Alcon Division

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Alcon Division
Alcon Division
Jeff George – Division Head, Alcon
Meet Novartis Management
June 17-18, 2015
Disclaimer
This presentation contains forward-looking statements that can be identified by words such as “momentum,” “progress,” “building,” “focused,”
“pipeline,” “focusing,” “focus,” “expect,” “target,” “on track,” “strategy,” “accelerating,” “well positioned,” “ongoing,” “planned,” “aim,” “being
investigated,” “continuing,” “potential,” “preparing,” “launch,” “underway,” “working,” “committed,” “potentially,” “developing,” “initiated,” “continued,”
“development,” “plans,” “evolving,” “will,” “expects,” “continue,” “expected,” “progressing,” “priorities,” or similar terms, or by express or implied
discussions regarding potential new products, potential new indications for existing products, or regarding potential future revenues from any such
products; potential shareholder returns or credit ratings; or regarding the potential completion of the announced transaction with CSL, or regarding
the potential financial or other impact on Novartis of the transactions with GSK, Lilly or CSL, or regarding any potential strategic benefits, synergies
or opportunities as a result of these transactions; or regarding potential future sales or earnings of the Novartis Group or its divisions and
associated companies; or by discussions of strategy, plans, expectations or intentions. You should not place undue reliance on these statements.
Such forward-looking statements are based on the current beliefs and expectations of management regarding future events, and are subject to
significant known and unknown risks and uncertainties. Should one or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those set forth in the forward-looking statements. There can be no guarantee
that any new products will be approved for sale in any market, or that any new indications will be approved for any existing products in any market,
or that any approvals which are obtained will be obtained at any particular time, or that any such products will achieve any particular revenue
levels. Nor can there be any guarantee that the announced transaction with CSL will be completed in the expected form or within the expected time
frame or at all. Neither can there be any guarantee that Novartis will be able to realize any of the potential strategic benefits, synergies or
opportunities as a result of the transactions with GSK, Lilly or CSL. Neither can there be any guarantee that the Novartis Group or any of its
divisions or associated companies will achieve any particular financial results in the future. Nor can there be any guarantee that shareholders will
achieve any particular level of shareholder returns. Neither can there be any guarantee that the Novartis Group, or any of its divisions, will be
commercially successful in the future, or achieve any particular credit rating. In particular, management’s expectations could be affected by, among
other things, unexpected regulatory actions or delays or government regulation generally, including an unexpected failure to obtain necessary
government approvals for the announced transaction with CSL, or unexpected delays in obtaining such approvals; the potential that the strategic
benefits, synergies or opportunities expected from the transactions with GSK, Lilly or CSL may not be realized or may take longer to realize than
expected; the inherent uncertainties involved in predicting shareholder returns or credit ratings; the uncertainties inherent in research and
development, including unexpected clinical trial results and additional analysis of existing clinical data; the Company’s ability to obtain or maintain
proprietary intellectual property protection; unexpected manufacturing or quality issues; global trends toward health care cost containment,
including ongoing pricing pressures; uncertainties regarding actual or potential legal proceedings, including, among others, actual or potential
product liability litigation, litigation and investigations regarding sales and marketing practices, government investigations and intellectual property
disputes; general economic and industry conditions, including uncertainties regarding the effects of the persistently weak economic and financial
environment in many countries; uncertainties regarding future global exchange rates; uncertainties regarding future demand for our products;
uncertainties involved in the development of new healthcare products; uncertainties regarding potential significant breaches of data security or
disruptions of the Company’s information technology systems; and other risks and factors referred to in Novartis AG’s current Form 20-F on file
with the US Securities and Exchange Commission. Novartis is providing the information in this press release as of this date and does not
undertake any obligation to update any forward-looking statements as a result of new information, future events or otherwise.
2
| Meet Novartis Management | June 17-18, 2015 | Investor Presentation
Overview
Alcon overview and recent performance
Surgical
Vision Care Pharmaceuticals
Ophthalmic
Vision Care
3
| Meet Novartis Management | June 17-18, 2015 | Investor Presentation
Alcon is the global leader in ophthalmology
Ophthalmology revenue
FY 2014, USD billions
 Global eye care market leadership
10.8
1
3.4
3.3
1.5
1.2
• #1 globally in Surgical Ophthalmology
• #1 globally in Pharmaceutical
Ophthalmology
• #2 globally in Vision Care
 Over 25,000+ employees globally
 260 million patients served in 180
countries
 ~USD 1 billion spent on R&D annually
 23 manufacturing sites making
2
0.8
>250,000 SKUs
 Second-largest Novartis division
1
2
4
Estimated based on Valeant reporting, as B&L did not report Q1 2014 sales
Includes surgical ophthalmology microscope business; Zeiss acquired Aaren Scientific IOL portfolio in Jan. 2014
| Meet Novartis Management | June 17-18, 2015 | Investor Presentation
Alcon is #1 in Surgical and Pharma,
close #2 in Vision Care
Ophthalmology revenue by eye care segment
FY 2014, USD billions
Surgical
Pharma
Vision Care
4.2
4.1
2.8
3.3
2.5
1.2
2.5
1.9
1
0.8
2
2
0.6
1
1.6
2
1.5
Includes surgical ophthalmology microscope business; Zeiss acquired Aaren Scientific IOL portfolio in Jan. 2014
Estimated based on Valeant reporting, as B&L did not report Q1 2014 sales
Source: Company filings and Alcon internal estimates
2
5
1.4
1.7
| Meet Novartis Management | June 17-18, 2015 | Investor Presentation
1.3
Alcon 2014 financial performance
FY 2014 Alcon financial results
USD millions at actual rates
Variance vs. PY
2013
2014
cc1
USD
Net sales
10,496
10,827
+6%
+3%
Gross margin
73.0%
72.0%
+5%
+2%
Total function costs
(3,956)
(3,925)
(1%)
+1%
Core operating income1
3,694
3,811
+8%
+3%
Core ROS1
35.2%
35.2%
+0.6%
+0.0%
Operating income
1,232
1,597
+43%
+30%
Free cash flow1
26.2%
28.5%
+17%
+12%
1
6
Constant currencies (cc), core results, and free cash flow are non-IFRS measures. See page 42 of the Novartis AG Q1 Condensed Financial Report
| Meet Novartis Management | June 17-18, 2015 | Investor Presentation
Alcon’s 2015 key priorities remain consistent with 2014
Alcon 2015 Key Priorities
Growth




7
IOL growth
New launches
Emerging markets
Core brands
Innovation
 IOL innovation
 Cataract Refractive
integration
 Retina and Dry Eye
 M&A and BD&L
| Meet Novartis Management | June 17-18, 2015 | Investor Presentation
Productivity &
Quality




Greater efficiency
Quality commitment
Collaboration
Simplicity
People & Culture




Customer/patient focus
Talent development
Diversity & Inclusion
Integrity
Overview
Alcon overview and recent performance
Surgical
Vision Care Pharmaceuticals
Ophthalmic
Vision Care
8
| Meet Novartis Management | June 17-18, 2015 | Investor Presentation
Surgical
Surgical franchise overview
FY 2014 net sales
USD billions
Key products
4.1
Refractive / Other
Vitreoretinal
9
0.3
0.6
Intraocular lenses
(IOLs)
1.3
Cataract products
(equipment and
consumables)
1.9
Wavelight® Lasik and refractive
correction equipment
Constellation® platform, numerous
devices and instrumentation
AcrySof® IQ IOLs
| Meet Novartis Management | June 17-18, 2015 | Investor Presentation
Centurion®, Infiniti® phaco platforms;
LenSx® femtosecond laser; viscoelastics, instruments, custom paks
Surgical
Surgical market projected to grow at 5% CAGR 2014-19
Market Growth Drivers
2014 industry
sales
USD billions
Cataract
Vitreoretinal
Refractive
Total
1.3
0.7
Projected
industry 2014 net
CAGR1
sales
2014-19 USD bn Position
6.8 6%
3.2
#1
4%
0.6
#1
4%
0.3
#2
5%
1
 Aging population
 Growing access in emerging markets
 Higher AT-IOL2 penetration and greater use
of femtosecond lasers
 Improved diagnostics and visualization
Planned Alcon Growth Drivers
 Strong Centurion® phaco platform uptake
 High LenSx® adoption in AT-IOL procedures
 Planned new Alcon IOL offering (pre-loaded,
trifocal, next gen material)
 Higher Toric AT-IOL2 penetration driven by
Verion™ and ORA® launches
 Vitreoretinal expansion in emerging markets
CAGR: Compound annual growth rate
AT-IOLs: Advanced technology intraocular lens
Source: Internal surgical estimates (SP15) based upon 2014 Market Scope Forecasts, GSFS
2
10
| Meet Novartis Management | June 17-18, 2015 | Investor Presentation
Surgical
Alcon’s Cataract Refractive Suite
drives improved outcomes
Clinical Plan
Surgical
Planning
11
Cataract Treatment
Femtosecond
Laser
| Meet Novartis Management | June 17-18, 2015 | Investor Presentation
Operate
Intra-operative
Aberrometry
Surgical
Very strong Centurion® adoption since launch
Cumulative number of units sold1
Ex-US
2,859
US
 Best-in-class
phacoemulsification
platform with active
fluidics™
2,295
1,284
 Over 2,800 units sold
globally through Q1 2015
1,596
1,036
1,231
global installed base and
over 25% in the US as of
May 2015
791
443
312
79
233
4Q13
1
513
186
327
1Q14
593
2Q14
 15% penetration of the
1,575
805
3Q14
1,064
4Q14
1Q15
All figures shown are the cumulative number of units sold from the beginning of sales of the product through the end of the listed calendar quarter
12
| Meet Novartis Management | June 17-18, 2015 | Investor Presentation
Surgical
Centurion® and LenSx® drive
strong Consumables and IOL sales
Global1 Centurion® and LenSx® accounts vs. non-accounts
FY 2014 IOL unit growth (%)
Centurion® accounts, Account-level impact
LenSx® accounts, Account-level impact
Centurion® Accounts
LenSx® Accounts
Non-Centurion® Accounts
Non-LenSx® Accounts
11%
9%
2%
Total IOLs
1
US, Top 5 Europe, Latin America & Canada, Asia and Japan
13
| Meet Novartis Management | June 17-18, 2015 | Investor Presentation
2%
Total IOLs
Surgical
US gained IOL share in the past year, but EMEA share
declined due to competitor trifocal / pre-loaded offering
Market unit share
Total IOL units as % of foldable IOL market
62
60
US
58.7
57.7
58
56
Q1 ’13
Q2 ’13
Q3 ’13
Q4 ’13
Q1 ’14
Q2 ’14
Q3 ’14
Q4 ’14
Q1 ’15
50
45
42.0
41.4
40
EMEA
35
Q1 ’13
Q2 ’13
Q3 ’13
Q4 ’13
Q1 ’14
Q2 ’14
Q3 ’14
Q4 ’14
Source: Alcon Global Sales and Forecasting System, including combination of Veris market data and management estimates; Marketscope
14
| Meet Novartis Management | June 17-18, 2015 | Investor Presentation
Q1 ’15
Surgical
Alcon has nearly tripled its IOL pipeline from
9 to 24 active projects since June 2014
Key new IOL pipeline projects initiated since June 2014
Short-term (incremental)
AcrySof®
PanOptix
(new trifocal IOL)
UltraSert: new pre-loaded IOL
delivery device1
15
| Meet Novartis Management | June 17-18, 2015 | Investor Presentation
Mid- to long-term (breakthrough)
New IOL platform:
Working toward best-inclass material, optics, and
mechanics
Next-Gen pre-loaded IOL:
Working toward best-in-class
automated, pre-loaded delivery
system
Surgical
Alcon is the market leader in vitreoretinal surgery
Global premium segment vitrectomy packs
Units in thousands, segment share (%)
100%
All other
competitors
Accurus®
(Alcon)
872
29%
30%
965
1,039
32%
31%
19%
13%
 State-of-the-art equipment
(Constellation®), with ~75% share in
developed markets
 Vit-ret ‘razor-razorblade’ consumables
sales model
 In Q1, Alcon acquired a portable, lowcost vit-ret surgery system to be
developed for emerging markets
Constellation®
(Alcon)
41%
2012
49%
2013
57%
2014
Source: Alcon internal estimates, Market Scope 2015
16
| Meet Novartis Management | June 17-18, 2015 | Investor Presentation
Overview
Alcon overview and recent performance
Surgical
Vision Care Pharmaceuticals
Ophthalmic
Vision Care
17
| Meet Novartis Management | June 17-18, 2015 | Investor Presentation
Pharma
Ophthalmic Pharmaceuticals franchise overview
FY 2014 net sales
USD billions
Key brands
4.2
Dry Eye / Other
Systane®, Tears Naturale®
0.9
Patanol®, Pataday®,
Patanase®, Ciprodex®
Allergy / Otic / Nasal
0.9
Infection /
Inflammation
1.1
NevanacTM, Ilevro®, Durezol®
Glaucoma
1.3
Travatan®, DuoTrav®, Azopt®,
Azarga®, Simbrinza®
18
| Meet Novartis Management | June 17-18, 2015 | Investor Presentation
Pharma
Ophthalmic Pharma market projected to grow at
6% CAGR 2014-2019, driven by Retina and Dry Eye
Projected
industry 2014 net
CAGR
sales
2014-19 USD bn Position
2014 industry sales
USD billions
8.0 10%
Retina
0
n/a1
Market Growth Drivers
 New retinal approvals and unmet need
 Aging demographics
Glaucoma
6.4
2%
1.3
#1
 Emerging market adoption
Dry Eye
3.2
7%
0.6
#2
Infection /
Inflammation
2.7
1%
1.1
#1
 Fixed-dose Glaucoma combo growth
(Azarga® and Simbrinza®)
Allergy /
Otic
2.3
3%
0.9
#1
 Systane® growth in dry eye
Total
Planned Alcon Growth Drivers
 RTH258 in wet AMD in retina market
6%
1
Including Lucentis®, Novartis Group has #1 position with USD 2.5 bn of sales
Source: Pharmaceuticals estimates according to IMS MIDAS 2015 forecast by ATC Class factored to account for IMS coverage gaps; Dry Eye is combined
S1K Tears from IMS and Restasis® Rx from EvaluatePharma estimations, 2014; Otic is S2A and S2C ATC revenues factored with AOM, OMTT indication
revenues; Retina Rx from EvaluatePharma estimations, 2014
19
| Meet Novartis Management | June 17-18, 2015 | Investor Presentation
Pharma
Glaucoma: Alcon is the global leader
Global Glaucoma revenue
FY 2014, USD billions
1.3
2013
1.2
2009
1998
0.6
0.3
0.2
2006
0.2
Source: Company filings and Alcon internal estimates
20
| Meet Novartis Management | June 17-18, 2015 | Investor Presentation
2004
2001
Pharma
Systane® growth accelerating and Alcon and NIBR are
collaborating on earlier-stage Dry Eye Rx opportunities
Global Systane® sales
USD millions
+25%
395
+16% CAGR
313
275
233
 LME636 – anti-TNFα; first-in-class
topical single-chain antibody fragment
 Completed Phase I; additional studies
ongoing in Dry Eye
2011
2012
2013
2014
Source: Internal data
21
| Meet Novartis Management | June 17-18, 2015 | Investor Presentation
Pharma
Pazeo™ was approved and launched in the US and
provides a significant source of lifecycle management
 Relief of ocular itching associated with
allergic conjunctivitis
 24-hour relief from single dose
 Significant product extension in Alcon’s
USD 0.6 billion allergy portfolio
 Expands allergy portfolio beyond
Patanol® and Pataday®; products are
facing LOE1 beginning in 2015
1
LOE: loss of exclusivity
22
| Meet Novartis Management | June 17-18, 2015 | Investor Presentation
Pharma
RTH258 demonstrated promising visual acuity gains
 Phase II studies of RTH2581 in patients
with wet AMD2 met their primary endpoints
25 million with
AMD globally
1
2
3
Formerly called ESBA 1008
AMD: age-related macular degeneration
Eylea® is a registered trademark of Regeneron Pharmaceuticals, Inc.
23
| Meet Novartis Management | June 17-18, 2015 | Investor Presentation
 Alcon initiated a Phase III study to
evaluate the efficacy and safety of
RTH258 versus Eylea® in Dec. 2014
Pharma
Pipeline launches are expected to drive growth over
the next five years offsetting near-term generic impact
Alcon Pharma global launches and LOEs1
Illustrative timing
+
+
+
RTH258
PazeoTM
Simbrinza®
2014
2019
–
Patanase®, Patanol®, and Pataday®
–
1
24
Azopt®
LOE: Loss of exclusivity
| Meet Novartis Management | June 17-18, 2015 | Investor Presentation
–
Travatan®/DuoTrav®
Overview
Alcon overview and recent performance
Surgical
Vision Care Pharmaceuticals
Ophthalmic
Vision Care
25
| Meet Novartis Management | June 17-18, 2015 | Investor Presentation
Vision Care
Alcon is #2 in contact lenses and #1 in solutions
FY 2014 net sales
USD billions
Key brands
2.5
Contact lens care
0.6
Contact lenses
1.9
26
| Meet Novartis Management | June 17-18, 2015 | Investor Presentation
Vision Care
Vision Care market projected
to grow at 4% CAGR 2014-2019
Market Growth Drivers
2014 industry
sales
USD billions
Contact
Lenses
Projected
industry 2014 net
CAGR
sales
2014-19 USD bn Position
8.2 5%
1.9
 Product mix shift (daily modality, SiHy1
materials, toric and multifocal)
 Unmet need in comfort, vision, and health
 Increasing emerging markets penetration
#2
Planned Alcon Growth Drivers
Lens
Care
Total
1.5
0%
0.6
#1
4%
1
Silicone hydrogel
DACP: Dailies Aqua Comfort Plus®
Source: Alcon internal estimates
2
27
| Meet Novartis Management | June 17-18, 2015 | Investor Presentation
 Best-in-class innovation portfolio
• Dailies Total1® water gradient SiHy rollout
• Launch of DACP2 Toric and Multifocal
• AirOptix® Colors launch
 Market and core products growth
Vision Care
Alcon has a broad contact lens offering
Tier
28
Daily Disposable Contact Lenses
Tier 1
Premium water
gradient technology
Tier 2
Blink-activated
moisture technology
Tier 3
Entry-level daily
disposable lens
| Meet Novartis Management | June 17-18, 2015 | Investor Presentation
Weekly/Monthly Contact Lenses
Plasma surface
technology; also with
color options
Entry-level daily silicon
hydrogel lens
Vision Care
Alcon has gained share vs. J&J
in the US in contact lenses
Alcon vs. J&J unit market share, US market
%, 2008-20151
45
40
39.6%
36.5%
33.8%
35
32.9%
32.1%
31.9%
30
25
25.6%
26.8%
28.2%
29.5%
Competitor
30.6%
31.0%
30.6%
30.9%
2014
2015
22.9%
20
18.6%
15
2008
2009
2010
2011
1
2012
2013
Data is from September of each year except 2008 and 2015 data, which are from July and February, respectively
Source: GfK Retail Data
29
| Meet Novartis Management | June 17-18, 2015 | Investor Presentation
Vision Care
Dailies Total1® has seen rapid uptake since launch
Dailies Total1® sales growth
%
Premium SiHy dollar market share, US market
%
100
100
80
+83%
Competitor
60
52
45
40
20
Alcon 2014
supply
constrained
0
0
FY 2013
FY 2014
Mar
Jun
2013
1
Significantly more capacity coming online in 2015
Source: GfK Retail Data
30
| Meet Novartis Management | June 17-18, 2015 | Investor Presentation
Sep
Dec
Mar
Jun
Sep
2014
Dec
Vision Care
“Smart lens” technology could
transform diabetes and presbyopia
 Strengthens Alcon’s leadership in the development
of contact lenses and intraocular lenses
 ‘Smart lens’ partnership is focused on diabetes
and presbyopia
 Exploratory clinical trials conducted with
glucose-sensing lens
31
| Meet Novartis Management | June 17-18, 2015 | Investor Presentation
Appendix
32
| Meet Novartis Management | June 17-18, 2015 | Investor Presentation
Alcon Division Executive Leadership Team (ELT)
1 year or less in position
Between 1-3 years in position
Jeff George
Division Head,
Alcon
Robert Warner
Region President,
US
Ed McGough
SVP, Global
Manufacturing &
Technical Operations
Christina
Ackermann
SVP, General
Counsel
33
Sergio Duplan
More than 3 years in position
Region President,
Latin America &
Canada
Riad Sherif
Jim Murphy
Region President,
EMEA
Region President,
Japan
Michael
Onuscheck
Frederic
Guerard
Global Franchise
Head, Surgical
Global Franchise
Head, Pharma
Eric Van
Oppens
Region President,
Asia & Russia
OPEN
Global Franchise
Head, Vision Care
Laurent Attias
OPEN
Sue Whitfill
SVP, Research &
Development
SVP, Global
Quality Operations
Head, Strategy,
BD&L, and Market
Access
David Nieto
Bettina Maunz
Chief Financial
Officer
VP, Head of Global
Communications
Merrick
McCracken
| Meet Novartis Management | June 17-18, 2015 | Investor Presentation
SVP, Global HR
Eye care expected to grow by over USD 10 bn in 5 years
Industry revenue by eye care segment, 2014 to 2019
USD billions
42
Vision Care
10
Surgical
9
Pharma
4
2
1
2
53
CAGR
+5%
12
+4%
11
+5%
30
+6%
2
23
Market
2014
Retina
Dry Eye
Cataract
Contact
Lens
Rest
Market
2019
Source: Contact Lens and Lens Care estimates Contact Lens Institute/Euromcontact Factory Sales Sharing Program/GfK/Internal Estimates; market definition
limited to soft contact lens and disinfectant solutions; Pharmaceuticals estimates according to IMS MIDAS, 2013; Surgical estimates according to 2013 Market
Scope, LLC Forecasts; Retina Rx from EvaluatePharma estimations, 2013
34
| Meet Novartis Management | June 17-18, 2015 | Investor Presentation
All franchises grew in 2014, led by Surgical
FY 2014 net sales
USD billions at actual rates
4.2
Pharma
Surgical
Vision
Care
4.1
2.5
Alcon
35
| Meet Novartis Management | June 17-18, 2015 | Investor Presentation
10.8
FY vs. PY
% cc
Q4 vs. PY
% cc
+5
+10
+7
+7
+4
+4
+5.7
+7.5
Alcon accelerated growth in key emerging markets
Alcon emerging markets1 net sales
USD billions
Alcon 2014 net sales growth vs. PY
% cc
+14% cc
2.7
Russia
2.5
+27%
China
+23%
Turkey
2013
1
2014
Includes all markets except US, Canada, Western Europe, Japan, Australia and New Zealand
36
| Meet Novartis Management | June 17-18, 2015 | Investor Presentation
+20%
Brazil
+13%
India
+13%
Alcon Q1 2015 financial performance
Q1 2014 and Q1 2015 Alcon financial results
USD millions at actual rates
Variance vs. PY
Q1 2014
Q1 2015
cc1
USD
Net sales
2,642
2,558
+5%
(3%)
Gross margin
71.6%
70.8%
+6%
(4%)
Total function costs
(967)
(925)
(2%)
+4%
925
894
+10%
(3%)
35.0%
34.9%
+1.5%
-0.1%
380
353
+25%
(7%)
14.5%
11.6%
+1%2
(23%)2
Core operating income1
Core ROS1
Operating income
Free cash flow1
1
2
37
Constant currencies (cc), core results, and free cash flow are non-IFRS measures. See page 42 of the Novartis AG Q1 Condensed Financial Report
Free cash flow +26% (cc) vs. PY excluding ESBATech and SMI milestone payments
| Meet Novartis Management | June 17-18, 2015 | Investor Presentation

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