 86.3 m
100

Alcon Laboratories (South Africa) (Pty) Ltd.,
Bryanston, Gauteng
ZAR 201 820
100

Sandoz South Africa (Pty) Ltd, Kempton Park
ZAR 3.0 m
100

South Korea
Novartis Korea Ltd., Seoul
KRW 24.5 bn
99

Alcon Korea Ltd, Seoul
KRW 33.8 bn
100

Spain
Novartis Farmacéutica, S.A., Barcelona
EUR 63.0 m
100

Alcon Cusi S.A., El Masnou
EUR 11.6 m
100

CIBA Vision, S.A., Barcelona
EUR 1.4 m
100

Sandoz Farmacéutica, S.A., Madrid
EUR 270 450
100

Sandoz Industrial Products, S.A., Les Franqueses 
del Vallés/Barcelona
EUR 9.3 m
100

257
Principal Group Subsidiaries and Associated Companies
2 | G R O U P R E V I E W  
16 | H E A LT H C A R E P O R T FO L I O  
6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T  
138 | F I N A N C I A L R E P O R T
Switzerland (continued)
Novartis Vaccines and Diagnostics Services AG, Basel
CHF 100 000
100

Novartis Consumer Health S.A., Nyon
CHF 30.0 m
100

Novartis Consumer Health Schweiz AG, Bern
CHF 250 000
100

Novartis Animal Health AG, Basel
CHF 101 000
100

Novartis Centre de Recherche Santé Animale S.A.,
St. Aubin
CHF 250 000
100

Roche Holding AG, Basel
CHF 160.0 m
33/63

Taiwan
Novartis (Taiwan) Co., Ltd., Taipei
TWD 170.0 m
100

Thailand
Novartis (Thailand) Limited, Bangkok
THB 230.0 m
100

Alcon Laboratories (Thailand) Ltd., Bangkok
THB 2.1 m
100

Turkey
Novartis Saglik, Gida ve Tarim Ürünleri Sanayi ve 
Ticaret A.S., Istanbul
TRY 98.0 m
100

Alcon Laboratuvarlari Ticaret A.S., Istanbul
TRY 25.2 m
100

Sandoz Ilaç Sanayi ve Ticaret A.S., Istanbul
TRY 120.0 m
100

USA
Novartis Corporation, East Hanover, NJ
USD 72.2 m
100

Novartis Finance Corporation, New York, NY
USD 1.7 bn
100

Novartis Capital Corporation, New York, NY
USD 1
100

Novartis Pharmaceuticals Corporation, 
East Hanover, NJ
USD 5.2 m
100

Novartis Institutes for BioMedical Research, Inc., 
Cambridge, MA
USD 1
100

Novartis Institute for Functional Genomics, Inc., 
San Diego, CA
USD 21 000
100

Genoptix, Inc., Carlsbad, CA
USD 1
100

Alcon Laboratories, Inc., Wilmington, DE
USD 1 000
100

Alcon Refractive Horizons, LLC, Wilmington, DE
USD 10
100

Alcon Research, Ltd., Wilmington, DE
USD 10
100

Alcon LenSx, Inc., Wilmington, DE
USD 100
100

CIBA Vision Corporation, Duluth, GA
USD 301.3 m
100

Sandoz Inc., Princeton, NJ
USD 25 000
100

USA (continued)
Eon Labs, Inc., Princeton, NJ
USD 1
100

Falcon Pharmaceuticals, Ltd., Wilmington, DE
USD 10
100

Novartis Vaccines and Diagnostics, Inc., 
Cambridge, MA
USD 3
100

Novartis Consumer Health, Inc., Parsippany, NJ
USD 02
100

Novartis Animal Health US, Inc., Greensboro, NC
USD 100
100

Idenix Pharmaceuticals, Inc., Cambridge, MA
USD 72 863
31

Venezuela
Novartis de Venezuela, S.A., Caracas
VEF 1.4 m
100

Alcon Pharmaceutical, C.A., Caracas
VEF 5.5 m
100

Share/paid-in
Equity
As at December 31, 2011
capital1
interest %
Activities
Share/paid-in
Equity
As at December 31, 2011
capital1
interest %
Activities
In addition, the Group is represented by subsidiaries, associated companies or joint ventures 
in the following countries: Algeria, Bosnia/Herzegovina, Bulgaria, Cayman Islands, Costa Rica,
Dominican Republic, Guatemala, the Former Yugoslav Republic of Macedonia, Morocco, Ukraine
and Uruguay.
Equity interest %
– above 50% and up to 100% of the voting rights – fully consolidated
– above 20% and up to 50% of the voting rights – investment in associated 
company – equity method accounting
1 Share/paid-in capital may not reflect the taxable share/paid-in capital amount and does not
include any paid-in surplus.
2 shares without par value
3 Approximately 33% of voting shares; approximately 6% of total net income and equity
attributable to Novartis
m = million; bn = billion 
The following describe the various types of entities within the Group:
 Holding/Finance: This entity is a holding company and/or performs finance functions for the
Group.
 Sales: This entity performs sales and marketing activities for the Group.
 Production: This entity performs manufacturing and/or production activities for the Group.
 Research: This entity performs research and development activities for the Group.

N OVA R T I S  G R O U P  A N N UA L  R E P O R T  2 0 1 1
258
32. RISK ASSESSMENT DISCLOSURES REQUIRED BY SWISS LAW
The Risk Committee of the Board ensures the Group has imple-
mented an appropriate and effective risk management system and
process. It reviews with management and internal audit the identi-
fication, prioritization and management of the risks, the account-
abilities and roles of the functions involved with risk management,
the risk portfolio and the related actions implemented by manage-
ment. The Risk Committee informs the Board of Directors on a peri-
odic basis.
The Corporate Risk Management function coordinates and
aligns the risk management processes, and reports to the Risk
Committee on a regular basis on risk assessment and risk manage-
ment. Organizational and process measures have been designed to
identify and mitigate risks at an early stage. Organizationally, the
responsibility for risk assessment and management is allocated to
the Divisions, with specialized Corporate Functions such as Finan-
cial Reporting & Accounting, Treasury, Group Quality Operations,
Corporate Health, Safety and Environment, and Business Continu-
ity providing support and controlling the effectiveness of the risk
management by the Divisions.
Financial risk management is described in more detail in Note 16
to the Group’s consolidated financial statements.

N OVA R T I S  G R O U P  A N N UA L  R E P O R T  2 0 1 1
260
REPORT OF THE STATUTORY AUDITOR ON THE CONSOLIDATED FINANCIAL STATEMENTS OF NOVARTIS AG AND
INTERNAL CONTROL OVER FINANCIAL REPORTING
TO THE GENERAL MEETING OF NOVARTIS AG, BASEL
REPORT OF THE STATUTORY AUDITOR ON THE CONSOLIDATED 
FINANCIAL STATEMENTS OF NOVARTIS AG
As statutory auditor, we have audited the consolidated financial
statements of Novartis AG and its consolidated subsidiaries
(“Novartis Group”), which comprise the consolidated income state-
ments, consolidated statements of comprehensive income, consol-
idated statements of changes in equity, consolidated balance
sheets, consolidated cash flow statements and notes (pages 190 to
258) for the year ended December 31, 2011.
Board of Directors’ Responsibility
The Board of Directors is responsible for the preparation and fair
presentation of the consolidated financial statements in accordance
with International Financial Reporting Standards (IFRS) and the
requirements of Swiss law. This responsibility includes designing,
implementing and maintaining an internal control system relevant
to the preparation and fair presentation of consolidated financial
statements that are free from material misstatement, whether due
to fraud or error. The Board of Directors is further responsible for
selecting and applying appropriate accounting policies and making
accounting estimates that are reasonable in the circumstances.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated
financial statements based on our audit. We conducted our audit in
accordance with Swiss law, Swiss Auditing Standards, International
Standards on Auditing and the standards of the Public Company
Accounting Oversight Board of the United States of America. Those
standards require that we plan and perform the audit to obtain rea-
sonable assurance whether the consolidated financial statements
are free from material misstatement. 
An audit involves performing procedures to obtain audit evi-
dence about the amounts and disclosures in the consolidated
financial statements. The procedures selected depend on the audi-
tor’s judgment, including the assessment of the risks of material
misstatement of the consolidated financial statements, whether
due to fraud or error. In making those risk assessments, the audi-
tor considers the internal control system relevant to the entity’s
preparation and fair presentation of the consolidated financial
statements in order to design audit procedures that are appropri-
ate in the circumstances. An audit also includes evaluating the
appropriateness of the accounting policies used and the reason-
ableness of accounting estimates made, as well as evaluating the
overall presentation of the consolidated financial statements. We
believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements for the year
ended December 31, 2011 present fairly, in all material respects,
the financial position, the results of operations and the cash flows
in accordance with International Financial Reporting Standards
(IFRS) as issued by the International Accounting Standards Board
and comply with Swiss law.
REPORT ON OTHER LEGAL REQUIREMENTS
We confirm that we meet the legal requirements on licensing
according to the Auditor Oversight Act (AOA) and independence
(article 728 CO and article 11 AOA) and that there are no circum-
stances incompatible with our independence.
In accordance with article 728a paragraph 1 item 3 CO and
Swiss Auditing Standard 890, we confirm that an internal control
system exists which has been designed for the preparation of con-
solidated financial statements according to the instructions of the
Board of Directors.
We recommend that the consolidated financial statements sub-
mitted to you be approved.

261
Auditors Report on Novartis Consolidated Financial Statements
2 | G R O U P R E V I E W  
16 | H E A LT H C A R E P O R T FO L I O  
6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T  
138 | F I N A N C I A L R E P O R T
REPORT ON THE EFFECTIVENESS OF INTERNAL CONTROL 
OVER FINANCIAL REPORTING
We have also audited the effectiveness of Novartis Group’s internal
control over financial reporting as of December 31, 2011, based on
criteria established in Internal Control – Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).
The Board of Directors and management of Novartis Group are
responsible for maintaining effective internal control over financial
reporting and management is responsible for the assessment of the
effectiveness of internal control over financial reporting included in
the accompanying Report of Novartis Management on Internal Con-
trol Over Financial Reporting in this financial report on page 259.
Our responsibility is to express an opinion on the effectiveness of
Novartis Group’s internal control over financial reporting based on
our integrated audit. 
We conducted our audit of internal control over financial report-
ing in accordance with the standards of the Public Company
Accounting Oversight Board of the United States of America. Those
standards require that we plan and perform the audit to obtain rea-
sonable assurance about whether effective internal control over
financial reporting was maintained in all material respects. An audit
of internal control over financial reporting includes obtaining an
understanding of internal control over financial reporting, assess-
ing the risk that a material weakness exists, testing and evaluating
the design and operating effectiveness of internal control based on
the assessed risk. Our audit also includes performing such other
procedures as we consider necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion. 
A company’s internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with the applicable
accounting standards. A company’s internal control over financial
reporting includes those policies and procedures that (i) pertain to
the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of
the company; (ii) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial state-
ments in accordance with the applicable accounting standards, and
that receipts and expenditures of the company are being made only
in accordance with authorizations of management and directors of
the company; and (iii) provide reasonable assurance regarding pre-
vention or timely detection of unauthorized acquisition, use, or dis-
position of the company’s assets that could have a material effect
on the financial statements. 
Because of its inherent limitations, internal control over finan-
cial reporting may not prevent or detect misstatements. Also, pro-
jections of any evaluation of effectiveness to future periods are sub-
ject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
In our opinion, Novartis Group maintained, in all material
respects, effective internal control over financial reporting as of
December 31, 2011, based on criteria established in Internal Con-
trol – Integrated Framework issued by the COSO.
PricewaterhouseCoopers AG
Peter M. Kartscher
Michael P. Nelligan
Audit expert
Global relationship partner
Auditor in charge
Basel, January 24, 2012

N OVA R T I S  G R O U P  A N N UA L  R E P O R T  2 0 1 1
262
FINANCIAL STATEMENTS OF NOVARTIS AG
INCOME STATEMENTS 
(For the years ended December 31, 2011 and 2010)
2011
2010
Note
CHF millions
CHF millions
Income
Income from financial assets
5 284
6 472
Gain from disposal of intangible assets
356
85
License fees
1 419
1 476
Other income
4
4
Total income
7 063
8 037
Expenses
Financial expense
– 326
– 782
Administrative expenses
– 21
– 21
Amortization of intangible assets
3
– 1 153
– 15
Other expenses
– 69
– 102
Taxes
– 123
– 89
Total expenses
– 1 692
– 1 009
Net income
5 371
7 028
The notes form an integral part of these unconsolidated financial statements.

263
Financial Statements of Novartis AG
2 | G R O U P R E V I E W  
16 | H E A LT H C A R E P O R T FO L I O  
6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T  
138 | F I N A N C I A L R E P O R T
BALANCE SHEETS (PRIOR TO PROFIT APPROPRIATION)
(At December 31, 2011 and 2010) 
2011
2010
Note
CHF millions
CHF millions
Assets
Non-current assets
Goodwill and other intangible assets
3
21 407
176
Financial assets-subsidiaries and associated companies
4
20 881
50 419
Total non-current assets
42 288
50 595
Current assets
Receivables
– subsidiaries
9 428
2 992
– others
46
60
Marketable securities
5
2 183
57
Total current assets
11 657
3 109
Total assets
53 945
53 704
Equity and liabilities
Equity
Total share capital
6
1 373
1 319
Reserves
Legal reserves
7
– General reserve
320
320
– Capital contribution reserve
198
– Reserve for treasury shares
5 744
3 374
Free reserves
8
39 271
40 065
Total reserves
45 533
43 759
Unappropriated earnings
Net income of the year
5 371
7 028
Total unappropriated earnings
5 371
7 028
Total equity
52 277
52 106
Liabilities
Bonds
9
794
792
Provisions
534
519
Accounts payable and accrued liabilities
– subsidiaries
116
22
– others
224
265
Total liabilities
1 668
1 598
Total equity and liabilities
53 945
53 704
The notes form an integral part of these unconsolidated financial statements.

N OVA R T I S  G R O U P  A N N UA L  R E P O R T  2 0 1 1
264
NOTES TO THE FINANCIAL STATEMENTS OF NOVARTIS AG
1. INTRODUCTION
The financial statements of Novartis AG comply with the requirements of the Swiss law for companies, the Code of Obligations (SCO).
2. ACCOUNTING POLICIES
EXCHANGE RATE DIFFERENCES 
Current assets and current liabilities denominated in foreign cur-
rencies are converted at year end exchange rates. Realized
exchange gains and losses as well as all unrealized exchange losses
arising from these as well as those from business transactions are
recorded in the income statement.
GOODWILL AND OTHER INTANGIBLE ASSETS 
Goodwill and other intangible assets are capitalized and amortized
over a period of between five and twenty years. Goodwill and other
intangible assets are reviewed for impairment on a yearly basis. If
necessary an impairment loss is recognized.
FINANCIAL ASSETS
These are valued at acquisition cost less adjustments for foreign
currency losses and any other impairment of value.
MARKETABLE SECURITIES
These are valued at the lower of cost and market value.
BONDS
These are valued on an amortized cost basis such that additional
interest is accrued over the duration of the bonds so that at matu-
rity the balance sheet amount will equal the amount that is due to
be paid.
PROVISIONS
Provisions are made to cover general business risks of the Group.

265
Notes to the Financial Statements of Novartis AG
2 | G R O U P R E V I E W  
16 | H E A LT H C A R E P O R T FO L I O  
6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T  
138 | F I N A N C I A L R E P O R T
3. GOODWILL AND OTHER INTANGIBLE ASSETS
At the Extraordinary General Meeting (EGM) on April 8, 2011
Novartis AG shareholders approved the retrospective merger as of
January 1, 2011 of Novartis AG with Alcon, Inc. which was a Swiss
company. Based on the EGM approval and on the merger agree-
ment, Alcon, Inc. assets and liabilities have been integrated into
Novartis AG at book value.
2011
2010
Goodwill
CHF millions
CHF millions
Cost
January 1
Arising on Alcon, Inc. merger with Novartis AG
39 101
Disposal as a result of a Novartis Group internal 
legal company reorganization
– 16 717
December 31
22 384
Accumulated amortization
January 1
Amortization charges
– 1 140
December 31
– 1 140
Net book value at December 31
21 244
Other intangible assets
Cost
January 1 and December 31
242
242
Accumulated amortization
January 1
– 66
– 51
Amortization charges
– 13
– 15
December 31
– 79
– 66
Net book value at December 31
163
176
Goodwill and other intangible assets
Net book value at December 31
21 407
176
4. FINANCIAL ASSETS
Included in financial assets are CHF 14 412 million (2010: CHF
50 135 million) of investments in subsidiaries and associated com-
panies and CHF 6 469 million (2010: CHF 284 million) of loans to
subsidiaries.
The principal direct and indirect subsidiaries and other hold-
ings of Novartis AG are shown in note 31 to the Group’s consoli-
dated financial statements.

N OVA R T I S  G R O U P  A N N UA L  R E P O R T  2 0 1 1
266
5. MARKETABLE SECURITIES
Included in marketable securities are Novartis AG treasury shares
with a net book value of CHF 2 108 million (2010: CHF 54 million)
(see notes 6 and 7 below). This position includes time deposits of
CHF 72 million (2010: CHF nil) to cover a guarantee and so it is
restricted in its use.
6. SHARE CAPITAL
Number of shares
Movement
Movement
Dec 31, 2009
in year
Dec 31, 2010
in year
Dec 31, 2011
Total Novartis AG shares
2 637 623 000
2 637 623 000
108 000 000
2 745 623 000
Treasury shares
Treasury shares held by Novartis AG
– 107 988 000
– 107 988 000
17 250 542
– 90 737 458
Treasury shares held by subsidiaries
– 67 374 159
8 480 322
– 58 893 837
– 8 541 945
– 67 435 782
Total treasury shares
– 175 362 159
8 480 322
– 166 881 837
8 708 597
– 158 173 240
The Novartis AG share capital consists of registered shares with a
nominal value of CHF 0.50 each.
The number of issued shares increased by 108 million during
the year to 2 745.6 million at December 31, 2011 as a result of
shares exchanged for acquiring the remaining outstanding inter-
ests in Alcon Inc. approved at the Extraordinary General Meeting on
April 8, 2011. This increased the amount of the issued share capi-
tal by CHF 54.0 million to CHF 1 372.8 million at December 31,
2011.
During 2010 the Novartis AG share capital was unchanged.
Treasury share purchases during 2011 totaled 60.1 million
(2010: 0.7 million) with an average purchase price of CHF 52
(2010: CHF 60), treasury share sales totaled 5.3 million (2010: 2.9
million) with an average sale price of CHF 51 (2010: CHF 56),
share-based compensation transactions totaled 6.8 million shares
(2010: 6.3 million shares) respectively and treasury shares used
for the Alcon merger totaled 164.7 million (108.0 million shares
issued on April 8, 2011 plus 56.7 million shares already held as
treasury shares).
The number of treasury shares held by the Company and sub-
sidiaries meet the definitions and requirements of Art. 659b SCO.
Out of the 158 173 240 treasury shares held at December 31,
2011, 146 273 240 are non-dividend bearing with the balance held
for share-based compensation and being dividend bearing. It
should be noted that the Novartis Group’s consolidated financial
statements comply with IFRS. This requires consolidation of enti-
ties, mainly foundations, which do not qualify as subsidiaries in the
sense of Article 659b SCO.

267
Notes to the Financial Statements of Novartis AG
2 | G R O U P R E V I E W  
16 | H E A LT H C A R E P O R T FO L I O  
6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T  
138 | F I N A N C I A L R E P O R T
7. LEGAL RESERVES
GENERAL RESERVE
2011
2010
CHF millions
CHF millions
January 1 and December 31
320
320
CAPITAL CONTRIBUTION RESERVE
2011
CHF millions
January 1
Created as a result of 
Alcon, Inc. merger with Novartis AG
198
December 31
198
RESERVE FOR TREASURY SHARES HELD BY THE GROUP
2011
2010
CHF millions
CHF millions
January 1
3 374
3 872
Transfer from/to free reserves
2 370
– 498
December 31
5 744
3 374
The general reserve must be accumulated until it is at least 20% of
the share capital of Novartis AG in order to comply with the SCO. 
Novartis AG has met the legal requirements for legal reserves
under Articles 659 et. seq. and 663b.10 SCO for the treasury shares
detailed in note 5.
8. FREE RESERVES
2011
2010
CHF millions
CHF millions
January 1
40 065
31 274
Transfer from unappropriated earnings
1 576
8 293
Transfer to/from reserve for treasury shares
– 2 370
498
December 31
39 271
40 065
9. CHF 800 MILLION BONDS 3.625% 2008/2015
On June 26, 2008 Novartis AG issued CHF 800 million of bonds bearing interest at 3.625% per annum and due on June 26, 2015. The
bonds were issued at 100.35% and proceeds received after deducting related costs amounted to CHF 787.9 million. The bonds are val-
ued on an amortized cost basis.

N OVA R T I S  G R O U P  A N N UA L  R E P O R T  2 0 1 1
268
10. CONTINGENT LIABILITIES
Outstanding
Outstanding
liabilities
liabilities
Dec 31, 2011
Dec 31, 2010
CHF millions
CHF millions
Guarantees in favor of subsidiaries to cover capital and interest of bonds and commercial paper program – 
total maximum amount CHF 24 486 million (2010: CHF 24 353 million)
13 950
16 650
Other guarantees in favor of subsidiaries, associated companies and others – total maximum amount 
CHF 2 989 million (2010: CHF 2 643 million)
1 711
1 101
Total
15 661
17 751
11. REGISTRATION, VOTING RESTRICTIONS AND MAJOR SHAREHOLDERS
The Company’s Articles of Incorporation state that no person or
entity shall be registered with the right to vote for more than 2% of
the share capital as set forth in the Commercial Register. In partic-
ular cases the Board of Directors may allow exemptions from the
limitation for registration in the share register.
According to the share register, shareholders owning 2% or
more of the Company’s capital at December 31, excluding Novartis
AG together with Novartis subsidiaries holding treasury shares, are
as follows:
% holding of
% holding of
share capital
share capital
December 31, 2011
December 31, 2010
Novartis Foundation for
Employee Participation, 
Basel, Switzerland
4.1
4.3
Emasan AG, Basel, Switzerland
3.2
3.3
In addition:
Shareholders registered as nominees:
– JPMorgan Chase Bank, New York, US, holds 10.9% (2010: 10.7%)
– Nortrust Nominees, London, GB, holds 3.2% (2010: 2.8%)
– Mellon Bank, Everett, Massachusetts, US, holds 3.0% (2010:
2.9%)
Shareholder acting as American Depositary Share (ADS) depositary:
– JPMorgan Chase Bank, New York, US, holds 11.0% (2010: 9.6%)
Shareholder according to a disclosure notification filed with
Novartis AG and the SIX Swiss Exchange:
– Capital Group Companies, Inc., Los Angeles, US, holds between
3% and 5%.

269
Notes to the Financial Statements of Novartis AG
2 | G R O U P R E V I E W  
16 | H E A LT H C A R E P O R T FO L I O  
6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T  
138 | F I N A N C I A L R E P O R T
12. BOARD AND EXECUTIVE COMPENSATION DISCLOSURES
Novartis AG’s financial statements have been prepared in accor-
dance with the requirements of Swiss company law, the Swiss Code
of Obligations (SCO). This note therefore differs in certain signifi-
cant respects from compensation disclosures in note 27 to the
Group’s consolidated financial statements, which have been pre-
pared in accordance with International Financial Reporting Stan-
dards (IFRS), mainly due to different expense recognition rules
being applied.
12.1) COMPENSATION OF BOARD MEMBERS
GENERAL PRINCIPLES 
The compensation of the Chairman is based on a contract, which
provides for Dr. Daniel Vasella a fixed remuneration of CHF 12.2 mil-
lion, indexed to the average compensation increase for associates
based in Switzerland. One third of his total compensation is paid
out in monthly cash installments; the remaining two-thirds are in
the form of unrestricted Novartis shares that are granted to him
each year at the closing market price of the underlying share at the
end of the day at grant date, in 2011 on January 19, 2011. Follow-
ing his term as Chairman, Dr. Vasella agreed to continue to make
available his know-how to Novartis and to refrain from activities that
compete with any business of Novartis for a multi-year period. Dr.
Vasella will receive fair market compensation in return for his serv-
ices and for complying with the restriction not to compete. Dr.
Vasella carries forward tradable options, shares and benefits
(including pension) as a result of his 14-year tenure as the CEO of
Novartis. In his current capacity he receives no variable compensa-
tion, tradable options or equity other than the shares that are part
of his retainer as Chairman.
The other members of the Board of Directors receive an annual
fixed Board membership fee and additional fees for committee
chairmanships, committee memberships, and other functions to
compensate for their increased responsibilities and engagements.
They do not receive additional fees for attending meetings. With the
exception of the Chairman, the members of the Board of Directors
can choose to receive their fees in cash, shares, or a combination
of both and they receive neither share options nor pension bene-
fits.
The Board of Directors determines the compensation of the
other Board members each year, based on a proposal by the Com-
pensation Committee.
The fee rates for Board membership and functional roles of
other members of the Board of Directors are as follows:
BOARD MEMBER ANNUAL FEE RATES (EXCL. CHAIRMAN)
Annual fee (CHF)
Board membership
350 000
Vice Chairman
350 000
Board Committee chairmanship
10 000
Chairman’s Committee membership
150 000
Audit and Compliance Committee membership
100 000
Risk Committee membership
50 000
Compensation Committee membership
50 000
Corporate Governance and Nomination Committee membership
50 000
Delegated board membership 1
125 000
1The Board of Directors has delegated Rolf M. Zinkernagel to the Scientific Advisory Board of the
Novartis Institute for Tropical Diseases (NITD). The Board of Directors has delegated both Rolf M.
Zinkernagel and William Brody to the Board of Directors of the Genomics Institute of the
Novartis Research Foundation (GNF).

N OVA R T I S  G R O U P  A N N UA L  R E P O R T  2 0 1 1
270
12. BOARD AND EXECUTIVE COMPENSATION DISCLOSURES (CONTINUED)
COMPENSATION IN 2011 AND 2010 
The following compensation tables disclose the compensation
granted to Board members in 2011 with comparatives to 2010. 
BOARD MEMBER COMPENSATION IN 2011 (MARKET VALUE) 1
Corporate
Annual cash 
Shares 
Governance
compen-
(Market
Board 
Audit and
Compen-
and
Delegated 
sation 
value)
Other
Total
member-
Vice
Chairman’s
Compliance
Risk
sation 
Nomination
board 
(CHF)
(CHF)
Shares 
(CHF)
(CHF)
ship
Chairman
Committee
Committee
Committee
Committee
Committee
membership
(A)
(B)2
(Number)
(C)
(A)+(B)+(C)
Daniel Vasella
Chair
Chair
•3
•3
•3
•3
4 060 004
8 786 7354
160 6354
654 2075
13 500 9467
Ulrich Lehner
•
•
•
•
•
•
Chair
1 110 000
–
–
62 6506
1 172 650
William Brody 8
•
•
•
229 688
295 325
5 399
–
525 013
Srikant Datar
•
•
Chair
•
•
550 250
159 779
2 921
–
710 029
Ann Fudge
•
•
•
450 000
–
–
–
450 000
Pierre Landolt 9
•
•
106 000
294 013
5 375
24 1776
424 190
Enrico Vanni
•
•
•
425 000
75 048
1 372
29 4046
529 4527
Andreas von Planta
•
•
Chair
•
448 000
112 026
2 048
32 6856
592 711
Wendelin Wiedeking
•
•
•
132 500
367 529
6 719
30 9656
530 994
Marjorie M.T. Yang
•
Chair
410 000
–
–
24 7196
434 719
Rolf M. Zinkernagel 10
•
•
•
–
650 000
11 883
34 3816
684 381
Total 11
7 921 442
10 740 454
196 352
893 188
19 555 084
1 Does not include reimbursement for travel and other necessary business expenses incurred in the performance of their services as these are not compensation.
2 The value of the shares reflected in this column has been calculated based on market value of the shares at grant date. All shares were granted as per January 19, 2011 against the prevailing share
price of CHF 54.70.
3 Daniel Vasella attended the meetings of these Committees as a guest without voting rights.
4 Includes 12 188 shares paid in 2011 related to the grant of 2010.
5 Includes social security costs due by the individual and paid by the company, pension and life insurance.
6 Includes social security costs due by the individual and paid by the company.
7 Does not include Board member compensation granted by Alcon, Inc. until April 8, 2011.
8 The Board of Directors has delegated William Brody to the Board of Directors of the Genomics Institute of the Novartis Research Foundation (GNF).
9 According to Pierre Landolt, the Sandoz Family Foundation is the economic beneficiary of the compensation.
10 The Board of Directors has delegated Rolf M. Zinkernagel to the Scientific Advisory Board of the Novartis Institute for Tropical Diseases (NITD) and to the Board of Directors of the Genomics Institute
of the Novartis Research Foundation (GNF).
11 Alexandre F. Jetzer-Chung and Hans-Jörg Rudloff were members of the Board of Directors until February 22, 2011. Their compensation was reported in the 2010 Annual Report.

271
Notes to the Financial Statements of Novartis AG
2 | G R O U P R E V I E W  
16 | H E A LT H C A R E P O R T FO L I O  
6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T  
138 | F I N A N C I A L R E P O R T
BOARD MEMBER COMPENSATION IN 2010 (MARKET VALUE) 1
Corporate
Annual cash 
Shares 
Governance
compen-
(Market
Board 
Audit and
Compen-
and
Delegated 
sation 
value)
Other
Total
member-
Vice
Chairman’s
Compliance
Risk
sation 
Nomination
board 
(CHF)
(CHF)
Shares 
(CHF)
(CHF)
ship
Chairman
Committee
Committee
Committee
Committee
Committee
membership
(A)
(B)
(Number)
(C)2
(A)+(B)+(C)
Daniel Vasella
Chair
Chair
•3
•3
•3
•3
3 666 674
7 333 328
131 304
189 260
11 189 2624
Ulrich Lehner
•
•
•
•
•
•
Chair
1 110 000
–
–
59 034
1 169 034
Hans-Joerg Rudloff
•
•
•
•
•
•
750 000
–
–
37 666
787 666
William Brody 5
•
•
•
375 000
150 013
2 686
–
525 013
Srikant Datar
•
Chair
•
•
459 688
100 362
1 797
–
560 050
Ann Fudge
•
•
250 000
150 013
2 686
–
400 013
Alexandre F.
Jetzer-Chung 6
•
350 000
–
–
17 722
367 722
Pierre Landolt 7
•
•
106 000
294 050
5 265
22 604
422 654
Andreas von Planta
•
•
Chair
•
453 000
107 009
1 916
28 344
588 353
Wendelin Wiedeking
•
•
•
150 875
349 174
6 252
26 593
526 642
Marjorie M.T. Yang
•
Chair
410 000
–
–
23 133
433 133
Rolf M. Zinkernagel 8
•
•
•
650 000
–
–
33 677
683 677
Total
8 731 237
8 483 950
151 906
438 033
17 653 220
1Does not include reimbursement for travel and other necessary business expenses incurred in the performance of their services as these are not compensation. All shares were granted as per
January 19, 2010 against the prevailing share price of CHF 55.85.
2Pension and social security costs due by the individual and paid by the company.
3Daniel Vasella attended the meetings of these Committees as a guest from February 1, 2010 without voting rights.
4Does not include Board member compensation granted by Alcon, Inc. and reflects only the compensation for the period starting February 1, 2010 to the end of the year 2010.
5The Board of Directors has delegated William Brody to the Board of Directors of the Genomics Institute of the Novartis Research Foundation (GNF).
6In addition, Alexandre F. Jetzer-Chung was paid CHF 380 004 for consulting services.
7According to Pierre Landolt, the Sandoz Family Foundation is the economic beneficiary of the compensation.
8The Board of Directors has delegated Rolf M. Zinkernagel to the Scientific Advisory Board of the Novartis Institute for Tropical Diseases (NITD) and to the Board of Directors of the Genomics Institute
of the Novartis Research Foundation (GNF).

N OVA R T I S  G R O U P  A N N UA L  R E P O R T  2 0 1 1
272
12. BOARD AND EXECUTIVE COMPENSATION DISCLOSURES (CONTINUED)
12.2) COMPENSATION OF EXECUTIVE COMMITTEE MEMBERS
GENERAL PRINCIPLES
The compensation policies, performance management process and
incentive plans apply equally to the Executive Committee members. 
Decisions concerning the compensation of the Executive Com-
mittee members are based on an evaluation of the individual per-
formance of the members of the Executive Committee as well as on
the performance of their respective business area or function. Com-
pensation of Executive Committee members is highly linked to
Novartis’ performance against performance objectives. The metrics
of performance objectives, including net sales, operating income,
market share, Novartis Economic Value Added (NVA) or innovation,
are designed to appropriately balance short-term and long-term
objectives. On the one hand, objectives are set at ambitious levels
each year to motivate a high degree of business performance with
emphasis on longer term financial objectives. On the other hand,
they are also designed to avoid inappropriate or excessive risk. 
COMPENSATION FOR PERFORMANCE IN 2011 AND 2010
The following compensation tables disclose the compensation
granted to the Executive Committee members for performance in
2011 with comparatives to 2010. The following paragraphs
describe the principles underlying the data in the tables.
ALIGNMENT OF REPORTING AND PERFORMANCE
The compensation tables synchronize the reporting of annual com-
pensation with the performance in the given year, i.e., all amounts
awarded for performance in 2011 and 2010, including the future
ESOP/LSSP match, are disclosed in full in the tables of 2011 and
2010.
DISCLOSURE STRUCTURE
The compensation table shows the compensation granted to the
CEO and each Executive Committee member for performance in
2011 for all compensation elements.
The column “Future ESOP/LSSP match” reflects shares to be
awarded in the future if the Executive Committee member remains
with Novartis for at least three or five years, respectively. 
The Executive Committee members were invited to invest their
annual incentive awards for 2011 and 2010 in the leveraged share
saving plans – either the three-year Swiss Employee Share Owner-
ship Plan (ESOP) or the five-year Leveraged Share Savings Plan
(LSSP) – to further align their interests with those of our sharehold-
ers. Under the plan rules, participants will receive additional shares
(“matching shares”) after the expiration of either the three- or five-
year vesting period. Under the three-year ESOP, for every two shares
invested, the participant receives one matching share. Under the
five-year LSSP, each share invested entitles the participant to
receive one matching share. If a participant leaves Novartis prior to
the expiration of the vesting period, in general, no matching shares
are awarded. 
VALUATION PRINCIPLES
In order to allow a comparison with other companies, the Compen-
sation Committee decided to disclose shares, restricted shares,
RSUs and ADS at their market value on the date of grant. Market
value is the current quoted share price at which a director or an
associate is granted a share, a restricted share or a restricted stock
unit at grant date. The market value of share options is calculated
by using an option pricing valuation model as per grant date. 
Shares, RSUs and share options under the variable compensa-
tion plans are generally granted with a vesting1 period and associ-
ates in Switzerland (including Executive Committee members) may
block2 shares received under any variable compensation plan for up
to 10 years. According to the Swiss Federal Tax Administration and
as the Compensation Committee also firmly believes, such restric-
tions affect the value of shares, RSUs and share options negatively.
In its “Kreisschreiben Nr. 5”, the Swiss Tax Administration provides
for a methodology pursuant to which unvested or blocked shares
or share options shall be valued with a discount for each year they
are unvested or blocked. In addition, for the valuation of share
options, the Swiss Tax Authorities apply – in a standing practice for
Novartis (since 1997) – an option valuation model based on Black-
Scholes.
See also Note 27 to the Group’s consolidated financial state-
ments for information on executive officer and non-executive direc-
tor compensation in accordance with IFRS.
1Vesting refers to the waiting period under a share-based incentive plan that must expire before the
associate becomes irrevocably entitled to the shares, RSUs or share options involved. The associate
cannot sell or exercise unvested share, RSUs or share options. If an associate leaves Novartis prior
to the expiration of the vesting period for reasons other than retirement, disability or death, the asso-
ciate will generally forfeit rights to such shares, RSUs or share options.
2Blocking refers to the ability of associates in Switzerland to opt for an extended trading restriction
period of up to 10 years from the award date (including vesting). Novartis encourages associates to
block their shares because doing so aligns the associates’ interests with those of shareholders.

273
Notes to the Financial Statements of Novartis AG
2 | G R O U P R E V I E W  
16 | H E A LT H C A R E P O R T FO L I O  
6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T  
138 | F I N A N C I A L R E P O R T
EXECUTIVE COMMITTEE MEMBER COMPENSATION FOR PERFORMANCE YEAR 2011 (MARKET VALUE) 1
Base
Total
compensation
Variable compensation
Benefits
Total
compensation
Short-term incentive plans
Long-term incentive plans
Including
Long-Term
Special
Future
future
Performance
share
Pension
Other
ESOP/LSSP
ESOP/LSSP
Equity Plan “Select”
Plan
awards
benefits
benefits
match10
match11,12
Shares
Shares
Options
Shares
Shares
Shares
Cash
Cash
(Market
(Market
(Market
(Market
(Market
(Market
Currency
(Amount)
(Amount)
value)2
value)3
value)4
value)5
value)6
(Amount)7
(Amount)8
(Amount)9
value)
(Amount)
Joseph Jimenez 
(Chief Executive Officer)
CHF
1 916 667
704 000
1 056 033
6 160 047
0
4 550 524
0
172 193
106 889
14 666 353
1 056 033
15 722 386
Juergen 
Brokatzky-Geiger
CHF
696 670
0
616 037
1 232 020
0
582 379
0
150 268
26 117
3 303 491
616 037
3 919 528
Kevin Buehler
(since April 8, 2011) 13
USD
803 611
618 799
1 078 872
2 716 195
0
1 312 775
0
229 624
45 974
6 805 850
1 078 872
7 884 722
David Epstein
USD
933 333
402 630
583 475
2 794 007
0
1 293 468
0
279 409
115 086
6 401 408
583 475
6 984 883
Mark C. Fishman
USD
986 333
13 997
951 304
3 861 038
0
1 347 831
0
252 712
122 315
7 535 530
951 304
8 486 834
Jeff George
CHF
733 334
365 650
365 687
1 462 533
0
443 410
940 000
105 934
48 053
4 464 601
182 871
4 647 472
George Gunn
CHF
845 836
663 000
0
1 105 030
0
930 397
0
98 584
9 992
3 652 839
0
3 652 839
Andrin Oswald
CHF
733 334
682 500
0
1 365 027
0
443 410
940 000
118 403
57 507
4 340 181
0
4 340 181
Jonathan Symonds
CHF
890 000
0
792 025
1 980 034
0
766 171
0
196 350
0
4 624 580
792 025
5 416 605
Thomas Werlen
(until September 30, 2011) 14 CHF
560 001
0
412 516
0
0
0
0
99 836
1 598 454
2 670 807
0
2 670 807
Naomi Kelman 
(as from March 2, 2011) 15
USD
497 826
262 500
0
525 028
0
81 720
4 773 120
18 466
638 443
6 797 103
0
6 797 103
Felix R. Ehrat 
(as from October 1, 2011) 16
CHF
175 000
0
130 405
260 810
0
76 639
0
36 296
4 352
683 502
130 405
813 907
Total 17
CHF
9 401 376
3 563 757
5 685 668 22 323 260
0 11 364 429
6 104 000
1 668 316
2 667 132
62 777 939
5 090 336
67 868 275
1 Does not include reimbursement for travel and other necessary business expenses incurred in
the performance of their services as these are not considered compensation.
2 Participants elected to invest some or all of the value of their annual incentive in the five-year
Leveraged Share Savings Plan (LSSP) or the three-year Swiss  Employee Share Ownership Plan
(ESOP) rather than to receive cash.
3 Novartis shares granted under the Novartis Equity Plan “Select” have a three-year vesting
period.
4 Novartis share options granted under the Novartis Equity Plan “Select” are tradable. Share
options granted outside North America will expire on January 19, 2022, have a three-year
vesting period and have an exercise price of CHF 54.20 per share (the closing price of Novartis
shares on the grant date of January 19, 2012). Based on the option pricing valuation model as
per grant date, the value of the share options granted outside North America used in this table
was CHF 4.30. Share  options on ADSs granted to participants in North America will expire on
January 19, 2022, have a three-year vesting period and an exercise price of USD 58.33 per ADS
(the closing price of Novartis ADSs on the grant date of January 19, 2012). Based on the option
pricing valuation model as per grant date, the value of the share options on ADSs granted to
participants in North America used in this table was USD 4.14.
5 Awarded based on the achievement of Novartis Economic Value Added (NVA) objectives over
the performance period ended December 31, 2011.
6 The special share awards consist of RSUs to Jeff George and to Andrin Oswald awarded on
September 1, 2011, against the closing share price of that day (CHF 47.00). These RSUs have a
five year vesting period. The special share awards also consist of a special award of 88 000
shares granted to Naomi Kelman to compensate her loss of equity from her former employer.
This grant was awarded on April 1, 2011 at the price of USD 54.24 with staggered vesting over
seven years.
7 Service costs of pension and post-retirement healthcare benefits accumulated in 2011.
8 Includes perquisites and other compensation paid during 2011. Does not include cost
allowances and tax-equalization payments regarding the international assignment of David
Epstein, Jeff George and Andrin Oswald. Does not include an annual pension in payment for
Kevin Buehler as a result of a change of control clause (USD 346 362 being the time pro-rated
amount for the period from April 8, 2011 to December 31, 2011).
9 The value of all equity grants included in this table has been calculated based on market value.
10 Reflects shares to be awarded in the future under the share saving plans, either the three-year
Swiss Employee Share Ownership Plan (ESOP) or the five-year Leveraged Share Savings Plan
(LSSP). Participants will receive additional shares (“matching shares”) after the expiration of
either the three- or five-year vesting period.
11 The values of the shares, RSUs and share options reflected in this table have been calculated
based on market value. The closing share price on the grant date January 19, 2012 was CHF
54.20 per Novartis share and USD 58.33 per ADS.
12 All amounts are gross amounts (i.e., before deduction of social security and income tax due by
the executives). The employer social security contribution is not included.
13 Excludes the annual incentive and an equity grant that were awarded to K. Buehler prior to
April 8, 2011 and which relate to past performance.
14 Thomas Werlen stepped down from the Executive Committee as per September 30, 2011 and
decided to leave Novartis on January 31, 2012. The base compensation and benefits
information in the table reflects his pro rata compensation over the period from January 1,
2011 to September 30, 2011 (i.e. the period during which he was member of the Executive
Committee). The other compensation (“Other benefits”) includes the contractual salary
payments from October 1, 2011 to January 31, 2012 and the pension benefits costs over this
period. The other compensation (“Other benefits”) does not include, however, the fair market
compensation for refraining to compete with any business of Novartis over an agreed period
after leaving the Company. Mr. Werlen will receive fair market compensation in return for
complying with the restriction not to compete.
15 The table reflects the compensation as Permanent Attendee to the Executive Committee from
date of hiring (March 2, 2011) until December 31, 2011.
16 The table reflects the compensation as Permanent Attendee to the Executive Committee from
hire date (October 1, 2011) until December 31, 2011.
17 Amounts in USD for Kevin Buehler, David Epstein, Mark C. Fishman and Naomi Kelman were
converted at a rate of CHF 1.00 = USD 1.130, which is the same average exchange rate used in
the Group’s consolidated financial statements.

N OVA R T I S  G R O U P  A N N UA L  R E P O R T  2 0 1 1
274
12. BOARD AND EXECUTIVE COMPENSATION DISCLOSURES (CONTINUED)
EXECUTIVE COMMITTEE MEMBER COMPENSATION FOR PERFORMANCE IN 2010 (MARKET VALUE) 1
Base
Total
compensation
Variable compensation
Benefits
Total
compensation
Short-term incentive plans
Long-term incentive plans
Including
Long-Term
Special
Future
future
Performance
share
Pension
Other
ESOP/LSSP
ESOP/LSSP
Equity Plan “Select”
Plan
awards
benefits
benefits
match10
match11,12
Shares
Shares
Options
Shares
Shares
Shares
Cash
Cash
(Market
(Market
(Market
(Market
(Market
(Market
Currency
(Amount)
(Amount)
value)2
value)3
value)4
value)5
value)6
(Amount)7
(Amount)8
(Amount)9
value)
(Amount)
Joseph Jimenez 
(Chief Executive Officer 
since February 1, 2010,
previously ECN member)
CHF
1 458 334
590 000
885 046
6 812 994
0
2 028 714
0
166 162
92 287
12 033 537
885 046
12 918 583
Juergen 
Brokatzky-Geiger
CHF
678 338
0
680 030
1 360 006
0
625 495
0
146 470
11 965
3 502 304
680 030
4 182 334
David Epstein 13
USD
832 500
390 937
494 569
2 406 014
0
1 060 304
0
201 800
93 065
5 479 189
494 569
5 973 758
Mark C. Fishman
USD
968 000
14 036
953 982
3 872 028
0
1 769 512
0
256 555
122 518
7 956 631
953 982
8 910 613
Jeff George 13
CHF
645 837
643 400
0
643 381
715 464
293 192
540 500
67 077
51 520
3 600 371
0
3 600 371
George Gunn 13
CHF
825 000
940 600
0
1 632 904
0
825 861
0
107 660
15 850
4 347 875
0
4 347 875
Andrin Oswald 13
CHF
645 837
629 800
0
1 259 413
0
387 167
540 500
70 465
30 347
3 563 529
0
3 563 529
Jonathan Symonds 13
CHF
836 722
0
836 746
1 740 007
0
404 124
0
136 493
0
3 954 092
836 746
4 790 838
Thomas Werlen
CHF
725 008
0
547 547
547 547
608 870
750 375
0
122 617
22 366
3 324 330
547 547
3 871 877
Total 14,15
CHF
7 688 645
3 225 208
4 456 706 20 529 074
1 324 334
8 259 586
1 081 000
1 293 900
448 667
48 307 120
4 456 706
52 763 826
1 Does not include reimbursement for travel and other necessary business expenses incurred in
the performance of their services as these are not considered compensation.
2 Participants elected to invest some or all of the value of their incentive in the five-year
Leveraged Share Savings Plan (LSSP) or the three-year Swiss Employee Share Ownership Plan
(ESOP; if eligible) rather than to receive cash.
3 Novartis shares granted under the Novartis Equity Plan “Select” have either a two or three-year
vesting period depending on the jurisdiction of the participant.
4 Novartis share options granted under the Novartis Equity Plan “Select” are tradable. Share
options granted outside North America will expire on January 19, 2021, have a two-year vesting
period in Switzerland (three years in other countries) and have an exercise price of CHF 54.70
per share (the closing price of Novartis shares on the grant date of January 19, 2011). Based
on the option pricing valuation model as per grant date, the value of the share options granted
outside North America used in this table was CHF 5.06. Share options on ADSs granted to
participants in North America will expire on January 19, 2021, have a three-year vesting period
and an exercise price of USD 57.07 per ADS (the closing price of Novartis ADSs on the grant
date of January 19, 2011). Based on the option pricing valuation model as per grant date, the
value of the share options on ADSs granted to participants in North America used in this table
was USD 5.94.
5 Awarded based on the achievement of Novartis Economic Value Added (NVA) objectives over
the performance period ended December 31, 2010.
6 The special share awards consist of RSUs to Jeff George and to Andrin Oswald awarded on
September 1, 2010, against the closing share price of that day of CHF 54.05. These awarded
RSUs have a five-year vesting period.
7 Service costs of pension and post-retirement healthcare benefits accumulated in 2010, and
employer contributions to defined contribution pension plans in 2010.
8 Includes perquisites and other compensation paid during 2010. Does not include cost
allowances and tax-equalization payments regarding the international assignment of David
Epstein, Jeff George and Andrin Oswald.
9 The value of all equity grants included in this table has been calculated based on market value.
10 Reflects shares to be awarded in the future under the share saving plans, either the three-year
Swiss Employee Share Ownership Plan (ESOP) or the five-year Leveraged Share Savings Plan
(LSSP). Participants will receive additional shares (“matching shares”) after the expiration of
either the three- or five-year vesting period.
11 The values of the shares, RSUs and share options reflected in this table have been calculated
based on market value. The closing share price on the grant date January 19, 2011 was CHF
54.70 per Novartis share and USD 57.07 per ADS.
12 All amounts are gross amounts (i.e., before deduction of social security and income tax due by
the executives). The employer’s share of social security contributions is not included.
13 The table reflects the compensation as a Permanent Attendee to the Executive Committee over
the period from January 1, 2010 to January 31, 2010 and as a member of the Executive
Committee over the period from February 1, 2010 to December 31, 2010.
14 Amounts in USD for David Epstein and Mark C. Fishman were converted at a rate of CHF 1.00 =
USD 0.961, which is the same average exchange rate used in the Group’s consolidated financial
statements.
15 Daniel Vasella (Chairman and CEO of Novartis until January 31, 2010), Raymund Breu, Jörg
Reinhardt, Andreas Rummelt and Thomas Wellauer stepped down from the Executive
Committee as of January 31, 2010. Their remuneration for this period is disclosed in the table
“Compensation for Executive Committee members who stepped down during 2010”.

275
Notes to the Financial Statements of Novartis AG
2 | G R O U P R E V I E W  
16 | H E A LT H C A R E P O R T FO L I O  
6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T  
138 | F I N A N C I A L R E P O R T
EXECUTIVE COMMITTEE MEMBER - EQUITY AWARDS FOR PERFORMANCE YEAR 2011 (NUMBER OF EQUITY INSTRUMENTS)
Variable compensation
Short-term 
incentive plans
Long-term incentive plans
Equity Plan “Select”
Long-Term Performance Plan
Special share awards
Future ESOP/LSSP match
Shares
Shares
Options
Shares
Shares
Shares
(Number)
(Number)
(Number)
(Number)
(Number)
(Number)
Joseph Jimenez 
(Chief Executive Officer)
19 484
113 654
0
83 958
0
19 484
Juergen Brokatzky-Geiger
11 366
22 731
0
10 745
0
11 366
Kevin Buehler 
(since April 8, 2011)
18 496
46 566
0
22 506
0
18 496
David Epstein
10 003
47 900
0
22 175
0
10 003
Mark C. Fishman
16 309
66 193
0
23 107
0
16 309
Jeff George
6 747
26 984
0
8 181
20 000
3 374
George Gunn
0
20 388
0
17 166
0
0
Andrin Oswald
0
25 185
0
8 181
20 000
0
Jonathan Symonds
14 613
36 532
0
14 136
0
14 613
Thomas Werlen 
(until September 30, 2011)
7 611
0
0
0
0
0
Naomi Kelman 
(as from March 2, 2011) 1
0
9 001
0
1 401
88 000
0
Felix R. Ehrat 
(as from October 1, 2011) 1
2 406
4 812
0
1 414
0
2 406
Total
107 035
419 946
0
212 970
128 000
96 051
1The table reflects the compensation as Permanent Attendee to the Executive Committee from date of hiring until December 31, 2011.
EXECUTIVE COMMITTEE MEMBER COMPENSATION FOR PERFORMANCE IN 2010 (NUMBER OF EQUITY INSTRUMENTS)

N OVA R T I S  G R O U P  A N N UA L  R E P O R T  2 0 1 1
276
12. BOARD AND EXECUTIVE COMPENSATION DISCLOSURES (CONTINUED)
COMPENSATION FOR EXECUTIVE COMMITTEE MEMBERS 
WHO STEPPED DOWN DURING 2010 (MARKET VALUE)
Total
compensation
(CHF) 1
Daniel Vasella 2
15 347 294
Raymund Breu 3
2 846 283
Joerg Reinhardt 4
3 524 149
Andreas Rummelt 5
1 738 300
Thomas Wellauer 6
2 845 832
Total
26 301 858
1The value of the shares reflected in the total compensation has been calculated based on market
value.
2Compensation relates to the period until January 31, 2010 during which Daniel Vasella served in
his role as Chairman and Chief Executive Officer. Includes shares to be awarded in the future
under the Leveraged Shares Savings Plan (LSSP). Includes a one-time payment of CHF 12
million in the form of an insurance policy and the conclusion of his residual statutory and
contractual employment entitlements.
3Compensation relates to the period until January 31, 2010 when Raymund Breu stepped down
from the Executive Committee. Includes a special award in recognition of his contributions to
Novartis.
4Compensation relates to the period until Joerg Reinhardt left Novartis.
5Compensation relates to the period until Andreas Rummelt left Novartis. Includes a special
award in recognition of his contribution to the A (H1N1) project.
6Compensation relates to the period until Thomas Wellauer left Novartis. Includes a special award
in recognition of his contributions to the procurement savings project. Also includes a special
contribution to his pension fund.
TOTAL COMPENSATION TO EXECUTIVE COMMITTEE MEMBERS IN 2010
(MARKET VALUE)
Total
compensation
(CHF)
Executive Committee member compensation for performance
in 2010
52 763 826
Compensation for Executive Committee members who stepped 
down during 2010
26 301 858
Total
79 065 684
The aggregate amount of compensation of all Executive Committee
members in 2010 (incl. compensation of Executive Committee
members who stepped down during 2010) is CHF 79 065 684
(compared to CHF 67 868 275 in 2011). The factors which may
influence in one way or another the difference of the aggregate
amount of compensation of all Executive Committee members
between 2010 and 2011 include, among others, the different com-
position of the Executive Committee (incl. the inclusion of Perma-
nent Attendees to the Executive Committee), the variations in aver-
age compensation mix and individual objective attainment.
12.3) SHARES AND SHARE OPTIONS OWNED BY BOARD MEMBERS
The total number of vested and unvested Novartis shares and share
options owned by Board members and “persons closely linked”1 to
them as of the end of the day of January 19, 2012, and the end of
the day of January 19, 2011, is shown in the following tables.
As of the end of the day of January 19, 2012, and the end of the
day of January 19, 2011, none of the Board members together with
“persons closely linked”1 to them owned 1% or more of the out-
standing shares of Novartis, either directly or through share
options.
1“Persons closely linked” are (i) their spouse, (ii) their children below age 18, (iii) any legal entities that
they own or otherwise control, and (iv) any legal or natural person who is acting as their fiduciary.
SHARES OWNED BY BOARD MEMBERS
Number of shares 1,2
As of
As of
January 19, 2012
January 19, 2011
Daniel Vasella
3 306 730
3 288 608
Ulrich Lehner
22 193
22 193
Hans-Joerg Rudloff
NA
40 080
William Brody
10 532
5 133
Srikant Datar
20 263
17 342
Ann Fudge
7 008
6 008
Alexandre F. Jetzer-Chung
NA
80 800
Pierre Landolt 3
40 442
35 061
Enrico Vanni
4 839
NA
Andreas von Planta
111 628
109 580
Wendelin Wiedeking
40 901
34 182
Marjorie M.T. Yang
18 000
18 000
Rolf M. Zinkernagel
34 683
22 800
Total
3 617 219
3 679 787
NA – Not applicable.
1Includes holdings of “persons closely linked” to Board members (see definition under 12.3).
2Each share provides entitlement to one vote.
3According to Pierre Landolt, the Sandoz Family Foundation is the economic beneficiary of all
shares.

277
Notes to the Financial Statements of Novartis AG
2 | G R O U P R E V I E W  
16 | H E A LT H C A R E P O R T FO L I O  
6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T  
138 | F I N A N C I A L R E P O R T
SHARE OPTIONS OWNED BY BOARD MEMBERS
Number of share options 1
Granted by Novartis 
Share options
As of 
As of 
in 2002 or earlier1
acquired in the market2
January 19, 2012
January 19, 2011
Daniel Vasella
0
0
2 433 290
3 565 366
Ulrich Lehner
0
0
0
Hans-Joerg Rudloff
0
NA
NA
24 570
William Brody
0
0
0
Srikant Datar
0
0
0
Ann Fudge
0
0
0
Alexandre F. Jetzer-Chung
0
NA
NA
9 214
Pierre Landolt 3
0
0
0
6 911
Enrico Vanni
0
0
0
Andreas von Planta
0
0
0
Wendelin Wiedeking
0
0
0
Marjorie M.T. Yang
0
0
0
Rolf M. Zinkernagel
0
0
0
15 357
Total
0
0
2 433 290
3 621 418
NA – Not applicable.
1The last year in which Novartis granted share options to non-executive Board members was in 2002. In 2002, Novartis granted 79 087 share options to non-executive Board members at an exercise
price of CHF 62 and a term of nine years.
2
2
T
j
 
7
0
8
0
 
2
T
j
 
7
0
8
0

N OVA R T I S  G R O U P  A N N UA L  R E P O R T  2 0 1 1
278
12. BOARD AND EXECUTIVE COMPENSATION DISCLOSURES (CONTINUED)
SHARE OPTIONS OWNED BY EXECUTIVE COMMITTEE MEMBERS
Number of share options 1
As of 
As of 
2012
2011
2010
2009
2008
Other
January 19, 2012
January 19, 2011
Joseph Jimenez
552 076
157 266
709 342
709 342
Juergen Brokatzky-Geiger
75 705
109 016
146 436
331 157
331 157
Kevin Buehler
(as from April 8, 2011)
782 4852
782 485
NA
David Epstein
267 777
267 777
590 229
Mark C. Fishman
184 870
587 149
772 019
850 809
Jeff George
141 396
114 979
256 375
256 375
George Gunn
94 371
94 371
94 371
Andrin Oswald
5 633
5 633
5 633
Jonathan Symonds
54 348
54 348
54 348
Thomas Werlen
(until September 30, 2011)
NA
NA
NA
NA
NA
NA
NA
608 653
Naomi Kelman 
(as from March 2, 2011) 3
NA
Felix R. Ehrat 
(as from October 1, 2011) 3
NA
Total
–
141 396
–
627 781
451 152
2 053 178
3 273 507
3 500 917
NA – Not applicable.
1Share options disclosed for a specific year were granted under the Novartis Equity Plan “Select.” The column “Other” refers to share options granted in 2005 or earlier, to share options granted to
these executives while they were not Executive Committee members, and to share options bought by the Executive Committee members or “persons closely linked” to them (see definition under
12.3) on the market.
2Consists of non tradable options and share settled appreciation rights resulting from conversion of Alcon equity into Novartis equity.
3Naomi Kelman and Felix R. Ehrat became members of the Executive Committee as from 1 January 2012. From March 2, 2011 to December 31, 2011, Naomi Kelman was Permanent Attendee to the
Executive Committee. From October 1, 2011 to December 31, 2011, Felix R. Ehrat was Permanent Attendee to the Executive Committee.
TERMS OF SHARE OPTIONS GRANTED
The share options granted to the Executive Committee members
under the variable compensation plans are exercisable for one
share each (1:1). The terms of the share options granted since
2007 are shown in the table below.
TERMS OF SHARE OPTIONS
Exercise price
Vesting (years)
Term
Grant year
(CHF/USD)
(CH/other countries)
(years)
2012
54.20/58.33
3/3
10
2011
54.70/57.07
2/3
10
2010
55.85/53.70
2/3
10
2009
53.65/46.42
2/3
10
2008
64.05/57.96
2/3
10
12.5) LOANS AND OTHER PAYMENTS
LOANS TO BOARD MEMBERS OR EXECUTIVE COMMITTEE MEMBERS
No loans were granted to current or former Board members or Exec-
utive Committee members during 2011 and 2010. No such loans
were outstanding as of December 31, 2011 and December 31, 2010.
OTHER PAYMENTS TO BOARD MEMBERS OR EXECUTIVE COMMITTEE 
MEMBERS
During 2011 and 2010, no payments (or waivers of claims) other
than those set out in the Board Member Compensation tables, the
Executive Committee Member Compensation tables and the table
of compensation of Executive Committee members who stepped
down during 2011 were made to current Board members or Exec-
utive Committee members or to “persons closely linked” to them
(see definition under 12.3).

279
Notes to the Financial Statements of Novartis AG
2 | G R O U P R E V I E W  
16 | H E A LT H C A R E P O R T FO L I O  
6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T  
138 | F I N A N C I A L R E P O R T
PAYMENTS TO FORMER BOARD MEMBERS OR EXECUTIVE COMMITTEE 
MEMBERS
During 2011 and 2010, no payments (or waivers of claims) were
made to former Board members or Executive Committee members
or to “persons closely linked” to them (see definition under 12.3),
except for an amount of CHF 62 346 (2010: CHF 62 298) that was
paid to the Honorary Chairman, and an amount of CHF 1 129 for
social security arrears which was paid in favor of a former member
of the Board of Directors and an amount of CHF 25 596, which was
paid to a former member of the Executive Committee as deferred
compensation.
13. RISK ASSESSMENT DISCLOSURES
Novartis AG, as the ultimate parent company of the Novartis Group,
is fully integrated into the Group-wide internal risk assessment
process and is fully integrated into the process described in note 32
to the Group’s consolidated financial statements.

N OVA R T I S  G R O U P  A N N UA L  R E P O R T  2 0 1 1
280
PROPOSAL FOR THE APPROPRIATION OF THE AVAILABLE EARNINGS OF NOVARTIS AG
2011
2010
CHF
CHF
Available unappropriated earnings
Balance brought forward
–
–
Net income of the year
5 370 749 043
7 027 682 826
Partial use of free reserves
477 787 917
–
Total available earnings
5 848 536 960
7 027 682 826
Appropriation
Payment of a dividend of CHF 2.25 (2010: CHF 2.20) gross on 2 599 349 760 (2010: 2 478 241 163) dividend bearing shares 
with a nominal value of CHF 0.50 each
– 5 848 536 960
– 5 452 130 559
Transfer to free reserves
–
– 1 575 552 267
Balance to be carried forward
–
–

281
Report of the Auditors on the Novartis AG Financial Statements
2 | G R O U P R E V I E W  
16 | H E A LT H C A R E P O R T FO L I O  
6 0 | C O R P O R AT E C I T I Z E N S H I P  
8 6 | C O R P O R AT E G OV E R N A N C E  
114 | C O M P E N S AT I O N R E P O R T  
138 | F I N A N C I A L R E P O R T
REPORT OF THE STATUTORY AUDITOR ON THE FINANCIAL STATEMENTS OF NOVARTIS AG
TO THE GENERAL MEETING OF NOVARTIS AG, BASEL
REPORT OF THE STATUTORY AUDITOR ON THE
FINANCIAL STATEMENTS OF NOVARTIS AG
As statutory auditor, we have audited the financial statements of
Novartis AG, which comprise the income statement, balance sheet
and notes (pages 262 to 279), for the year ended December 31,
2011.
Board of Directors’ Responsibility
The Board of Directors is responsible for the preparation of the
financial statements in accordance with the requirements of Swiss
law and the Company’s articles of incorporation. This responsibil-
ity includes designing, implementing and maintaining an internal
control system relevant to the preparation of financial statements
that are free from material misstatement, whether due to fraud or
error. The Board of Directors is further responsible for selecting and
applying appropriate accounting policies and making accounting
estimates that are reasonable in the circumstances. 
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial state-
ments based on our audit. We conducted our audit in accordance
with Swiss law and Swiss Auditing Standards. Those standards
require that we plan and perform the audit to obtain reasonable
assurance whether the financial statements are free from material
misstatement. 
An audit involves performing procedures to obtain audit evi-
dence about the amounts and disclosures in the financial state-
ments. The procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatement of
the financial statements, whether due to fraud or error. In making
those risk assessments, the auditor considers the internal control
system relevant to the entity’s preparation of the financial state-
ments in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opin-
ion on the effectiveness of the entity’s internal control system. An
audit also includes evaluating the appropriateness of the account-
ing policies used and the reasonableness of accounting estimates
made, as well as evaluating the overall presentation of the financial
statements. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements for the year ended Decem-
ber 31, 2011 comply with Swiss law and the Company’s articles of
incorporation. 
REPORT ON OTHER LEGAL REQUIREMENTS
We confirm that we meet the legal requirements on licensing
according to the Auditor Oversight Act (AOA) and independence
(article 728 CO and article 11 AOA) and that there are no circum-
stances incompatible with our independence.
In accordance with article 728a paragraph 1 item 3 CO and Swiss
Auditing Standard 890, we confirm that an internal control system
exists which has been designed for the preparation of financial
statements according to the instructions of the Board of Directors.
We further confirm that the proposed appropriation of available
earnings complies with Swiss law and the Company’s articles of
incorporation. We recommend that the financial statements sub-
mitted to you be approved.
PricewaterhouseCoopers AG
Peter M. Kartscher
Gerd Tritschler
Audit expert
Audit expert
Auditor in charge
Basel, January 24, 2012

ACKNOWLEDGEMENTS
We would like to thank all contributors to 
this Novartis Annual Report for sharing 
their knowledge and personal experiences.
282
N O VA RT I S  G R O U P A N N UA L  R E PO R T  2 0 11
ANNUAL REPORT PHOTOGRAPHY
Each year Novartis commissions a photographer 
to portray a unique, personal and artistic 
perspective of healthcare around the world. 
Depicting the diversity of patients, medical 
professionals, researchers and caregivers, these 
photographs demonstrate the complex realities 
of global healthcare. 
We are grateful to Eugene Richards, and to the 
patients and caregivers who shared their images 
and stories in the Annual Report 2011. 
With the exception of Novartis associates or 
other people speciﬁ cally so identiﬁ ed, people 
in the photographs and stories have no actual 
or implied connection with Novartis or with 
the Group’s products.

283
2 | G R O UP R E V IE W 
16 | HE A LT H C A R E P O R T FO L I O 
6 0 | C O R P O R AT E C I T IZE NSHIP 
8 6 | C O R P O R AT E G OV E R N A N C E 
114 | C O MPE NS AT I O N R E P O R T 
13 8 | F IN A N C I A L R E P O R T
Eugene Richards was born in Dorchester, Massachusetts, United 
States. Following college he served with Volunteers in Service to 
America (VISTA) in eastern Arkansas, then founded a social service 
organization and community newspaper. The photographs he made 
during that time were collected in his first book, Few Comforts or 
Surprises: The Arkansas Delta.
Returning to Dorchester, Mr. Richards documented racially charged 
changes in his old neighborhood, resulting in the book, Dorchester 
Days. Mr. Richards began to work increasingly as a freelance 
magazine photog rapher, undertaking assignments on such diverse 
subjects as emergency medicine, the American family, river blind-
ness, the war in Bosnia, and aging and death in America. 
Mr. Richards has published several other award-winning books, 
including Exploding Into Life, which chronicles his ﬁ rst wife’s struggle 
with breast cancer; Below The Line, a documentation of rural and 
urban poverty in America; Cocaine True, Cocaine Blue, a study of the 
impact on society of drug addiction; The Fat Baby, 15 textual and 
photographic essays; The Blue Room, a study of abandoned and 
deserted houses in rural America; and A Procession of Them, which 
confronts the plight of the institutionalized mentally disabled. His 
most recent book, War Is Personal, is an assessment in words and 
pictures of the human consequences of the Iraq war.
 
Among numerous honors, Mr. Richards has received a Guggenheim 
Fellowship, National Endowment for the Arts grants, the W. Eugene 
Smith Memorial Award, the Kraszna-Krausz Award for Photographic 
Innovation in Books, the Robert F. Kennedy Lifetime Achievement 
Award, and the Amnesty International Media Award. 
The books Cocaine True, Cocaine Blue and Dorchester Days were 
chosen for inclusion in The Open Book, an exhibition and catalog 
that recognizes the ﬁ nest photographic books from the past 100 
years. The Fat Baby and Dorchester Days are cited in the anthology, 
The Photobook: A History, Volume II. But, the day came, a ﬁ lm written 
and directed by Mr. Richards, was named Best Short Film at the 
Full Frame Documentary Film Festival.
EUGENE RICHARDS

284
N O VA RT I S  G R O U P A N N UA L  R E PO R T  2 0 11
KEY DATES FOR 2012
Anticipated key reporting dates
Annual General Meeting 
February 23, 2012
irst Quarter 2012 Results
April 24, 2012 
econd Quarter and 
irst Half 2012 Results
July 19, 2012 
hird Quarter and 
irst Nine Months 2012 Results
October 25, 2012
ull Year 2012
 January 2013
CONTACT INFORMATION
or further information regarding
ovartis please contact:
ovartis International AG
CH-4002 Basel
witzerland
General information
el: + 41 61 324 11 11
ax:+ 41 61 324 80 01
Investor relations
el: + 41 61 324 79 44
ax:+ 41 61 324 84 44
-mail: investor.relations@novartis.com
Share registry
el: + 41 61 324 72 04
ax:+ 41 61 324 32 44
-mail: share.registry@novartis.com
Media relations
el: + 41 61 324 22 00
ax:+ 41 61 324 90 90
-mail: media.relations@novartis.com
ovartis on the internet
ww.novartis.com
ovartis Annual Report on the internet
ww.novartis.com/annualreport2011
FORWARD-LOOKING STATEMENTS
his presentation contains forward-looking statements that can 
e identified by terminology such as “planned,” “expected,” “will,”
potential,” “pipeline,” or similar expressions, or by express or
mplied discussions regarding potential new products, potential 
ew indications for existing products, or regarding potential 
uture revenues from any such products; or regarding potential
uture sales or earnings of the Novartis Group or any of its divi-
ions; or by discussions of strategy, plans, expectations or inten-
ions. You should not place undue reliance on these statements. 
uch forward-looking statements reflect the current views of the 
Group regarding future events, and involve known and unknown 
isks, uncertainties and other factors that may cause actual 
esults to be materially different from any future results, perfor-
ance or achievements expressed or implied by such statements. 
here can be no guarantee that any new products will be approved 
or sale in any market, or that any new indications will be approved
or any existing products in any market, or that any approvals 
hich are obtained will be obtained at any particular time, or that 
ny such products will achieve any particular revenue levels. Nor 
an there be any guarantee that the Group, or any of its divisions, 
ill achieve any particular financial results. In parti cular, man-
gement’s expectations could be affected by, among other things, 
nexpected regulatory actions or delays or government regula-
ion generally, including the potential outcomes of our ongoing 
iscussions with health authorities concerning Rasilez/Tekturna
s a result of the ALTITUDE study, and including the outcome of 
ealth authority reviews of the benefits and risks of Gilenya; unex-
ected clinical trial results, including additional analyses of exist-
ng clinical data or unexpected new clinical data, including any 
otential new analyses of the ALTITUDE study which may occur;
he Group’s ability to obtain or maintain patent or other proprie-
ary intellectual property protection, including the ultimate extent 
f the impact on the Group of the loss of patent protection on key 
roducts which commenced last year and will continue this year; 
nexpected product manufacturing issues, including the potential 
utcomes of the Warning Letter issued to us with respect to three 
andoz manufacturing facilities, and the potential outcome of the 
hutdown of the OTC manufacturing facility at Lincoln, Nebraska; 
overnment, industry, and general public pricing pressures; 
ncertainties regarding actual or potential legal proceedings, 
ncluding, among others, actual or potential product liability 
itigation, litigation regarding sales and marketing practices, share-
older litigation, government investigations and intellectual prop-
rty disputes; competition in general; uncertainties regarding the 
fter-effects of the recent global financial and economic crisis; 
ncertainties regarding future global exchange rates and uncer-
ainties regarding future demand for our products; uncertainties 
nvolved in the development of new healthcare products; the impact 
hat the foregoing factors could have on the values attributed to 
he Group’s assets and liabilities as recorded in the Group’s con-
olidated balance sheet; and other risks and factors referred to in 
ovartis AG’s current Form 20-F on file with the US Securities and 
xchange Commission. Should one or more of these risks or uncer-
ainties materialize, or should underlying assumptions prove incor-
ect, actual results may vary materially from those described 
erein as anticipated, believed, estimated or expected. Novartis is 
roviding the information in this presentation as of this date and 
oes not undertake any obligation to update any forward-looking
tatements as a result of new information, future events or otherwise.
All product names printed in italics in this Annual Report are 
rademarks owned by or licensed to the Novartis Group.
he use of the registered trademark ® in combination with 
ro ducts in normal script indicates third-party brands.
he business policy of Novartis takes into account the OECD’s
Guidelines for Multinational Enterprises, with their recommen-
ations on the disclosure of information. 
ur Annual Report is published in English, with a German 
ranslation available. 
Publisher: Novartis International AG, Basel, Switzerland 
Design: phorbis Communications AG, Basel, Switzerland
Print: Swissprinters AG, Zürich, Switzerland 
© Novartis AG, 2012
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