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Novartis AG ADR NVS
Q2 2011 Earnings Call Transcript

Transcript Call Date 07/19/2011

Operator: Good morning or good afternoon, depending where you're attending from. I am Stephanie, the Chorus Call operator for this conference. Welcome to the Novartis Q2 Half Year Results 2011 Conference Call and Live Webcast. Please note that for the duration of the presentation, all participants will be in listen-only mode and the conference is being recorded. This call must not be recorded for publication or broadcast.

At this time, I would like to turn the conference over to Mr. Joe Jimenez. Please go ahead, sir.

Joseph Jimenez - CEO: Thank you. Good afternoon and good morning to those of you on the line. I'd like to welcome everybody to the second quarter 2011 conference call. Now, joining with me on the Novartis end are Jon Symonds, CFO; David Epstein, Head of Pharma; Kevin Buehler, Spearhead of Alcon business; Jeff George, Head of Sandoz; Andrin Oswald, Head of Vaccines and Diagnostics; and we also have Trevor Mundel, Head of Pharmaceutical Development.

Before we start, I'd like Susanne to read the Safe Harbor Statement. Please.

Susanne Schaffert - Global Head, IR: The information presented in this conference call contains forward-looking statements that involve known and unknown risks, uncertainties and other factors. These may cause actual results to be materially different from any future results, performance or achievements expressed or implied by such statements. Please refer to the Company's Form 20-F on file with the Securities and Exchange Commission for a description of some of these factors

Joseph Jimenez - CEO: Thanks, Susanne. So, starting on Slide number 4, we had a strong quarter and the second quarter our sales were up 19% versus year ago. We're also able to drive strong operating leverage with our core operating income up 29% in U.S. dollars and core EPS up 23% in U.S. dollars. We had a great cash flow quarter. We also made great progress in our innovation this quarter with four major approvals which we'll talk about a little bit later.

On Slide 5, you can see an overview of the financials and Jon will speak to these, but core EPS of 1.48 which is up 23% versus a year ago.

Slide 6 shows what I think is the benefit of the Novartis diversified portfolio. We had very strong contribution this quarter from Sandoz which was up 16% in constant currency and Alcon up 6%. Pharma also had a good performance, it was up 2%, but this includes absorbing four points of generic erosion on Femara in the U.S. and Diovan in Europe, particularly Spain, where we have lost exclusivity.

Now Vaccines and Diagnostics business was down, excluding H1N1, due to the timing of some bulk product shipments, but as you know Q2 is historically a low sales quarter for vaccines. So, I look at vaccines more on the half year at the first half of the year and they were up 6% in constant currency behind the Menveo launch.

Now on Slide 7, we're continuing to execute well against our three priorities of innovation, growth and productivity. Let me just touch on each of those starting with innovation on Slide 8. We made great progress with some key approvals. The four key approvals in the quarter are listed here and if you add those to first quarter, we've had in total seven approvals in the first half of the year. Also in the same quarter, we had two very important filings; INC424, our new JAK2 inhibitor for myelofibrosis was filed in Europe, and Menveo in U.S. to expand the label for (UC) in infants and toddlers between 2 and 12 months of age.

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