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Bristol-Myers Squibb Reports Fourth Quarter and Full Year 2015 Financial Results

On January 28, 2016 Bristol-Myers Squibb Company (NYSE:BMY) reported results for the fourth quarter and full year of 2015, which were highlighted by strong sales for Opdivo, Eliquis and Orencia and continued advances in the company’s Immuno-Oncology portfolio (Press release, Bristol-Myers Squibb, JAN 28, 2016, View Source [SID:1234508885]).

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"We have had an unprecedented year in Immuno-Oncology, delivered strong overall business performance and made strategic investments that position the company well for growth," said Giovanni Caforio, M.D., chief executive officer, Bristol-Myers Squibb. "We are looking forward to 2016 as an exciting year to continue our leadership in Immuno-Oncology, drive performance of our in-line products and continue to advance our diversified R&D portfolio."

FOURTH QUARTER FINANCIAL RESULTS

Bristol-Myers Squibb posted fourth quarter 2015 revenues of $4.3 billion, an increase of 1% compared to the same period a year ago. Global revenues increased 6% adjusted for foreign exchange impact.

U.S. revenues increased 9% to $2.3 billion in the quarter compared to the same period a year ago. International revenues decreased 7%. When adjusted for foreign exchange impact, international revenues increased 3%.

Gross margin as a percentage of revenues was 77.8% in the quarter compared to 77.3% in the same period a year ago.

Marketing, selling and administrative expenses, which includes advertising and product promotion expenses, increased 10% to $1.5 billion in the quarter.

Research and development expenses increased 61% to $1.9 billion in the quarter due to higher charges resulting from business development transactions and an in-process research and development (IPRD) impairment.

The effective tax benefit rate was 59.7% in the quarter, compared to 145.0% in the fourth quarter last year. Income taxes in both periods include net tax benefits attributed to specified items and the R&D credit for the full year.

The company reported a net loss attributable to Bristol-Myers Squibb of $138 million, or $0.08 per share, in the quarter compared to net earnings of $13 million, or $0.01 per share, a year ago. Results in the current quarter include charges resulting from the Five Prime Therapeutics, Inc. and Cardioxyl Pharmaceuticals, Inc. business development transactions ($0.24 per share after tax) and non-cash charges resulting from an IPRD impairment for BMS-986020, an investigational oral lysophosphatidic acid 1 receptor antagonist, in fibrosis and the transfer of the Erbitux business in North America to Eli Lilly and Company ($0.14 per share after tax).

The company reported non-GAAP net earnings attributable to Bristol-Myers Squibb of $647 million, or $0.38 per share, in the fourth quarter, compared to $771 million, or $0.46 per share, for the same period in 2014. An overview of specified items is discussed under the "Use of Non-GAAP Financial Information" section.

Cash, cash equivalents and marketable securities were $8.9 billion, with a net cash position of $2.2 billion, as of December 31, 2015.

FOURTH QUARTER PRODUCT AND PIPELINE UPDATE

Global revenues for the fourth quarter of 2015, compared to fourth quarter 2014, were driven by Opdivo, which grew by $470 million; Eliquis, which grew by $321 million; Daklinza and Sunvepra, which grew by $251 million, Orencia, which grew 22%; and Sprycel, which grew 8%.

Opdivo

In January, the company announced that a randomized Phase 3 study evaluating Opdivo versus investigator’s choice in patients with recurrent or metastatic platinum-refractory squamous cell carcinoma of the head and neck (CheckMate -141) was stopped early because an assessment conducted by the independent Data Monitoring Committee concluded that the study met its primary endpoint, demonstrating superior overall survival (OS) in patients receiving Opdivo compared to the control arm. The company looks forward to sharing these data with health authorities soon.

In January, the company announced the U.S. Food and Drug Administration (FDA) has approved Opdivo in combination with Yervoy for the treatment of patients with BRAF v600 wild-type (WT) and BRAF v600 mutation-positive unresectable or metastatic melanoma. This approval expands the original indication for the Opdivo + Yervoy Regimen for the treatment of patients with BRAF v600 WT unresectable or metastatic melanoma to include patients, regardless of BRAF mutational status, based on data from the Phase 3 CheckMate -067 trial which evaluated progression-free survival (PFS) and OS as co-primary endpoints. This indication is approved under accelerated approval based on PFS. Continued approval for this indication may be contingent upon verification and description of clinical benefit in confirmatory trials.

In December, the company and its partner, Ono Pharmaceutical Co. Ltd., announced that Ono received manufacturing and marketing approval for Opdivo in Japan for the treatment of patients with unresectable, advanced or recurrent non-small cell lung cancer.

In December, the company and its partner, Seattle Genetics, Inc., announced the companies have initiated a Phase 1/2 clinical trial of ADCETRIS (brentuximab vedotin) in combination with Opdivo for patients with CD30-expressing relapsed or refractory B-cell and T-cell non-Hodgkin lymphomas, including diffuse large B-cell lymphoma, peripheral T-cell lymphoma and cutaneous T-cell lymphoma. This is the second of two trials being conducted under a previously announced clinical trial collaboration agreement between the company and Seattle Genetics, Inc.

In November, the company announced the FDA approved Opdivo injection, for intravenous use, for the treatment of patients with advanced renal cell carcinoma (RCC) who have received prior anti-angiogenic therapy. Opdivo is the first and only PD-1 inhibitor to deliver significant OS in patients with advanced RCC who have received prior anti-angiogenic therapy. The approval, which was granted Breakthrough Therapy Designation by the FDA, was based on data from CheckMate -025, an open-label, randomized Phase 3 study evaluating Opdivo versus everolimus in patients with advanced RCC who have received prior anti-angiogenic therapy.
In November, the company announced the FDA approved Opdivo injection, for intravenous use, as a single-agent for the treatment of patients with BRAF v600 WT unresectable or metastatic melanoma. The approval is based on data from the Phase 3 trial, CheckMate -066, which evaluated OS as the primary endpoint in treatment-naïve patients with BRAF WT unresectable or metastatic melanoma compared to chemotherapy (dacarbazine). Separately, the company announced the FDA issued a Complete Response Letter for its supplemental Biologics License Application (sBLA) for Opdivo as a single agent for the treatment of previously untreated patients, specifically those with BRAF v600 mutation positive unresectable or metastatic melanoma. The company submitted data for Opdivo in BRAF v600 mutation-positive metastatic melanoma, which was the subject of the FDA’s Complete Response Letter.

In November, the company announced that the European Medicines Agency (EMA) validated a type II variation application which seeks to extend the current indication for Opdivo to include the treatment of adult patients with advanced RCC after prior therapy. Validation of the application confirms the submission is complete and begins the EMA’s centralized review process. The type II variation submitted is based on data from CheckMate -025, a Phase 3 study that evaluated, as the primary endpoint, the OS of Opdivo versus everolimus, a current standard of care, in advanced or metastatic clear-cell RCC after prior anti-angiogenic treatment.

In November, the company announced results from multiple clinical trials at the Society for Melanoma Research 2015 International Congress in San Francisco, California.
CheckMate -066 – In the study evaluating Opdivo as a single agent versus dacarbazine in patients with previously untreated, BRAF WT unresectable or metastatic melanoma, Opdivo continued to demonstrate superior OS versus dacarbazine with 57.7% of patients alive at two years compared to 26.7% of patients treated with dacarbazine. The safety profile of Opdivo was consistent with prior studies.

Study 004 – In the study evaluating Opdivo in combination with Yervoy in patients with unresectable or metastatic melanoma on which the proof of concept for Opdivo + Yervoy regimen approval was based, data from the longest follow-up of the regimen from various Phase 1 cohorts showed a three-year OS rate of 68% across Phase 1 dosing cohorts. The frequency of treatment-related adverse events (AE) in the study were similar between cohorts and was consistent with the Phase 2 and 3 trials for the combination therapy.

Yervoy

In October, the company announced the FDA approved Yervoy 10 mg/kg for the adjuvant treatment of patients with cutaneous melanoma with pathologic involvement of regional lymph nodes of more than 1 mm who have undergone complete resection including total lymphadenectomy. The approval is based on clinical data from a pivotal Phase 3 trial, CA184-029 (EORTC 18071), initiated in 2008 by the European Organization for Research and Treatment of Cancer evaluating the 10 mg/kg dose in the adjuvant setting.

Empliciti

In November, the company and its partner, AbbVie, Inc., announced the FDA approved Empliciti for the treatment of multiple myeloma as combination therapy with Revlimid and dexamethasone in patients who have received one to three prior therapies. The approval of this first and only immunostimulatory antibody for multiple myeloma is based on data from the randomized, open-label, Phase 3, ELOQUENT-2 study, which demonstrated the combination of Empliciti with Revlimid and dexamethasone delivered a 30% reduction in the risk of disease progression or death compared to dexamethasone alone.

In December, the company announced extended follow-up data and a pre-specified interim OS analysis of Empliciti in combination with Revlimid and dexamethasone in patients with relapsed or refractory multiple myeloma from ELOQUENT-2. The follow-up data demonstrated a 44% relative improvement in PFS at three years, which was consistent with the pivotal two-year analysis. The Empliciti combination delayed the need for subsequent myeloma therapy by a median of one year compared to dexamethasone alone. Data were presented at the 57th American Society of Hematology (ASH) (Free ASH Whitepaper) Annual Meeting and Exposition in Orlando, Florida.

Daklinza

In November, the company announced results from the Phase 3 ALLY-3+ trial investigating a regimen of Daklinza in combination with sofosbuvir and ribavirin in genotype 3 hepatitis C patients with advanced fibrosis or cirrhosis, for treatment durations of 12 and 16 weeks. The results show that 100% of patients in the advanced fibrosis cohort achieved sustained virologic response (SVR12) in both the 12- and 16-week arms of the study. SVR12 rates were 83% and 89% in patients with cirrhosis in the 12- and 16-week arms, respectively. The combination regimen had no discontinuations due to adverse events and relapse occurred in four patients (two in the 16-week and two in the 12-week arm). There was one death (12-week arm; not treatment-related) and no virologic breakthroughs. Results were presented at The Liver Meeting 2015, the annual meeting of The American Association for the Study of Liver Diseases in San Francisco, California.

Eliquis

In December, the company and its partner, Pfizer, Inc., announced results from a post-hoc subanalysis of the Phase 3 AMPLIFY trial. Results demonstrated that Eliquis was comparable to conventional therapy (subcutaneous enoxaparin overlapped and followed by oral warfarin dose-adjusted to an international normalized ratio of 2.0 to 3.0) in recurrent venous thromboembolism (VTE) and VTE-related death. There was significantly less major bleeding during the first 7, 21 and 90 days after starting treatment. The data were published in Thrombosis and Haemostasis.

ADCETRIS is a trademark of Seattle Genetics, Inc.
Revlimid is a trademark of Celgene Corporation.

BUSINESS DEVELOPMENT UPDATE

In December, the company announced it has entered into agreements with ViiV Healthcare, a global HIV company, to divest its pipeline of investigational HIV medicines including an attachment inhibitor (BMS-663068), currently being investigated in Phase 3 as a therapeutic option for heavily treatment-experienced patients, and a maturation inhibitor (BMS-955176) currently being investigated in Phase 2b development for treatment-naïve and treatment-experienced patients. These transactions are consistent with the evolution of the company’s strategic focus, including the decision announced in June to discontinue its discovery efforts in virology.

In December, the company announced a new research collaboration with the Department of Chemistry at Princeton University that includes the establishment of the Center for Molecular Synthesis (BMS-CMS). The agreement creates opportunities for scientists at Princeton University and the company to collaborate on top-flight synthetic chemistry research, leveraging the two sites’ close proximity to foster a robust exchange of scientific ideas. Research projects will investigate areas of mutual interest and benefit, using the expertise developed in the laboratories of the Princeton faculty to conduct frontier science within the pharmaceutical industry. Over the next five years, the Center will also fund a select group of research fellows each year.

In November, the company announced a definitive agreement to acquire all of the issued and outstanding capital stock of Cardioxyl Pharmaceuticals, Inc., a private biotechnology company focused on the discovery and development of novel therapeutic agents for the treatment of cardiovascular disease. The company completed the acquisition in December. The acquisition gives the company full rights to Cardioxyl’s lead asset CXL-1427, a novel nitroxyl (HNO) donor (prodrug) in Phase 2 clinical development as an intravenous treatment for acute decompensated heart failure.

In November, the company completed a previously announced agreement with Five Prime Therapeutics, Inc. for an exclusive worldwide license and collaboration agreement for the development and commercialization of Five Prime’s colony stimulating factor 1 receptor (CSF1R) antibody program, including FPA008, which is in Phase 1 development for immunology and oncology indications.

The company announced several collaborations as part of the Immuno-Oncology Rare Population Malignancy (I-O RPM) program in the U.S.:

In December, the company announced an agreement with the David Geffen School of Medicine at UCLA to conduct a range of early phase clinical studies. The company will fund positions within UCLA’s fellowship program in the UCLA Division of Hematology/Oncology.

In December, the company announced an agreement with The Ohio State University Comprehensive Cancer Center – Arthur G. James Cancer Hospital and Richard J. Solove Research Institute to conduct a range of early phase clinical studies. The company will fund training positions within the Hematology and Medical Oncology fellowship programs of the Ohio State University College of Medicine, Department of Internal Medicine.

In November, the company announced an agreement with The Sidney Kimmel Comprehensive Cancer Center at Johns Hopkins to conduct a range of early phase clinical studies. The company will also fund positions within The Johns Hopkins University School of Medicine fellowship program.

2016 FINANCIAL GUIDANCE

Bristol-Myers Squibb is setting its 2016 GAAP and non-GAAP EPS guidance range at $2.30 – $2.40. Both GAAP and non-GAAP guidance assume current exchange rates. Key 2016 non-GAAP guidance assumptions include:

Worldwide revenues increasing in the mid-single digit range.

Full-year gross margin as a percentage of revenues to be approximately 75% – 76%.

Marketing, sales and administrative expenses decreasing in the mid-single digit range.

Research and development expenses increasing in the high-single digit range.

An effective tax rate between 21% and 22%.

The financial guidance for 2016 excludes the impact of any potential future strategic acquisitions and divestitures, and any specified items that have not yet been identified and quantified. The non-GAAP 2016 guidance also excludes other specified items as discussed under "Use of Non-GAAP Financial Information." Details reconciling adjusted non-GAAP amounts with the amounts reflecting specified items are provided in supplemental materials available on the company’s website.

Use of Non-GAAP Financial Information

This press release contains non-GAAP financial measures, including non-GAAP earnings and related earnings per share information. These measures are adjusted to exclude certain costs, expenses, significant gains and losses and other specified items. Among the items in GAAP measures but excluded for purposes of determining adjusted earnings and other adjusted measures are: restructuring and other exit costs; accelerated depreciation charges; IPRD and asset impairments; charges and recoveries relating to significant legal proceedings; upfront, milestone and other payments for in-licensing or acquisition of investigational compounds that have not achieved regulatory approval which are immediately expensed; pension settlement charges; significant tax events and additional charges related to the Branded Prescription Drug Fee. This information is intended to enhance an investor’s overall understanding of the company’s past financial performance and prospects for the future. Non-GAAP financial measures provide the company and its investors with an indication of the company’s baseline performance before items that are considered by the company not to be reflective of the company’s ongoing results. The company uses non-GAAP gross profit, non-GAAP marketing, selling and administrative expense, non-GAAP research and development expense, and non-GAAP other income and expense measures to set internal budgets, manage costs, allocate resources, and plan and forecast future periods. Non-GAAP effective tax rate measures are primarily used to plan and forecast future periods. Non-GAAP earnings and earnings per share measures are primary indicators the company uses as a basis for evaluating company performance, setting incentive compensation targets, and planning and forecasting of future periods. This information is not intended to be considered in isolation or as a substitute for financial measures prepared in accordance with GAAP.

Statement on Cautionary Factors

This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding, among other things, statements relating to goals, plans and projections regarding the company’s financial position, results of operations, market position, product development and business strategy. These statements may be identified by the fact that they use words such as "anticipate", "estimates", "should", "expect", "guidance", "project", "intend", "plan", "believe" and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. Such forward-looking statements are based on current expectations and involve inherent risks and uncertainties, including factors that could delay, divert or change any of them, and could cause actual outcomes and results to differ materially from current expectations. These factors include, among other things, effects of the continuing implementation of governmental laws and regulations related to Medicare, Medicaid, Medicaid managed care organizations and entities under the Public Health Service 340B program, pharmaceutical rebates and reimbursement, market factors, competitive product development and approvals, pricing controls and pressures (including changes in rules and practices of managed care groups and institutional and governmental purchasers), economic conditions such as interest rate and currency exchange rate fluctuations, judicial decisions, claims and concerns that may arise regarding the safety and efficacy of in-line products and product candidates, changes to wholesaler inventory levels, variability in data provided by third parties, changes in, and interpretation of, governmental regulations and legislation affecting domestic or foreign operations, including tax obligations, changes to business or tax planning strategies, difficulties and delays in product development, manufacturing or sales including any potential future recalls, patent positions and the ultimate outcome of any litigation matter. These factors also include the company’s ability to execute successfully its strategic plans, including its business development strategy, the expiration of patents or data protection on certain products, including assumptions about the company’s ability to retain patent exclusivity of certain products, and the impact and result of governmental investigations. There can be no guarantees with respect to pipeline products that future clinical studies will support the data described in this release, that the compounds will receive necessary regulatory approvals, or that they will prove to be commercially successful; nor are there guarantees that regulatory approvals will be sought, or sought within currently expected timeframes, or that contractual milestones will be achieved. For further details and a discussion of these and other risks and uncertainties, see the company’s periodic reports, including the annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, filed with or furnished to the Securities and Exchange Commission. The company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise.

Lynparza™ (olaparib) granted Breakthrough Therapy designation by US FDA for treatment of BRCA1/2 or ATM gene mutated metastatic Castration Resistant Prostate Cancer

On January 28, 2016 AstraZeneca reported that the US Food and Drug Administration (FDA) has granted Breakthrough Therapy designation (BTD) for the oral poly ADP-ribose polymerase (PARP) inhibitor Lynparza (olaparib), for the monotherapy treatment of BRCA1/2 or ATM gene mutated metastatic Castration Resistant Prostate Cancer (mCRPC) in patients who have received a prior taxane-based chemotherapy and at least one newer hormonal agent (abiraterone or enzalutamide) (Press release, AstraZeneca, 28 1/, 2016, View Source [SID:1234508875]).

The FDA criteria for BTD require preliminary clinical evidence that demonstrates a drug may have substantial improvement on at least one clinically significant endpoint over available therapy. The decision to assign a BTD for Lynparza is based on the results of the TOPARP-A Phase II trial, which found that Lynparza (olaparib) monotherapy in mCPRPC may offer substantial improvement over available therapies for the treatment of the biomarker-selected population with this serious and life-threatening condition. The TOPARP-A Phase II trial was presented at AACR (Free AACR Whitepaper) 2015 and published in the New England Journal of Medicine in October 2015.i It showed that men with prostate cancer with defective DNA damage repair mechanisms responded to Lynparza (olaparib).

The Breakthrough Therapy designation for Lynparza in this patient population means the FDA will expedite review of submission data within 60 days of receipt.
Antoine Yver, Head of Oncology, Global Medicines Development at AstraZeneca, said: "More than 27,000 men died of prostate cancer last year in the US alone. The Breakthrough Therapy designation for Lynparza is encouraging news for patients, and their families, as there are currently very limited treatment options for metastatic Castration Resistant Prostate Cancer. We will work closely with the FDA to introduce Lynparza as a new treatment option as soon as possible."

Once prostate cancer has progressed to mCPRPC, treatment focuses on extending life, delaying disease progression, and improving symptoms and quality of life. Overall survival time for patients treated with chemotherapy and newer hormonal agents is 10 months.ii There are also no approved therapies for third line and above (3L+) mCRPC patients, and no targeted therapies are available for mCRPC patients with somatic or germline mutations in BRCA1, BRCA2 or ATM.

Lynparza (olaparib) is an innovative, first-in-class oral poly ADP-ribose polymerase (PARP) inhibitor that exploits tumour DNA repair pathway deficiencies to preferentially kill cancer cells. This mode of action gives olaparib the potential for activity in a range of tumour types with DNA repair deficiencies.

Lynparza has been approved by regulatory authorities in 40 countries for the maintenance treatment of women with BRCA-mutated ovarian cancer. AstraZeneca is investigating the potential of olaparib in other PARP dependent tumours. Phase III studies in gastric cancer, pancreatic cancer and adjuvant and metastatic BRCAm breast cancers are underway, with further studies planned.

NOTES TO EDITORS

About prostate cancer
In 2015, 27,540 US men died of prostate cancer.iii Based on the Global Burden of Disease Cancer Collaboration, there were 1.4 million incidents of prostate cancer and 293,000 deaths worldwide for the year 2013. Prostate cancer caused 4.8 million disability-adjusted life-years globally in 2013, with 57% occurring in developed countries and 43% occurring in developing countries.iv

20-F – Annual and transition report of foreign private issuers [Sections 13 or 15(d)]

(Filing, 20-F, Novartis, JAN 27, 2016, View Source [SID:1234508882])

6-K – Report of foreign issuer [Rules 13a-16 and 15d-16]

On January 27, 2016 Prima BioMed Ltd (ASX: PRR; NASDAQ: PBMD), a leading immuno-oncology company, is pleased to announce the initiation of the first clinical trial site for TACTI-mel, a Phase I clinical study in melanoma using its lead compound IMP321, to be conducted in Australia (Filing, 6-K, Prima Biomed, JAN 27, 2016, View Source [SID:1234508894]).

‘TACTI-mel’ (Two ACTive Immunotherapeutics in melanoma) is a multicentre, open label, Phase I study in which patients with unresectable or metastatic melanoma will be dosed with IMP321 in combination with an approved checkpoint inhibitor. The study will evaluate safety as the primary endpoint and anti-tumour activity and the immune response to the combination as secondary endpoints.

The first clinical site, the Gallipoli Medical Research Foundation at the Greenslopes Private Hospital in Queensland, has been approved by the Australian Therapeutic Goods Administration (TGA). Recruitment for the trial can now commence under the direction of Dr. Victoria Atkinson, Principal Investigator for the trial. The TACTI-mel study will recruit up to 24 patients across 6 sites in Australia, with the first patients expected to be dosed in the first quarter of 2016.

Dr. Atkinson commented: "The TACTI-mel study will be the first human study combining IMP321 as an antigen presenting cell activator together with a PD-1 checkpoint inhibitor. With the highest incidence of melanoma in the world, we look forward to working with Greenslopes Hospital staff in treating Australian patients in this ground-breaking study."

Prima believes that checkpoint inhibitors represent a cancer treatment revolution. Showing IMP321 to be synergistic with checkpoint inhibitors could significantly increase its clinical and commercial potential.

The pre-clinical and clinical evidence to date has suggested that IMP321 can treat cancer by activating Antigen Presenting Cells (APC) to sustain an anti-cancer immune response. This is a markedly different mechanism of action from the checkpoint inhibitors and suggests that the two approaches can be used synergistically in combination.

About IMP321

IMP321, a first-in-class APC activator based on the immune checkpoint LAG-3, represents one of the first proposed active immunotherapy drugs in which the patient’s own immune system is harnessed to respond to tumour antigenic debris created by chemotherapy. As an APC activator, IMP321 boosts the network of dendritic cells in the body that can respond to tumour antigens for a better anti-tumour CD8 T cell response.

IMP321 has been shown in an open-label Phase I study to be able to double the expected six-month response rate in HER-2 negative metastatic breast cancer patients receiving standard-of-care paclitaxel, from a 25% historic response rate (RECIST criteria)1 to 50% when combined with IMP321.

6-K – Report of foreign issuer [Rules 13a-16 and 15d-16]

Summary:

Novartis delivered strong sales growth and core margin expansion (cc1) in 2015; announces plans to accelerate growth at Alcon, streamline Group operations
· Strong growth (cc) in full year sales, core operating income and core EPS2

o Net sales up 5% (cc) and core operating income up 10% (cc)
o Core operating income margin up 1.3 percentage points (cc)
o Operating income (-2% cc) down mainly due to amortization of the new oncology assets
o Net income (-18% cc) impacted by exceptional gains in 2014 (from the sale of shares in Idenix and LTS) and exceptional charges in 2015 (related to Venezuela subsidiaries)
o Core EPS up 10% (cc) to USD 5.01
o Currency negatively impacted sales by -10% and core operating income by -15%
o Free cash flow of USD 9.3 billion, down 15% (USD) due to currency

· Solid Q4 with net sales up 4% (cc) and core operating income up 9% (cc)
o Strong Pharmaceuticals performance offset weak Alcon

· Innovation momentum continued with key approvals and filings in Q4
o Entresto approved for chronic heart failure in EU
o Cosentyx approved for AS and PsA in EU and, in January 2016, in US
o Sandoz submitted biosimilar etanercept in EU and pegfilgrastim in US

· Focusing Alcon Division on core Surgical and Vision Care business, with growth plan underway
o Alcon ophthalmic pharmaceuticals business to move to Pharmaceuticals Division, combining Alcon’s strong brand with Pharmaceuticals strengths in development and marketing

· Leveraging Group scale to drive even greater efficiency and innovation
o Centralizing manufacturing operations across Group to optimize capacity planning and lower costs
o Integrating some drug development functions across divisions to improve resource allocation, technology and standards to increase innovation even further
o Changes expected to generate over USD 1 billion in annual cost savings by 2020, ramp-up starting in 2016; one-time restructuring costs of approximately USD 1.4 billion spread over 5 years

· Novartis leadership changes effective February 1, 2016
o Mike Ball appointed Division Head and CEO Alcon, succeeding Jeff George
o Vas Narasimhan appointed Global Head Drug Development and Chief Medical Officer
o Andre Wyss appointed President Novartis Operations

· Dividend of CHF 2.70 per share, up 4%, proposed for 2015

· 2016 Outlook2
o Net sales and core operating income expected to be broadly in line with prior year (cc)

On January 27, 2016 CEO of Novartis, Joseph Jimenez reported:
"In 2015, we completed our portfolio transformation, delivered solid financial results and improved core margin despite a very strong currency impact (Filing, 6-K, Novartis, JAN 27, 2016, View Source [SID:1234508893]) . With the plan we announced today, we intend to return the Alcon business to growth and strengthen our leading competitive position. Across the Group we will further focus our divisions, create even greater innovation by integrating drug development, and lower our costs by centralizing our manufacturing across divisions. This will position the company well for the future."

Commenting on the leadership changes, Mr. Jimenez said:
"I want to welcome Mike Ball as Division Head and CEO of Alcon. His expertise in ophthalmology, as well as medical devices, will be instrumental in accelerating innovation and growth at Alcon. I also want to thank Jeff George for his contributions to Alcon and Sandoz over the past ten years. In addition, I want to congratulate Vas Narasimhan on his expanded role as the first Global Head of Drug Development and Chief Medical Officer at Novartis and Andre Wyss on his expanded responsibilities managing global Technical Operations."

TAKING OUR STRATEGY FORWARD IN 2016

2015 was a transformational year for Novartis. We focused our company on three leading divisions with innovation power and global scale, divested sub-scale divisions and operationalized Novartis Business Services to manage our resources more effectively. We also achieved major innovation milestones, with the approval and launch of Entresto and Cosentyx, and the first US biosimilar approved under the new BPCIA pathway.

Today we are announcing further steps to build on our strategy:

Focusing our divisions, integrating businesses that share therapeutic areas to better leverage development and marketing capabilities

We are focusing the Alcon Division on its core Surgical and Vision Care business. Within this business, we have identified key actions to accelerate growth in 2016 and beyond. These include:

· Optimizing IOL innovation and commercial execution
· Prioritizing and investing in promising pipeline opportunities
· Ensuring best-in-class service, training and education for eye care professionals
· Improving sales force effectiveness
· Investing in DTC behind key brands

We are strengthening our ophthalmic medicines business by transferring Alcon’s pharmaceutical products (sales of USD 3.8 billion in 2015) to the Pharmaceuticals Division, creating the world leading ophthalmology business with approximately USD 6 billion in sales. This will simplify our ophthalmic medicines business, leverage Alcon’s strong brand with Pharmaceuticals development and marketing capabilities, and help us accelerate innovation and growth in eye care.

At the same time, we are shifting selected mature, non-promoted pharmaceutical products (totaling approximately USD 0.9 billion in 2015 sales) into Sandoz, which has proven experience in managing mature products successfully.

Leveraging Group scale to further improve efficiency

We will drive greater efficiency by centralizing our manufacturing operations across divisions within a single technical operations unit. The new unit is expected to optimize capacity planning and lower costs through simplification, standardization and external spend optimization. Centralization is also expected to improve our ability to develop next-generation technologies, implement continuous manufacturing and share best practices across divisions.

Integrating some drug development functions across divisions to create even greater innovation

At Novartis, we remain committed to science and innovation in growing areas of healthcare where we can lead. To increase innovation even further, we are increasing Group-wide coordination of drug development. We are establishing a single Global Head of Drug Development to improve resource allocation, technology and standards across divisions. We are also integrating certain common functions, such as the Chief Medical Office, which will cover medical policy, safety and pharmacovigilance policy for the Group.

Expected savings

These changes are a natural extension of our strategy, and are expected to increase innovation while improving the efficiency of our organization. We expect these changes to generate over USD 1.0 billion in annual cost savings from 2020, with the ramp-up starting in 2016. Associated with these changes we expect one-time restructuring costs of approximately USD 1.4 billion spread over five years. Net savings will be used to fund innovation and improve our profit margins.

Novartis leadership changes

· Mike Ball, Division Head and CEO Alcon
Mike Ball has been appointed Division Head and CEO Alcon, effective February 1, 2016. Mr. Ball will be a member of the Executive Committee of Novartis (ECN). He joins Novartis from Hospira, where he was CEO from 2011 until recently. Prior to Hospira, he spent five years as President of Allergan, where he held a series of leadership positions over 16 years with the company. Mr. Ball succeeds Jeff George, who has decided to leave Novartis.

· Vas Narasimhan, Global Head Drug Development and Chief Medical Officer
Dr. Vas Narasimhan has been appointed Global Head Drug Development and Chief Medical Officer, a new position in the ECN. In this position, Dr. Narasimhan will have functional oversight for drug development for General Medicines, Ophthalmology Pharmaceuticals, Oncology and Biosimilars and will create a stronger collaboration across these units.

· Andre Wyss, President Novartis Operations
Andre Wyss, already a member of the ECN, Head Novartis Business Services (NBS) and Country President for Switzerland, has been appointed President, Novartis Operations. In his new role, he will assume responsibility for the integrated Technical Operations organization as well as for Global Public & Government Affairs, in addition to his current responsibilities.

2015 GROUP REVIEW

Novartis laid out five priorities for 2015: deliver strong financial results; strengthen innovation; complete the portfolio transformation; capture cross-divisional synergies; and build a high-performing organization. We made progress in each of these areas in the fourth quarter and full year.

Financial results

Following the announcement of our portfolio transformation transactions on April 22, 2014, Novartis reported the Group’s financial results for the current and prior years as "continuing operations" and "discontinued operations." See page 43 of the Condensed Financial Report for full explanation.

The commentary below focuses on continuing operations, which include the businesses of Pharmaceuticals, Alcon and Sandoz and Corporate activities. Starting on March 2, 2015, the date of the completion of the GSK transactions, continuing operations also include the results from the new oncology assets acquired from GSK and the 36.5% interest in the GSK consumer healthcare joint venture (the latter reported as part of income from associated companies). We also provide detail on discontinued operations and total Group performance on pages 5 and 7.

Fourth quarter

Continuing operations

Net sales were USD 12.5 billion (-4%, +4% cc). Growth Products1 contributed USD 4.3 billion or 35% of net sales, up 16% (USD) over the prior-year quarter.

Operating income was USD 1.7 billion (-29%, -12% cc), mainly due to the decline in Alcon and legal settlement provisions. The adjustments made to operating income to arrive at core operating income amounted to USD 1.4 billion (2014: USD 0.9 billion), mainly on account of the amortization of the new oncology assets in Pharmaceuticals.

Core operating income was USD 3.1 billion (-5%, +9% cc). Core operating income margin in constant currencies increased 1.1 percentage points, mainly due to strong Pharmaceuticals performance. Currency had a negative impact of 1.4 percentage points, resulting in a net decrease of 0.3 percentage points in US dollar terms to 24.4% of net sales.

Net income was USD 1.1 billion (-57%, -34% cc), impacted by a prior-year exceptional pre-tax gain of USD 0.4 billion from the sale of our shares in LTS Lohmann Therapie-Systeme AG, as well as exceptional charges of USD 0.3 billion related to our Venezuela subsidiaries in the 2015 quarter.

EPS was USD 0.44 (-57%, -34% cc), in line with net income.

Core net income was USD 2.7 billion (-5%, +7% cc), broadly in line with core operating income.

Core EPS was USD 1.14 (-4%, +8% cc), broadly in line with core net income.

The free cash flow in the fourth quarter was USD 2.9 billion (-26%), a decrease of USD 1.0 billion compared to the prior-year period, primarily due to the negative currency impact on operations, lower hedging gains and higher investments in intangible assets (mainly for the remaining ofatumumab rights).

Pharmaceuticals net sales reached USD 7.9 billion (0%, +9% cc), with volume growth of 14 percentage points, including the new oncology assets acquired from GSK (sales of USD 0.6 billion in Q4). Generic competition had a negative impact of 5 percentage points, largely for Exelon Patch, Diovan monotherapy and Vivelle-Dot in the US. Pricing impact was negligible. Growth Products – which include Gilenya, Tasigna, Tafinlar + Mekinist, Jakavi, Promacta/Revolade and Cosentyx – generated USD 3.7 billion or 47% of division net sales. These products grew 34% (cc) over the same period last year.

Operating income was USD 1.5 billion (-9%, +9% cc). Core operating income was USD 2.1 billion (+6%, +23% cc). Core operating income margin in constant currencies increased by 3.3 percentage points; currency had a negative impact of 1.7 percentage points, resulting in a net increase of 1.6 percentage points to 26.8% of net sales.

Alcon net sales were USD 2.3 billion (-13%, -6% cc) in the fourth quarter. Surgical sales (-5% cc) declined, driven by competitive pressure on intraocular lenses (IOLs) and a slowdown in equipment purchases, partially offset by continued strong cataract consumables sales. Ophthalmic Pharmaceuticals sales (-5% cc) declined, driven by increased generic competition in the US, primarily to Patanol and Infection/Inflammation products, partially offset by double-digit growth in Glaucoma fixed-dose combination products and solid Systane sales in Dry Eye. Vision Care sales (-8% cc) were impacted by weaker AirOptix contact lens sales in the US and the continued decline in contact lens care, partially offset by continued strong performance of Dailies Total1.

Operating income (-64%, -36% cc) was USD 132 million. Core operating income was USD 670 million (-25%, -13% cc), primarily impacted by declining sales and higher spending in R&D, particularly for RTH258 in wet age-related macular degeneration (AMD). Core operating income margin in constant currencies decreased by 2.6 percentage points; currency had a negative impact of 2.0 percentage points, resulting in a net decrease of 4.6 percentage points to 28.5% of net sales.

1 "Growth Products" are an indicator of the rejuvenation of the portfolio, and comprise products launched in a key market (EU, US, Japan) in 2010 or later, or products with exclusivity in key markets until at least 2019 (except Sandoz, which includes only products launched in the last 24 months). They include the acquisition effect of the GSK oncology assets.

Sandoz net sales were USD 2.3 billion (-8%, 0% cc) in the fourth quarter. Volume growth of 8 percentage points was fully offset by 8 percentage points of price erosion, which increased compared to prior quarters but was in line with the 2014 average. Growth in the fourth quarter was impacted by the strong prior-year period, which included a higher number of key retail product launches and benefitted from the Diovan monotherapy authorized generic, as well as increased US pricing erosion and a weak start to the flu season in 2015. Global sales of Biopharmaceuticals (including biosimilars, biopharmaceutical contract manufacturing and Glatopa) grew 41% (cc) to USD 218 million, including solid sales for Glatopa in the quarter. Anti-Infectives franchise sales (consisting of partner label and finished dosage form sales) increased by 1% (cc) to USD 368 million, reflecting the weak start to the flu season.

Operating income declined 26% (-18% cc) to USD 216 million, largely driven by legal charges of USD 34 million in the quarter. Core operating income was USD 397 million (-5%, +4% cc), impacted by price erosion in the US and the impact of unfavorable currency exchange rates. Core operating income margin increased by 0.6 percentage points (in cc and USD) to 17.2% of net sales.

Discontinued operations1

As all transactions from the portfolio transformation were closed by the end of July 2015, the fourth quarter does not include any sales from Vaccines, Animal Health or OTC, whereas the prior-year quarter included the results of all divested businesses during the three months, which amounted to USD 1.6 billion in net sales.

Operating loss from discontinued operations was USD 94 million, including additional transaction-related expenses, whereas the prior-year period amounted to a net operating loss of USD 1.2 billion, mainly driven by the exceptional impairment charge of USD 1.1 billion related to the divestment to CSL Limited, Australia (CSL) of the Vaccines influenza business.

Core operating loss for discontinued operations amounted to USD 2 million, compared to an income of USD 93 million in the prior-year quarter.

Net income from discontinued operations was USD 2 million, compared to a loss of USD 961 million in the prior-year period.

Total Group1

For the total Group, net income amounted to USD 1.1 billion compared to USD 1.5 billion in the prior-year period, and basic earnings per share decreased to USD 0.44 from USD 0.62.

Free cash flow for the total Group amounted to USD 3.0 billion.

Full year

Continuing operations

Net sales amounted to USD 49.4 billion (-5%, +5% cc) in the full year. Growth Products contributed USD 16.6 billion or 34% of net sales, up 17% (USD) over 2014.

Operating income was USD 9.0 billion (-19%, -2% cc), mainly due to amortization of the new oncology assets in Pharmaceuticals. The adjustments made to operating income to arrive at core operating income amounted to USD 4.8 billion (2014: USD 3.4 billion). The increase was mainly on account of the amortization of the new oncology assets in Pharmaceuticals.

Core operating income was USD 13.8 billion (-5%, +10% cc). Core operating income margin in constant currencies increased 1.3 percentage points, mainly due to strong Pharmaceuticals performance. Currency had a negative impact of 1.1 percentage points, resulting in a net increase of 0.2 percentage points in US dollar terms to 27.9% of net sales.

1 Discontinued operations and total Group are defined on page 43 of the Condensed Financial Report.

Net income was USD 7.0 billion (-34%, -18% cc), impacted by prior-year exceptional pre-tax gains totaling USD 1.2 billion from the sale of our shares in Idenix (USD 0.8 billion) and LTS Lohmann Therapie-Systeme AG (USD 0.4 billion), as well as the exceptional charges of USD 0.4 billion related to our Venezuela subsidiaries in 2015.

EPS was USD 2.92 (-33%, -17% cc), broadly in line with net income.

Core net income was USD 12.0 billion (-5%, +9% cc), broadly in line with core operating income.

Core EPS was USD 5.01 (-3%, +10% cc), broadly in line with core net income.

Free cash flow for the year was USD 9.3 billion (-15%), compared to USD 10.9 billion in 2014. The decrease was primarily due to the negative currency impact on operations.

Pharmaceuticals delivered net sales of USD 30.4 billion (-4%, +6% cc) for the full year, driven by volume growth (+13 percentage points), including the new oncology assets acquired from GSK (sales of USD 1.8 billion), which more than offset the negative impact of generic competition (-7 percentage points). Pricing impact was negligible.

Operating income was USD 7.6 billion (-10%, +5% cc) for the full year. Included in operating income were USD 1.3 billion of amortization of intangible assets and USD 0.2 billion of net acquisition-related costs, mainly related to the new oncology assets acquired from GSK, as well as USD 578 million in legal-related items, including USD 400 million for a settlement of the specialty pharmacies case in the Southern District of New York, partly offset by divestment gains. Core operating income was USD 9.4 billion (-1%, +14% cc), generating core operating leverage in constant currencies through the continued reduction of functional costs and ongoing productivity initiatives. Core operating income margin in constant currencies improved by 2.4 percentage points; currency had a negative impact of 1.4 percentage points, resulting in a net margin expansion of 1.0 percentage points to 30.9% of net sales.

Alcon net sales were USD 9.8 billion (-9%, -1% cc) for the full year. Surgical sales (-1% cc) declined, driven by weaker performance in IOLs and cataract equipment, partially offset by strong cataract consumables and vitreoretinal sales. Ophthalmic Pharmaceuticals were flat, with generic competition in the US partially offset by double-digit growth of fixed-dose combination products in Glaucoma and the Systane product portfolio in Dry Eye. Vision Care (-2% cc) declined as a result of the continued weakness in Contact Lens Care and slower contact lens sales, despite continued strong growth of Dailies Total1 and AirOptix Colors.

Operating income was USD 0.8 billion (-50%, -20% cc). Core operating income was USD 3.1 billion
(-20%, -7% cc), impacted by lower sales and higher spending, primarily in R&D and M&S behind investments to drive growth and an increase in provisions for bad debt in Asia. Core operating income margin in constant currencies decreased by 2.1 percentage points; currency had a negative impact of 1.9 percentage points, resulting in a net decrease of 4.0 percentage points to 31.2% of net sales.

Sandoz net sales were USD 9.2 billion (-4%, +7% cc) for the full year, as volume growth of 15 percentage points more than offset 8 percentage points of price erosion. All regions grew, led by the US (+10% cc), Western Europe (+3% cc), Asia Pacific (+13% cc) and Latin America (+18% cc). From a franchise perspective, global sales of Biopharmaceuticals grew 39% (cc) to USD 772 million, benefitting from the performance of recent launches. Anti-Infectives franchise sales were USD 1.4 billion (+9% cc), supported by a strong flu season at the beginning of the year and restored production capacities following quality upgrades in 2014.

Operating income was USD 1.0 billion (-8%, +1% cc) for the full year, including USD 204 million of restructuring charges mainly related to our manufacturing footprint initiative. Core operating income increased 6% (+17% cc) to USD 1.7 billion. Core operating income margin in constant currencies increased by 1.5 percentage points; currency had a positive impact of 0.2 percentage points, resulting in a net increase of 1.7 percentage points to 18.1% of net sales.

Discontinued operations

Operational results for discontinued operations in 2015 include seven months of results from the Vaccines influenza business, until its divestment date on July 31, 2015, as well as results from the non-influenza Vaccines business and OTC until their divestment date on March 2, 2015. Operational results from the Animal Health business, which was divested on January 1, 2015, include only the divestment gain. The prior year included the results of all divested businesses during the full year.

Discontinued operations sales in 2015 amounted to USD 601 million, including USD 70 million from the Vaccines influenza business, USD 75 million from the non-influenza Vaccines business and USD 456 million from OTC. In 2014, discontinued operations net sales were USD 5.8 billion.

Operating income for discontinued operations includes preliminary exceptional pre-tax gains of USD 12.7 billion from the divestment of Animal Health (USD 4.6 billion) and the transactions with GSK (USD 2.8 billion for the non-influenza Vaccines business and USD 5.9 billion arising from the contribution of Novartis OTC into the consumer healthcare joint venture). In addition, the GSK transactions resulted in approximately USD 0.6 billion of additional transaction-related expenses.

The remaining operating loss from discontinued operations was USD 0.2 billion, representing the operating performance of the Vaccines influenza business up to July 31, as well as the non-influenza Vaccines business and OTC up to March 2, and is net of the partial reversal of USD 0.1 billion of the impairment recorded in 2014.

Core operating loss for discontinued operations, which excludes these exceptional items, amounted to USD 225 million in 2015, compared to an income of USD 143 million in 2014.

Net income from discontinued operations amounted to USD 10.8 billion, mainly due to the exceptional gains from the GSK and Lilly transactions, compared to a net loss of USD 447 million in 2014, which included the exceptional gain of USD 0.9 billion from the divestment of the blood transfusion diagnostics unit to Grifols, more than offset by an exceptional impairment charge of USD 1.1 billion related to the divestment to CSL of the Vaccines influenza business.

Total Group

For the total Group, net income amounted to USD 17.8 billion compared to USD 10.3 billion in 2014, impacted by the exceptional divestment gains included in net income from the discontinued operations. Basic earnings per share increased to USD 7.40 from USD 4.21.

Free cash flow for the total Group amounted to USD 9.0 billion.

Key growth drivers for fourth quarter

Underpinning our financial results in the fourth quarter is a continued focus on key growth drivers, including Gilenya, Tasigna, Tafinlar + Mekinist, Jakavi, Promacta/Revolade, Cosentyx and Entresto, as well as biopharmaceuticals and Emerging Growth Markets.

Growth Products

· Growth Products, an indicator of the ongoing rejuvenation of our portfolio, contributed 35% of continuing operations net sales in the fourth quarter, and were up 16% (USD). In Pharmaceuticals, Growth Products contributed 47% of division net sales in the quarter, and sales for these products were up 34% (cc).

· Gilenya (USD 742 million, +18% cc), our oral MS therapy, grew double-digit in the quarter behind strong volume growth.

· Tasigna (USD 432 million, +8% cc) continued to drive growth in our CML franchise (which also includes Gleevec/Glivec), with strong volume growth in the US and other markets.

· Tafinlar + Mekinist (USD 147 million) grew as the first approved combination therapy for the treatment of patients with BRAF V600 mutation positive unresectable or metastatic melanoma.

· Promacta/Revolade (USD 133 million) saw sales accelerate as the only approved once-daily oral thrombopoietin receptor agonist.

· Jakavi (USD 119 million, +59% cc), an oral JAK inhibitor approved for myelofibrosis and polycythemia vera, grew strongly over the previous-year quarter.

· Cosentyx (USD 121 million), the first IL-17A inhibitor approved in the US and Europe for psoriasis patients (and as of the fourth quarter, for ankylosing spondylitis and psoriatic arthritis patients in Europe as well), has progressed strongly since its launch in February 2015.

· Entresto (USD 5 million), our breakthrough treatment for chronic heart failure with reduced ejection fraction, had modest sales in the fourth quarter due to continuing NDC blocks.

· Biopharmaceuticals (which include biosimilars, biopharmaceutical contract manufacturing and Glatopa) grew 41% (cc) to USD 218 million.

Emerging Growth Markets

· Continuing operations net sales in our Emerging Growth Markets – which comprise all markets except the US, Canada, Western Europe, Japan, Australia and New Zealand – grew 4% (cc) in the fourth quarter, reflecting a general slowdown in the Chinese economy. Growth was led by Turkey (+16% cc) and Brazil (+14% cc). China grew 5% (cc).

Strengthen innovation

The fourth quarter saw pipeline progress with positive regulatory decisions and significant clinical trial data released. Key developments are included below.

New approvals and positive opinions

· Entresto approved in EU
In November, the EC approved Entresto (sacubitril/valsartan) for the treatment of adult patients with symptomatic chronic heart failure with reduced ejection fraction (HFrEF).

· Cosentyx approved for AS and PsA in EU, and in US in January
The EC approved Cosentyx (secukinumab) for the treatment of two new indications: ankylosing spondylitis (AS) and psoriatic arthritis (PsA). In January 2016, the FDA also approved Cosentyx for AS and PsA.

· FDA approved Utibron Neohaler for COPD
The FDA approved the dual combination bronchodilator Utibron Neohaler (indacaterol/ glycopyrrolate) for the long-term maintenance treatment of airflow obstruction in patients with chronic obstructive pulmonary disease (COPD), including chronic bronchitis and/or emphysema.

· Tafinlar + Mekinist received regular approval in US
The combination Tafinlar + Mekinist (dabrafenib + trametinib) received regular approval from the FDA based on the completion of two Phase III confirmatory trials, which demonstrated an overall survival (OS) benefit for Tafinlar + Mekinist. The combination was previously approved in the US under the FDA’s accelerated approval program.

Regulatory submissions and filings

· FDA granted Afinitor priority review in GI/lung NET
The FDA granted priority review to Afinitor (everolimus) for use in advanced, progressive, non-functional neuroendocrine tumors (NET) of gastrointestinal (GI) or lung origin.

· Sandoz submitted biosimilar etanercept in Europe
The EMA accepted Sandoz’s regulatory submission for biosimilar Enbrel (etanercept), a TNF-alpha inhibitor. Sandoz is seeking approval for all indications included in the reference product’s label, including rheumatoid arthritis and psoriasis.

· Sandoz submitted biosimilar pegfilgrastim in the US
The FDA accepted Sandoz’s regulatory submission for biosimilar Neulasta (pegfilgrastim), a recombinant human granulocyte colony-stimulating factor. The submission was based on the Phase III PROTECT 2 study, which showed the proposed biosimilar to be both equivalent and non-inferior to Neulasta for the prevention of neutropenia in patients with breast cancer. Sandoz is seeking approval for the same indication as the reference product.

Results from important clinical trials and other highlights

· Two year Phase III data for Cosentyx showed sustained efficacy in AS and PsA
The Cosentyx MEASURE 1 study showed up to 80% of patients with AS had no radiographic progression in the spine as shown by x-ray assessment over two years. In addition, the Cosentyx FUTURE 1 study showed no further progression in joint damage in 84% of patients with PsA over two years of treatment.

· Phase III studies for Cosentyx in AS published in NEJM
Results of the MEASURE 1 and MEASURE 2 studies for Cosentyx in AS were published in the New England Journal of Medicine (NEJM).

· RELAX-AHF-2 study of serelaxin continued following interim analysis
Following an interim analysis, the Data Monitoring Committee of the RELAX-AHF-2 study of serelaxin recommended continuing the trial without changes. Top-line results are expected in 2017, based on the latest projections to obtain the pre-specified number of cardiovascular events needed to complete the study. Timelines were slightly extended after the addition in 2015 of "worsening heart failure" as an additional primary endpoint.

· Novartis continued to grow immuno-oncology pipeline through collaboration and licensing agreement with Surface Oncology
In January 2016, Novartis entered into a collaboration and licensing agreement with Surface Oncology. Through the agreement, Novartis gained access to four pre-clinical programs that target regulatory T cell populations, inhibitory cytokines, and immunosuppressive metabolites in the tumor microenvironment.

· New CTL019 data in relapsed/refractory ALL presented at ASH (Free ASH Whitepaper)
An ongoing Phase II study in children and young adults with relapsed/refractory acute lymphoblastic leukemia (r/r ALL) found that 93% (55/59) experienced complete remissions with CTL019.

· Five year Phase III Jakavi data reinforced long-term treatment benefit in MF
In the COMFORT-II study, five-year treatment with Jakavi (ruxolitinib) demonstrated an OS advantage for myelofibrosis (MF) patients, despite crossover from best available therapy after week 48.

· Ultibro Breezhaler demonstrated superiority over Seretide in COPD
Ultibro Breezhaler (indacaterol/glycopyrronium) met the primary endpoint of the Phase III FLAME trial, demonstrating superiority to Seretide in reducing chronic obstructive pulmonary disease (COPD) exacerbations during 52 weeks of treatment.

· Phase III PKC412 data showed survival benefit in certain AML patients
The Phase III RATIFY study of adult patients with newly-diagnosed FLT3-mutated acute myeloid leukemia (AML) showed that PKC412 (midostaurin) plus standard induction and consolidation chemotherapy improves OS by 23% compared to standard induction and consolidation chemotherapy alone.

· Promacta/Revolade studies in MDS/AML discontinued
Novartis determined that the SUPPORT and ASPIRE studies do not support registration of Promacta/Revolade (eltrombopag) in intermediate-1, intermediate-2 and high-risk myelodysplastic syndrome (MDS) and/or acute myeloid leukemia (AML). Novartis is still evaluating the data to assess whether ongoing development of Promacta/Revolade in these patient populations is warranted.

· Alcon launched Contoura Vision as first personalized LASIK procedure
Alcon launched Contoura Vision, a topography-guided LASIK treatment designed to provide surgeons the ability to perform more personalized laser procedures based on the unique corneal topography of each eye.

Complete the portfolio transformation

With the announcement on March 2, 2015 of the completion of the transactions with GSK, and the announcement on July 31, 2015 of the divestment of the Vaccines influenza business to CSL, we completed our portfolio transformation.

Build a high-performing organization

The company’s focus on quality continued to yield results in 2015. There were a total of 53 global health authority inspections during the fourth quarter, four of which were conducted by the FDA. 51 of the 53 inspections were assessed as good or satisfactory. The outcomes of three inspections, including one from the third quarter and two from the fourth quarter, are still pending. For the full year there were 192 inspections, including 31 conducted by the FDA. 189 of the 192 inspections in the full year were good or satisfactory.

Capture cross-divisional synergies

We continued to advance our productivity programs in the fourth quarter, helping to support margins for the Group.

· Novartis Business Services (NBS), our cross-divisional services organization, continued to execute on its priorities of driving efficiency, standardization and simplification across the Group. The organization continued to scale up the offshoring of transactional services to Global Service Centers, and at the end of the fourth quarter, had approximately 9,500 full-time-equivalent associates, transferred from within the Novartis Group. The cost within the scope of NBS was stable from the prior year, contributing to Group margin improvement.

· In the fourth quarter, we generated approximately USD 480 million in procurement savings, in part by leveraging our scale through NBS.

· In addition, we continued to streamline our manufacturing footprint. In the fourth quarter, we finalized the divestment of our Alcon manufacturing site in Kaysersberg, France to Recipharm. For continuing operations, this brings the total number of production sites that have been or are in the process of being restructured, closed or divested to 25. Exceptional charges were USD 76 million in the fourth quarter and USD 375 million in the full year. Exceptional charges recorded cumulatively since the program began amount to USD 950 million.

In total, our productivity initiatives generated gross savings that contributed approximately USD 920 million in the fourth quarter. We achieved productivity gains of approximately USD 3.2 billion or 6% of net sales in 2015.

Capital structure and net debt

Retaining a good balance between investment in the business, a strong capital structure and attractive shareholder returns will remain a priority. Strong cash flows and a sound capital structure have allowed Novartis to focus on driving innovation and growth across its diversified healthcare portfolio, while keeping its double-A credit rating as a reflection of financial strength and discipline.

During 2015, 38.9 million treasury shares were delivered as a result of options exercised and share deliveries related to equity-based participation plans of associates. 13.7 million shares were repurchased on the SIX Swiss Exchange first trading line and from employees. In addition, Novartis repurchased 49.9 million shares on the second trading line in 2015 under the now completed share buy-back of USD 5.0 billion announced in November 2013 and to offset the dilutive impact from equity-based participation plans of associates. With these transactions, the total number of shares outstanding decreased by 24.7 million in 2015 and the sixth share buyback program has been completed.

During 2015, Novartis issued five bonds (three bonds in CHF and two bonds in USD) for a total amount of USD 4.5 billion and repaid two bonds for a total amount of USD 2.9 billion (USD 2.0 billion bond issued in March 2010 and a Swiss franc denominated bond of USD 0.9 billion issued in June 2008) at maturity.

As of December 31, 2015, the net debt stood at USD 16.5 billion compared to USD 6.5 billion at December 31, 2014. The increase of USD 10.0 billion was driven by the outflows related to the acquisition of the oncology assets from GSK of USD 16.0 billion, the dividend payment of USD 6.6 billion, share repurchases of USD 6.1 billion, divestment related payments of USD 1.0 billion and other net cash outflow items of USD 0.8 billion. This was partially compensated by the free cash flow of USD 9.0 billion, net divestment proceeds of USD 9.9 billion related to the portfolio transformation transactions and proceeds from options exercised of USD 1.6 billion.

The long-term credit rating for the company continues to be double-A (Moody’s Aa3; Standard & Poor’s AA-; Fitch AA).

2016 Group outlook

Barring unforeseen events

Group net sales and core operating income in 2016 are expected to be broadly in line with the prior year (cc), after absorbing the impact of generic competition. Generic competition impact on sales is expected to be as much as USD 3.2 billion compared to USD 2.2 billion in 2015.

Excluding Gleevec/Glivec generic impact, we would expect Group net sales to grow mid-single digit (cc) and Group core operating income to grow in the mid-teens (cc).

These comparisons are versus 2015 continuing operations.

Including the steps we announced today to focus the Alcon Division on Surgical and Vision Care, move Alcon’s ophthalmic pharmaceutical products to the Pharmaceuticals Division, and shift selected mature pharmaceutical products from Pharmaceuticals to Sandoz, we expect divisional net sales performance (cc) in 2016 to be as follows:
· Pharmaceuticals: broadly in line with 2015 to a slight decline (mid-single digit growth excluding Glivec generic impact)
· Alcon: low single digit growth
· Sandoz: low to mid-single digit growth

If early January exchange rates prevail for the remainder of 2016, the currency impact for the year would be negative 3% on sales and negative 5% on core operating income. This currency impact versus 2015 results from the continued strength of the US dollar against most currencies.

Annual General Meeting

Dividend proposal
The Board proposes a dividend payment of CHF 2.70 per share for 2015, up 4% from CHF 2.60 per share in 2014, representing the 19th consecutive dividend increase since the creation of Novartis in December 1996. Shareholders will vote on this proposal at the 2016 Annual General Meeting (AGM) scheduled for February 23, 2016.

Reduction of share capital
The Board proposes to cancel 49,878,180 shares repurchased on the second trading line under the sixth share repurchase program in the financial year 2015 and to reduce the share capital accordingly by CHF 24,939,090, from CHF 1,338,496,500 to CHF 1,313,557,410.

Further share repurchase program
The Board proposes that shareholders authorize the Board of Directors to launch a seventh share repurchase program that will allow Novartis to repurchase shares up to a maximum of CHF 10 billion in the future. Any repurchased shares will be cancelled. The necessary capital reductions will be submitted to the shareholders for approval.

Re-elections of the Chairman and the members of the Board, election to the Board
The Board proposes the re-election of Joerg Reinhardt, Ph.D. (also as Chairman of the Board), Nancy C. Andrews, M.D., Ph.D., Dimitri Azar, M.D., Srikant Datar, Ph.D., Ann Fudge, Pierre Landolt, Ph.D., Andreas von Planta, Ph.D., Charles L. Sawyers, M.D., Enrico Vanni, Ph.D., and William T. Winters as well as the election of Ton Buechner and Elizabeth Doherty as members of the Board, each until the end of the next Annual General Meeting.

Verena Briner, M.D, has announced her decision not to stand for re-election. The Board of Directors thanks her for her services and commitment to Novartis as a Director and member of the Board of Director’s Risk Committee.

Re-elections and election to the Compensation Committee
The Board proposes the re-election of Srikant Datar, Ph.D., Ann Fudge, Enrico Vanni, Ph.D., and William T. Winters as members of the Compensation Committee, each until the end of the next Annual General Meeting.