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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 or 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934

Report on Form 6-K dated January 23, 2004
(Commission File No. 1-15024)

Novartis AG
(Name of Registrant)


Lichtstrasse 35
4056 Basel
Switzerland


(Address of Principal Executive Offices)


Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F:   ý   Form 40-F:   o

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Yes:   o   No:   ý

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Yes:   o   No:   ý

Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes:   o   No:   ý

Enclosure: Press release announcing Novartis AG's full year 2003 annual results, dated January 23, 2004

    Novartis International AG
Novartis Communications
CH-4002 Basel
Switzerland
GRAPHIC     
Tel + 41 61 324 2200
Fax + 41 61 324 3300
Internet Address:
http://www.novartis.com
MEDIA RELEASE • COMMUNIQUE AUX MEDIAS • MEDIENMITTEILUNG

PRESS CONFERENCE: 10.00 CET on Internet www.novartis.com
Phone-in: +41 91 610 56 00 (UK: +44 207 107 06 11)

Novartis posts leading growth among top-ten pharmaceutical companies*, sustaining double-digit increase in sales and operating income in 2003

Full year 2003

 
   2003

   2002

   % Change
 
   USD m

   % of sales

   USD m

   % of sales

   USD

   local
currencies
Group sales   24 864       20 877       19   11
  Pharmaceuticals sales   16 020       13 528       18   11
  Consumer Health sales   8 844       7 140 1     24   16
Operating income   5 889   23.7   5 092   24.4   16    
Net income   5 016   20.2   4 725   22.6   6    
Free cash flow   3 628       2 958       23    
Basic earnings per share/ADS   USD 2.03       USD 1.88       8    
Dividend proposed   CHF 1.00       CHF 0.95           5
1
Ongoing business excluding divested activities with sales of USD 209 million in 2002

Fourth quarter

 
   Q4 2003

   Q4 2002

   % Change
 
   USD m

   % of sales

   USD m

   % of sales

   USD

   local
currencies
Group sales   6 730       5 569       21   12
  Pharmaceuticals sales   4 379       3 632       21   12
  Consumer Health sales   2 351       1 895 2     24   15
Operating income   1 606   23.9   1 354   24.3   19    
Net income   1 360   20.2   1 187   21.3   15    
Free cash flow   1 444       1 634       -12    
2
Ongoing business excluding divested activities with 4th quarter sales of USD 42 million in 2002

•
Sustained double-digit growth accelerates in fourth quarter: full-year Group sales up 19%; Pharmaceuticals climbs 18%; Consumer Health rises 24% driven by dynamic 60% sales growth in Sandoz

•
Market-share gains lead to advance in rank to global #5 pharmaceuticals company*

•
Double-digit (16%) rise in full-year operating income driven by volume expansions, product mix enhancements and productivity gains

•
Net income increases 6% to new record level of USD 5.0 billion, lifting earnings per share by 8%

•
Free cash flow jumps 23% to USD 3.6 billion; dividend increase of 5% proposed
*
Based on IMS healthcare data, January–November 2002/3 17 countries
All product names appearing in italics are trademarks of the Novartis Group
Unless otherwise stated, growth rates in USD and comments refer to full-year figures

1

Basel, 22 January 2004—Reviewing Novartis' 2003 full-year results, published today, Novartis Chairman and CEO Dr. Daniel Vasella said:

"2003 ended on a strong note as our sales grew dynamically, reaching record levels for the eighth time in our eight-year history. All of our businesses gained market share, based on our innovation-focused strategy. In pharmaceuticals, we moved up to the number-five rank worldwide. In research and development, we increased our investment by 32% and the build-up of our Novartis Institute for Biomedical Research progressed on track. We also expanded our pharmaceutical pipeline to 79 projects in clinical development and registration, promising sustainable future growth. Sandoz, our generics business unit, achieved an exceptionally strong growth of 60%. This combination of activities uniquely positions Novartis at the forefront of bringing better, innovative medicines to patients, as well as playing an important role in offering inexpensive, high quality generics."

Sales

Group sales up 19% to USD 24.9 billion

Full-year sales climbed 19% or 11% in local currencies (l.c.) with growth in the fourth quarter rising to 21% in USD. Eight percentage points of 2003 sales growth was driven by volume expansions, while acquired businesses contributed 2 percentage points and price increases a further 1 percentage point. The impact of translations from local currencies into USD accounted for 8 percentage points.

Throughout 2003, group sales were driven primarily by Pharmaceuticals and Sandoz. Collectively, the medicines businesses1 grew sales by 22% and contributed 86% to total revenues.

1
Pharmaceuticals, Sandoz, OTC, Animal Health

Pharmaceuticals sales up 18% to USD 16.0 billion

The core Pharmaceuticals business achieved above-market growth2 to post an 18% (11% in l.c.) rise in full-year sales on the back of a fourth quarter of sustained momentum (21%; 12% in l.c.).

In 2003, Novartis captured further share of the key US market (sales: +15% in l.c.) rising two places in the US healthcare company rankings. This and additional share gains in Japan (sales: +14% in l.c.), the second largest single market, and Europe (sales: +6% in l.c.) resulted in Novartis being the fastest growing among the ten largest pharmaceutical companies, according to IMS2. As a result, the company climbed one rank globally to the number five position, with a 4.38% share of the global healthcare market.

2
Based on IMS data January–November 2002/3, the global healthcare market grew approximately 9% compared with Novartis healthcare 17%

The cardiovascular (+36%; +29% in l.c.) and oncology franchises (+36%; +26% in l.c.) continued to be the main drivers throughout the year, led in particular by Diovan, Gleevec/Glivec, Zometa, Lotrel and Lescol, with sales growth boosted by the contributions of newly launched products including Elidel and Zelnorm/Zelmac.

Highlights on the key brands are presented below.

2


Consumer Health sales up 24% to USD 8.8 billion

Full-year sales of Consumer Health's ongoing business grew a substantial 24% (+16% in l.c.) as all of the business units outperformed their markets. Top-line growth was driven mainly by Sandoz and fuelled throughout the year by the other businesses, of which OTC (over-the-counter medicines), CIBA Vision and Medical Nutrition all delivered double-digit sales increases in USD. Dynamic sales growth in the fourth-quarter was led by OTC, CIBA Vision and Sandoz, each of which posted increases of more than 20% in USD.

Sandoz' (+60%; +47% in l.c.) full-year sales were driven by the US retail pharmaceuticals business and the successful integration of Lek, which contributed 38 percentage points to sales growth and 37 percentage points in the fourth quarter. Sandoz posted strong sales growth (+43%; 31% in l.c.) in the fourth quarter versus the prior year, despite lower prices and more intense competition for AmoxC (a generic version of Augmentin®3). The fourth-quarter also included the acquisition of Amifarma in Spain, strengthening in-house antibiotics production capacity and technology.

3
Augmentin® is a trademark of GlaxoSmithKline

Among the other business unit highlights, OTC full-year sales were boosted by the exceptional contribution of loratadine in the US, the performance of its core strategic brands and strong fourth-quarter sales of cough and cold remedies.

Operating income

Full-year

 
     
2003
     
2002
    
 
   USD m

   % of sales

   USD m

   % of sales

   Change
in %
Pharmaceuticals   4 423   27.6   3 891   28.8   14
Consumer Health (ongoing)   1 320   14.9   946   13.2   40
Divested Health & Functional Food activities           140        
Consumer Health   1 320   14.9   1 086   14.8   22
Corporate income/expense, net   146       115       27
Total   5 889   23.7   5 092   24.4   16

Fourth quarter

 
     
Q4 2003
     
Q4 2002
    
 
   USD m

   % of sales

   USD m

   % of sales

   Change
in %
Pharmaceuticals   1 174   26.8   1 041   28.7   13
Consumer Health (ongoing)   330   14.0   219   11.6   51
Divested Health & Functional Food activities           116        
Consumer Health   330   14.0   335   17.3   -1
Corporate income/expense, net   102       -22        
Total   1 606   23.9   1 354   24.3   19

3

Group operating income rises 16% to USD 5.9 billion

Full-year operating income grew 16% driven by dynamic sales and productivity gains. Bold investments in pharmaceutical research and development, in particular the research expansion in Cambridge, Massachusetts, and the addition of new development projects led to a significant overall increase of 32% in Research & Development investments to 15.1% of sales. Thanks to continued productivity gains and product-mix improvements, the cost of goods sold grew slower than sales, as did Marketing & Sales investments. General & Administration expenses increased as a proportion of sales, owing to several factors including a USD 216 million impairment of tangible, intangible and other financial assets. On the other hand, General & Administration expenses were reduced by USD 90 million owing to the release of litigation provisions related to AmoxC. With the overall full-year operating result improving to USD 5.9 billion, the operating margin was 23.7%, 0.7 percentage points off the previous year's level, in line with expectations.

Pharmaceuticals operating income climbs 14% to USD 4.4 billion

Earnings growth accelerated in the year as sales continued to expand strongly. The cost of goods sold, as well as investments in Marketing & Sales, increased slower than sales over the prior year. Research & Development increased substantially and reached 19.1% of sales, reflecting payments of USD 151 million related to development milestones and in-licensing deals, in addition to the sustained high-level investment in the new Cambridge facility. General & Administration costs increased from 5.9% to 6.0% of sales owing to increased royalties, foreign exchange fluctuations and an increase in product liability insurance costs. This was partially offset by one-time gains on the sale of non-core products, primarily the Fioricet and Fiorinal lines for USD 178 million.

Consumer Health operating income rises 40% to USD 1.3 billion

Operating income from Consumer Health's ongoing business rose 40% in 2003, outpacing sales and driven in particular by Sandoz (+78%). Overall continued productivity gains, lower material costs, and the focus on higher-margin products contributed to a reduction in the cost of goods sold as a percentage of sales. Marketing & Sales investments were maintained at the previous year's level to drive new products and recent launches and to support key brands. On the other hand, Research & Development investments grew as a proportion of sales mainly due to the expansion at Sandoz and licensing agreements. General & Administration costs increased mainly on account of the impairment of intangible assets of USD 72 million related to Azupharma. The overall increase was, however, slower than sales owing to the release of USD 49 million of provisions following the successful conclusion of litigation with GSK.

With almost all business units achieving margin improvements, the profit margin of the Division's ongoing businesses improved from 13.2% in 2002 to 14.9% in 2003.

Group net income

Full-year group net income reached a record USD 5.0 billion. At 6%, growth was less pronounced than at the operating income level because non-operating income from associated companies and financial investments were significantly reduced. Earnings per share expanded by 8% to USD 2.03.

On the basis of the strong 2003 performance, a dividend increase of 5% to CHF 1.00 will be proposed to the shareholders' AGM on 24 February 2004.

Board of Directors

With effect of the date of the AGM, Walter G. Frehner and Heini Lippuner are retiring from the Board of Directors, having reached the age limit. The Board also proposes the re-elections of Prof. Helmut Sihler, Hans-Jörg Rudloff and Dr. Daniel Vasella for a three-year term each.

Group outlook (barring any unforeseen events)

Novartis expects to deliver strong top-line growth ahead of the market and in the high single-digit range in local currencies, driven by key pharmaceutical brands, seven of which are forecast to be blockbusters by 2008, and boosted by the launch and roll-out of attractive new products.

The rapid build-up of the Cambridge research center is scheduled for completion in 2004. At the same time, Development investments are expected to grow strongly reflecting the rich late-stage pharmaceutical pipeline. Research & Development investments are, therefore, projected to continue to increase overproportionately in 2004, underscoring Novartis' commitment to bringing innovative therapies to patients.

Barring unforeseen events, both full-year operating and net income are expected to exceed the 2003 levels.

4

Pharmaceutical business and key product highlights

Primary Care

Diovan (+46%; +38% in l.c.; US: +42%) became the world's leading angiotensin receptor blocker (ARB) in March and has continued to capture further market share from its competitors. With the heart failure indication now approved in more than 40 markets, the flagship brand has continued to outpace its fast-growing ARB segment with year-to-date sales in the US alone surpassing the USD 1 billion mark by December.

The fourth quarter was marked by the publication of the VALIANT mega-trial at the American Heart Association Scientific Session. The positive results are an important milestone making Diovan the first and only ARB to demonstrate a significant improvement in morbidity and mortality in post-myocardial infarction patients, reducing death by 25%. These data provide compelling evidence towards establishing Diovan as the new gold standard in the treatment of hypertension. A supplemental new drug application based on these results has already been filed in the US.

Diovan HCT/Co-Diovan became the most prescribed product in the combination ARB segment in the US. This rapid growth was powered by the roll-out of new dosage forms and new treatment guidelines. In Germany, the flagship brand secured the number-one rank in this segment, buoyed by the success of Co-Diovan 160/12.5 mg.

Lotrel (US: +20%), the leading combination treatment for hypertension, posted strong full-year prescription growth while fourth-quarter sales were spurred by a disease awareness campaign launched in August. Overall, the brand steadily gained segment share as a result of: new guidelines recommending more aggressive treatment; a new focus on patients who are not controlled by ACE inhibitors and calcium channel blockers; and the successful launch of the new dosage strength (10/20 mg), which adds efficacy and dosing flexibility.

Lescol (+27%; +18% in l.c.; US: +19%; cholesterol reduction) continued strong sales growth driven by proven benefits in high-risk patients, the successful roll-out of the XL formulation in France, Italy and Spain and the launch of the secondary prevention indication in the US.

Elidel (+147%; +144% in l.c.; US: +125%; non-steroid eczema treatment) notched up full-year sales of USD 235 million, generated predominantly in the US. In less than two years since its first launch, Elidel is the clear number-one branded prescription treatment for eczema and is now available in more than 38 markets.

Zelnorm/Zelmac (irritable bowel syndrome with constipation) revenues exceeded USD 165 million (US: USD 132 million) reflecting the product's therapeutic benefits and the increase in disease awareness. Total US prescriptions, as well as new prescriptions, grew 32% in the fourth quarter. Zelnorm/Zelmac has now been launched in 39 countries and was filed, in the fourth quarter, for the new indication of chronic constipation in the US.

Oncology

Gleevec/Glivec (+84%; +68% in l.c.; US: +41%), for chronic myeloid leukemia (CML) and gastro-intestinal stromal tumors (GIST), continued to grow dynamically, boosted by its use as first-line therapy and its approval for GIST in the US, Europe and Japan. The number of patients reached by the Gleevec/Glivec Patient Assistance Program rose to more than 8000 worldwide, providing treatment to many needy patients who otherwise would not have access.

5

Zometa (+83%; +74% in l.c.; US: +59%), the most prescribed intravenous bisphosphonate for bone metastases, continued to post dynamic growth and is on track to become a blockbuster in 2004. Reimbursement in the EU and elsewhere for the bone metastases indication fuelled additional growth, as did the continued expanded use in a number of tumor types including lung, prostate, multiple myeloma, and breast.

Femara (first-line therapy for advanced breast cancer in postmenopausal women) achieved a 30% rise (+18% in l.c.; US: +22%) in sales supported by its strong profile and the landmark results of the MA-17 extended adjuvant study published in the fourth quarter. These showed a 43% reduction in the risk of cancer recurrence, in addition to significantly improved disease-free survival in postmenopausal women with early breast cancer, who had completed five years of tamoxifen.

Fourth-quarter regulatory and clinical highlights

Novartis published a comprehensive update on its current pharmaceutical pipeline at its "R&D Day" event in November. With median development times among the shortest in the industry, Novartis has been rated by analysts as having the industry's highest development productivity in terms of pipeline value and development costs4. Its full pipeline includes 10 new medicines in late-stage development with potential combined peak sales anticipated to be in excess of USD 10 billion and 79 development projects in total of which 64 are in Phases II/III or registration.

4
Goldman Sachs Global Equity Report, 29 September 2003.

Major approvals and launches

Further progress was made on the regulatory front in the fourth quarter, helping to bring new treatments to transplant recipients and patients suffering from diseases such as Parkinson's disease and urinary incontinence. Overall, Novartis obtained seven major market approvals in 2003, three of which came in the fourth quarter.

Certican, which targets the primary causes of allograft dysfunction, including acute rejection, secured approvals in 15 EU member states for the prevention of rejection in kidney and heart transplantation in combination with Neoral. Approvable status was received in the US in November.

Enablex, the novel M3 antagonist treatment for overactive bladder, received an approvable letter from FDA in October.

Gleevec/Glivec 100mg and 400mg film-coated tablets were approved in Europe in November.

Lotrel also received an approvable letter from the FDA for two new strengths (5/40 and 10/40) to broaden the range of treatment options.

Myfortic (transplantation) gained approval in France in November and the mutual recognition procedure in Europe is ongoing. Myfortic has now gained approval in 36 countries.

Stalevo (Parkinson's disease) gained marketing approval in the EU in October, following the successful launch in the US in September.

Visudyne (treatment of age-related macular degeneration) gained approval in Japan in October, with subsequent approval, in December, of the Zeiss laser used with this innovative therapy.

6


Corporate

Net corporate income rose USD 31 million from the previous year's level to USD 146 million. Higher income was generated from charging share and share option plan costs to the operations. In addition, there was a gain of USD 41 million as liabilities related to AmoxC litigation were settled at less than the amount provided for. Overall, these factors more than offset the increased investments in Corporate research and the reduction in pension income.

Net financial income declined, as expected, by USD 234 million to USD 379 million, reflecting the persistently low interest rate environment and lower level of net liquidity than in the prior year. The overall return on net liquidity amounted to 5.2%.

Novartis' stake in Chiron Corporation generated an income of USD 134 million, whereas the stake in Roche Holding AG yielded a full-year pre-tax loss of USD 354 million, USD 269 million of which was due to Novartis' share in the associated company's unexpected loss of CHF 4.0 billion in 2002, reported by Roche, and hence booked by Novartis, only in 2003. The remainder represents an estimate of Novartis' share (USD 185 million) in Roche's 2003 pre-tax income based on independent analysts' forecasts for the full year. This was reduced by a USD 270 million goodwill and intangible depreciation charge. In total, associated companies resulted in an overall expense of USD 200 million.

In July 2002, Novartis started a third program to repurchase shares via a second trading line on the SWX Swiss Exchange. Since its initiation, 46.9 million shares have been repurchased in this program for a total of USD 1.9 billion. Of these, 24.3 million shares were repurchased in 2003 for an approximate total of USD 939 million and shares were sold for USD 666 million on the first trading line. As of 31 December 2003, the Group held approximately 334 million shares in treasury.

Following changes in US GAAP and expected changes in IFRS (formerly IAS) accounting rules, Novartis decided in June 2003 to redeem, in advance, equity instruments (put and call options on Novartis shares) that were sold to Deutsche Bank in 2001. This resulted in an equity reduction of USD 3.5 billion.

Overall, the Group's equity increased from USD 28.3 billion at 31 December 2002 to USD 30.4 billion at 31 December 2003. The Group's 2003 net income of USD 5.0 billion, translation gains of USD 2.4 billion, and fair value adjustments on financial instruments of USD 0.2 billion were partly offset by payments for dividends (USD 1.7 billion), equity instrument repayments (USD 3.5 billion) and the acquisition of treasury shares (USD 0.3 billion). In the same period, total financial debts rose USD 0.4 billion. As a result there was no change in the year-end debt/equity ratio, which was 0.20:1 on 31 December 2003.

Novartis thus maintained the strength of its balance sheet at 31 December 2003 and continues to be rated AAA by Standard & Poor's and Moody's, a rating it has held since its creation in 1996. Novartis is now one of just two European-based companies with this rating.

The strong business expansion and good working capital management boosted cash flow from operating activities, which increased 27% to USD 6.7 billion.

7

Cash outflow for investing activities amounted to USD 1.3 billion. Capital expenditure increased 24% to USD 1.3 billion and now represents 5% of sales, while USD 465 million was spent on the acquisition of subsidiaries, principally 51% of Idenix acquired in the first half, and the investments in intangible and financial assets. This was offset by a significant inflow of USD 496 million from the sale of marketable securities and other assets.

At USD 3.6 billion, free cash flow jumped 23% from the prior year level. Boosted by a USD 457 million reduction in net operating assets, operating cash flow improved USD 1.4 billion, more than offsetting the dividend increase of USD 357 million, additional investments of USD 261 million in tangible fixed assets, and USD 124 million in intangible assets.

Overall, liquidity (cash, cash equivalents and marketable securities including financial derivative assets) amounted to USD 13.3 billion at 31 December 2003. After deducting financial debt and derivative liabilities, net liquidity stood at USD 7.3 billion, USD 0.3 billion higher than at 31 December 2002, despite the redemption of the equity instruments.

This release contains certain "forward-looking statements", relating to the Group's business, which can be identified by the use of forward-looking terminology such as "forecast", "Outlook", "expects", "expected", "projected", "scheduled", "potential", "anticipated" or similar expressions, or express or implied discussions regarding potential future sales of existing products, potential new products or potential new indications for existing products, or by other discussions of strategy, plans or intentions. Such statements reflect the current views of the Group with respect to future events and are subject to certain risks, uncertainties and assumptions. There can be no guarantee that existing products will reach any particular sales levels, or that any new products will be approved for sale in any market, or that any new indications will be approved for existing products in any market. In particular, management's expectations could be affected by, among other things, new clinical data; unexpected clinical trial results; unexpected regulatory actions or delays or government regulation generally; the company's ability to obtain or maintain patent or other proprietary intellectual property protection; competition in general; government pricing pressures and other risks and factors referred to in the Company's current Form 20-F on file with the US Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated or expected. 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 contained in this press release as a result of new information, future events or otherwise.

Novartis AG (NYSE: NVS) is a world leader in pharmaceuticals and consumer health. In 2003, the Group's businesses achieved sales of USD 24.9 billion and a net income of USD 5.0 billion. The Group invested approximately USD 3.8 billion in R&D. Headquartered in Basel, Switzerland, Novartis Group companies employ about 78 500 people and operate in over 140 countries around the world. For further information please consult http://www.novartis.com.

Further Reporting Dates

24 February 2004   Shareholders Annual General Meeting
22 April 2004   First quarter results
20 July 2004   First half and second quarter results
21 October 2004   Nine-month and third quarter results
January 2005   2004 full-year results

Contacts

Media:   Investors:
+41 61 324 2200 (Mark Hill)   +41 61 324 8433 (Karen Huebscher)
US: +1 212 830 2457 (Sheldon Jones)   US: +1 212 307 1122 (US IR)

8

Consolidated income statements

Full year

 
   2003
USD m

   2002
USD m

   Change
 
   USD m

   %
Total sales   24 864   20 877   3 987   19
Cost of goods sold   -5 894   -4 994   -900   18
Gross profit   18 970   15 883   3 087   19
Marketing & Sales   -7 854   -6 737   -1 117   17
Research & Development   -3 756   -2 843   -913   32
General & Administration   -1 471   -1 211   -260   21
Operating income   5 889   5 092   797   16
Result from associated companies   -200   -7   -193   —
Financial income, net   379   613   -234   -38
Income before taxes and minority interests   6 068   5 698   370   6
Taxes   -1 008   -959   -49   5
Minority interests   -44   -14   -30   214
Net income   5 016   4 725   291   6

Fourth quarter (unaudited)

 
   Q4 2003
USD m

   Q4 2002
USD m

   Change
 
   USD m

   %
Total sales   6 730   5 569   1 161   21
Cost of goods sold   -1 608   -1 260   -348   28
Gross profit   5 122   4 309   813   19
Marketing & Sales   -2 176   -1 757   -419   24
Research & Development   -1 092   -810   -282   35
General & Administration   -248   -388   140   -36
Operating income   1 606   1 354   252   19
Result from associated companies   12   -24   36   150
Financial income, net   -16   86   -102   -119
Income before taxes and minority interests   1 602   1 416   186   13
Taxes   -248   -231   -17   7
Minority interests   6   2   4   200
Net income   1 360   1 187   173   15

9

Condensed consolidated balance sheets

 
   31 Dec. 2003
USD m

   31 Dec. 2002
USD m

   Change
USD m
Assets            
Total long-term assets   27 044   24 210   2 834
Current assets            
Inventories   3 346   2 963   383
Trade accounts receivable   4 376   3 697   679
Other current assets   1 292   1 613   -321
Cash, short-term deposits and marketable securities   13 259   12 542   717
Total current assets   22 273   20 815   1 458
Total assets   49 317   45 025   4 292

Equity and liabilities
 
 
 
 
 
 

Total equity
 
30 429
 
28 269
 
2 160
Long-term liabilities (including minority interests)            
Financial debts   3 191   2 729   462
Other long-term liabilities   6 377   5 755   622

Total long-term liabilities
 
9 568
 
8 484
 
1 084

Short-term liabilities
 
 
 
 
 
 
Trade accounts payable   1 665   1 266   399
Financial debts and derivatives   2 779   2 841   -62
Other short-term liabilities   4 876   4 165   711
Total short-term liabilities   9 320   8 272   1 048
Total liabilities   18 888   16 756   2 132
Total equity and liabilities   49 317   45 025   4 292

10

Condensed consolidated changes in equity

Full year

 
   2003
USD m

   2002
USD m

   Change
USD m
Consolidated equity at 1 January   28 269   25 161   3 108
Dividends   -1 724   -1 367   -357
Purchase of treasury shares, net   -273   -3 228   2 955
Translation effects   2 363   3 761   -1 398
Net income for the year   5 016   4 725   291
Redemption of equity instruments   -3 458       -3 458
Other equity movements   236   -783   1 019
Consolidated equity at 31 December   30 429   28 269   2 160

Fourth quarter (unaudited)

 
   Q4 2003
USD m

   Q4 2002
USD m

   Change
USD m
Consolidated equity at 1 October   28 442   25 650   2 792
Purchase/sale of treasury shares, net   -542   220   -762
Translation effects   1 053   1 238   -185
Net income for October to December   1 360   1 187   173
Other equity movements   116   -26   142
Consolidated equity at 31 December   30 429   28 269   2 160

11

Condensed consolidated cash flow statements

Full year

 
   2003
USD m

   2002
USD m

   Change
USD m
Net income   5 016   4 725   291

Reversal of non-cash items
 
 
 
 
 
 
  Taxes   1 008   959   49
  Depreciation, amortization and impairments   1 386   1 336   50
  Net financial income   -379   -613   234
  Other   -81   -372   291
Net income adjusted for non-cash items   6 950   6 035   915
Interest and other financial receipts   575   493   82
Interest and other financial payments   -240   -174   -66
Taxes paid   -842   -769   -73
Cash flow before working capital and provision changes   6 443   5 585   858
Restructuring payments and other cash payments out of provisions   -248   -204   -44
Change in net current assets and other operating cash flow items   457   -152   609
Cash flow from operating activities   6 652   5 229   1 423
Investments in tangible fixed assets   -1 329   -1 068   -261
Decrease/increase in marketable securities, intangible and financial assets   31   -1 797   1 828
Cash flow used for investing activities   -1 298   -2 865   1 567
Cash flow used for financing activities   -5 764   -4 041   -1 723
Translation effect on cash and cash equivalents   258   836   -578
Change in cash and cash equivalents   -152   -841   689
Net cash and cash equivalents at 1 January   5 798   6 639   -841
Net cash and cash equivalents at 31 December   5 646   5 798   -152

12

Fourth quarter (unaudited)

 
   Q4 2003
USD m

   Q4 2002
USD m

   Change
USD m
Net income   1 360   1 187   173

Reversal of non-cash items
 
 
 
 
 
 
  Taxes   248   231   17
  Depreciation, amortization and impairments   432   615   -183
  Net financial income   16   -86   102
  Other   -116   -186   70
Net income adjusted for non-cash items   1 940   1 761   179
Interest and other financial receipts   105   186   -81
Interest and other financial payments   -142   -60   82
Taxes paid   -152   -175   23
Cash flow before working capital and provision changes   1 751   1 712   39
Restructuring payments and other cash payments out of provisions   -105   -78   -27
Change in net current assets and other operating cash flow items   239   421   -182
Cash flow from operating activities   1 885   2 055   -170
Investments in tangible fixed assets   -503   -486   -17
Decrease/increase in marketable securities, intangible and financial assets   168   -454   622
Cash flow used for investing activities   -335   -940   605
Cash flow used for financing activities   -588   1 055   -1 643
Translation effect on cash and cash equivalents   —   365   -365
Change in cash and cash equivalents   962   2 535   -1 573
Net cash and cash equivalents at 1 October   4 684   3 263   1 421
Net cash and cash equivalents at 31 December   5 646   5 798   -152

13

Sales by Business Unit

Full year

 
   2003
USD m

   2002
USD m

   % change
 
   USD

   l.c.
Pharmaceuticals   16 020   13 528   18   11
Sandoz   2 906   1 817   60   47
OTC   1 772   1 521   17   7
Animal Health   682   623   9   3
Medical Nutrition   815   711   15   3
Infant & Baby   1 361   1 333   2   3
CIBA Vision   1 308   1 135   15   7
Consumer Health (ongoing)   8 844   7 140   24   16
Divested Health & Functional Food activities       209        
Consumer Health   8 844   7 349   20   12
Total   24 864   20 877   19   11

Fourth quarter (unaudited)

 
   Q4 2003
USD m

   Q4 2002
USD m

   % change
 
   USD

   l.c.
Pharmaceuticals   4 379   3 632   21   12
Sandoz   768   537   43   31
OTC   499   413   21   11
Animal Health   180   153   18   9
Medical Nutrition   208   174   20   8
Infant & Baby   348   330   5   6
CIBA Vision   348   288   21   11
Consumer Health (ongoing)   2 351   1 895   24   15
Divested Health & Functional Food activities       42        
Consumer Health   2 351   1 937   21   13
Total   6 730   5 569   21   12

14

Operating income by Business Unit

Full year

 
   2003
   2002
    
 
   USD m

   % of sales

   USD m

   % of sales

   Change
in %
Pharmaceuticals   4 423   27.6   3 891   28.8   14
Sandoz   473   16.3   265   14.6   78
OTC   309   17.4   240   15.8   29
Animal Health   88   12.9   92   14.8   -4
Medical Nutrition   82   10.1   4   0.6    
Infant & Baby   254   18.7   227   17.0   12
CIBA Vision   153   11.7   118   10.4   30
Divisional Management costs   -39                
Consumer Health (ongoing)   1 320   14.9   946   13.2   40
Divested Health & Functional Food activities           140        
Consumer Health   1 320   14.9   1 086   14.8   22
Corporate income/expense, net   146       115       27
Total   5 889   23.7   5 092   24.4   16

Fourth quarter (unaudited)

 
   2003
   2002
    
 
   USD m

   % of sales

   USD m

   % of sales

   Change
in %
Pharmaceuticals   1 174   26.8   1 041   28.7   13
Sandoz   122   15.9   77   14.3   58
OTC   93   18.6   79   19.1   18
Animal Health   27   15.0   15   9.8   80
Medical Nutrition   28   13.5   -15   -8.6    
Infant & Baby   66   19.0   44   13.3   50
CIBA Vision   16   4.6   19   6.6   -16
Divisional Management costs   -22                
Consumer Health (ongoing)   330   14.0   219   11.6   51
Divested Health & Functional Food activities           116        
Consumer Health   330   14.0   335   17.3   -1
Corporate income/expense, net   102       -22        
Total   1 606   23.9   1 354   24.3   19

15

Notes to the financial report for the year ended 31 December 2003

1. Basis of preparation

The Novartis Group changed the presentation of its consolidated financial statements from 1 January 2003 and has restated its 2002 results in US dollars for comparison purposes. With effect of 1 July 2003, the measurement currency of certain Swiss and foreign financial companies used for preparing the financial statements has been changed to US dollars from the respective local currency. This reflects changes in these entities' cash flows and transactions now being primarily denominated in US dollars.

During the first quarter of 2003, the associated company Roche Holding AG announced an unexpected loss for 2002. This resulted in additional losses of USD 269 million before tax and USD 287 million after tax relating to 2002 being included in Novartis' full-year results.

Reference should be made to the 2003 Annual Report, published today, for other changes in accounting policies or estimates and contingent liabilities.

2. Changes in the scope of consolidation, and other significant transactions

The following significant transactions were made during 2003 and in 2002:

2003

On 11 February, Novartis announced the completed sale of the US rights to its Fioricet and Fiorinal lines (tension headache treatments) to Watson Pharmaceuticals, Inc. for USD 178 million.

On 23 April, the urinary incontinence treatment Enablex (darifenacin) was acquired from Pfizer for a total of up to USD 225 million, part of which is still conditional on certain marketing approvals in the US and EU.

On 8 May, 51% of the capital stock of Idenix Pharmaceuticals Inc. was acquired for an initial payment of USD 255 million in cash. This company is included in the consolidated financial statements from this date. Goodwill of USD 297 million has been recorded on this transaction.

Following changes in US GAAP and expected changes in IFRS accounting rules, Novartis decided on 26 June 2003 to redeem, in advance, equity instruments (put and call options on Novartis shares) that were sold to Deutsche Bank in 2001. This resulted in an equity reduction of USD 3.5 billion.

In 2003, the Group increased its stake in Roche Holding AG voting shares by 0.6%, bringing its overall stake to 33.3%. At 31 December 2003, the Group owned a total 6.3% of Roche's total shares and equity securities.

2002

In November 2002, more than 99% of the shares of Lek, Slovenia's leading drug-maker, were acquired for approximately USD 0.9 billion. Lek sales and operating income have been consolidated from 1 January 2003. The outstanding minority interests were acquired during 2003 and the final acquisition balance sheet has been determined. Final goodwill amounted to USD 110 million, which is being amortized on a straight-line basis over 20 years.

16

In January 2002, the Business Unit completed the acquisition of two US farm animal vaccine companies, Grand Laboratories Inc., Iowa and ImmTech Biologies Inc., Kansas. The combined purchase price is a minimum of USD 99 million of which USD 78 million was settled in Novartis American Depositary Shares. The final purchase price may increase depending on whether certain future sales and other targets are met.

The sale of the Food & Beverage portion of the Health & Functional Food businesses to Associated British Foods for USD 270 million was completed in November 2002. The divested businesses' sales were USD 209 million in 2002 and produced an operating income, including the gain on sale, of USD 140 million.

In 2002, the Group increased its stake in Roche Holding AG voting shares by 11.4%, bringing its overall stake to 32.7%. At 31 December 2002 the Group owned a total 6.2% of Roche's total shares and equity securities.

3. Principal currency translation rates

 
   Average rates
2003
USD

   Average rates
2002
USD

   Period-end rates
31 Dec. 2003
USD

   Period-end rates
31 Dec. 2002
USD
1 CHF   0.745   0.643   0.800   0.712
1 EUR   1.131   0.946   1.247   1.038
1 GBP   1.636   1.503   1.774   1.601
100 JPY   0.867   0.802   0.935   0.834

4. Share information

 
   2003

   2002
Average number of shares outstanding (million)   2 473.5   2 515.3
Basic earnings per share (USD)   2.03   1.88
Diluted earnings per share (USD)   2.00   1.84

 
   Fourth quarter
2003

   Fourth quarter
2002
Average number of shares outstanding (million)   2 472.3   2 471.8
Basic earnings per share (USD)   0.55   0.48
Diluted earnings per share (USD)   0.55   0.48

 
   31 Dec. 2003

   31 Dec. 2002
Number of shares outstanding (million)   2 467.8   2 475.0
Registered share price (CHF)   56.15   50.45
ADS price (USD)   45.89   36.73
Market capitalization (USD billion)   110.9   89.0

17

5. Condensed consolidated change in liquidity

Full year

 
   2003
USD m

   2002
USD m

   Change
USD m
Change in cash and cash equivalents   -152   -841   689
Change in marketable securities, financial debt and financial derivatives   469   -213   682
Change in net liquidity   317   -1 054   1 371
Net liquidity at 1 January   6 972   8 026   -1 054
Net liquidity at 31 December   7 289   6 972   317

Fourth quarter

 
   Q4 2003
USD m

   Q4 2002
USD m

   Change
USD m
Change in cash and cash equivalents   962   2 535   -1 573
Change in marketable securities, financial debt and financial derivatives   100   -933   1 033
Change in net liquidity   1 062   1 602   -540
Net liquidity at 1 October   6 227   5 370   857
Net liquidity at 31 December   7 289   6 972   317

6. Free cash flow

Full year

 
   2003
USD m

   2002
USD m

   Change
USD m
Cash flow from operating activities   6 652   5 229   1 423
Purchase of tangible fixed assets   -1 329   -1 068   -261
Purchase of intangible assets   -214   -90   -124
Purchase of financial assets   -816   -725   -91
Sale of tangible, intangible and financial assets   1 059   979   80
Dividends   -1 724   -1 367   -357
Free cash flow   3 628   2 958   670

Fourth quarter

 
   Q4 2003
USD m

   Q4 2002
USD m

   Change
USD m
Cash flow from operating activities   1 885   2 055   -170
Purchase of tangible fixed assets   -503   -486   -17
Purchase of intangible assets   -37   -13   -24
Purchase of financial assets   -124   -143   19
Sale of tangible, intangible and financial assets   223   221   2
Free cash flow   1 444   1 634   -190

18

7. Significant differences between IFRS and United States Generally Accepted Accounting Principles

The Group's consolidated financial statements have been prepared in accordance with IFRS (formerly IAS), which, as applied by the Group, differs in certain significant respects from US GAAP. The effects of the application of US GAAP to net income and equity are set out in the tables below.

For further comments regarding the nature of these adjustments please consult Note 32 of the Novartis 2003 annual report.

 
   2003
USD m

   2002
USD m
Net income under IFRS   5 016   4 725
US GAAP adjustments:        
Purchase accounting: Ciba-Geigy   -339   -294
Purchase accounting: other acquisitions   -175   -298
Purchase accounting: IFRS goodwill amortization   172   140
Available-for-sale securities and financial instruments   -240   -273
Pension provisions   -18   27
Share-based compensation   -273   -120
Consolidation of share-based compensation foundation   -3   -20
Deferred taxes   -63   -93
In-process Research & Development arising on acquisitions   -260   -11
Other   -20   -95
Deferred tax effect on US GAAP adjustments   -9   141
Net income under US GAAP   3 788   3 829
Basic earnings per share under US GAAP (USD)   1.59   1.58
Diluted earnings per share under US GAAP (USD)   1.57   1.55

 
   31 Dec. 2003
USD m

   31 Dec. 2002
USD m
Equity under IFRS   30 429   28 269
US GAAP adjustments:        
Purchase accounting: Ciba-Geigy   3 131   3 113
Purchase accounting: other acquisitions   2 808   3 011
Purchase accounting: IFRS goodwill amortization   327   155
Pension provisions   1 209   1 072
Share-based compensation   -96   -156
Consolidation of share-based compensation foundation   -728   -489
Deferred taxes   -609   -547
In-process Research & Development arising on acquisitions   -1 338   -984
Other   -93   -34
Deferred tax effect on US GAAP adjustments   -162   -185
Equity under US GAAP   34 878   33 225

19

Supplementary tables: Full year 2003—Sales of top twenty pharmaceutical products (unaudited)

 
    
   US

   Rest of world

   Total

   % change
Brands

   Therapeutic area

   USD m

   % change
in local
currencies

   USD m

   % change
in local
currencies

   USD m

   in USD

   in local
currencies
Diovan/Co-Diovan   Hypertension   1 107   42   1 318   34   2 425   46   38
Gleevec/Glivec   Chronic myeloid leukemia   299   41   829   82   1 128   84   68
Neoral/Sandimmun   Transplantation   216   -21   804   -6   1 020   -2   -10
Lamisil (group)   Fungal infections   428   2   550   9   978   12   5
Zometa   Cancer complications   574   59   318   118   892   83   74
Lotrel   Hypertension   777   20   0       777   20   20
Lescol   Cholesterol reduction   309   19   425   18   734   27   18
Sandostatin (group)   Acromegaly   318   13   377   2   695   14   7
Voltaren (group)   Inflammation/pain   8   -33   591   -5   599   1   -6
Cibacen/Lotensin/Cibadrex   Hypertension   306   -9   127   -8   433   -6   -9
Top ten products total       4 342   21   5 339   20   9 681   28   20
Trileptal   Epilepsy   305   43   92   27   397   42   39
Miacalcic   Osteoporosis   239   0   150   -14   389   -1   -6
Tegretol (incl. CR/XR)   Epilepsy   122   1   262   -1   384   5   0
Exelon   Alzheimer's disease   181   8   186   19   367   21   13
Visudyne   Macular degeneration   181   8   176   27   357   24   16
Leponex/Clozaril   Schizophrenia   86   -28   223   -2   309   -4   -12
Foradil   Asthma   9   -61   280   2   289   10   -4
Elidel   Eczema   205   125   30   575   235   147   144
Famvir*   Viral infections   146   -7   87   19   233   5   0
HRT range   Hormone replacement   125   -9   106   -24   231   -11   -16
Top twenty products total       5 941   18   6 931   16   12 872   24   17
Rest of portfolio       643   -9   2 505   -9   3 148   -1   -9
Total       6 584   15   9 436   8   16 020   18   11
*
2002 restated because of transfers to other Business Units

20

Supplementary tables: Fourth quarter 2003—Sales of top twenty pharmaceutical products (unaudited)

 
    
   US

   Rest of world

   Total

   % change
Brands

   Therapeutic area

   USD m

   % change
in local
currencies

   USD m

   % change
in local
currencies

   USD m

   in USD

   in local
currencies
Diovan/Co-Diovan   Hypertension   268   34   400   26   668   39   29
Gleevec/Glivec   Chronic myeloid leukemia   82   39   251   59   333   69   53
Neoral/Sandimmun   Transplantation   55   -5   221   0   276   10   -1
Lamisil (group)   Fungal infections   111   -5   158   10   269   11   3
Zometa   Cancer complications   148   24   92   62   240   42   35
Lotrel   Hypertension   184   8   0       184   8   8
Lescol   Cholesterol reduction   95   30   117   6   212   26   17
Sandostatin (group)   Acromegaly   86   23   98   4   184   20   12
Voltaren (group)   Inflammation/pain   0   -100   163   -3   163   4   -7
Cibacen/Lotensin/Cibadrex   Hypertension   70   -14   35   -6   105   -8   -12
Top ten products total       1 099   15   1 535   18   2 634   25   16
Trileptal   Epilepsy   87   21   26   32   113   24   22
Miacalcic   Osteoporosis   53   20   41   -8   94   12   6
Tegretol (incl. CR/XR)   Epilepsy   38   31   75   3   113   20   11
Exelon   Alzheimer's disease   43   -4   53   18   96   14   6
Visudyne   Macular degeneration   47   15   49   14   96   25   16
Leponex/Clozaril   Schizophrenia   22   -33   61   -7   83   -8   -17
Foradil   Asthma   2   -50   77   3   79   14   0
Elidel   Eczema   58   53   12   267   70   71   68
Famvir*   Viral infections   35   -13   25   24   60   5   0
HRT range   Hormone replacement   30   30   26   -32   56   4   -4
Top twenty products total       1 514   14   1 980   14   3 494   23   14
Rest of portfolio       197   25   688   -5   885   12   1
Total       1 711   16   2 668   9   4 379   21   12
*
2002 restated because of transfers to other Business Units

21

Sales by region (unaudited)

Full year

 
    
    
   % change
    
    
 
   2003
USD m

   2002
USD m

   USD

   local
currencies

   2003
% of total

   2002
% of total
Pharmaceuticals                        
  US   6 584   5 734   15   15   41   42
  Rest of world   9 436   7 794   21   8   59   58
TOTAL   16 020   13 528   18   11   100   100
Sandoz                        
  US   1 098   706   56   54   38   39
  Rest of world   1 808   1 111   63   43   62   61
Total   2 906   1 817   60   47   100   100
OTC                        
  US   531   485   9   9   30   32
  Rest of world   1 241   1 036   20   6   70   68
Total   1 772   1 521   17   7   100   100
Animal Health                        
  US   255   234   9   9   37   38
  Rest of world   427   389   10   0   63   62
Total   682   623   9   3   100   100
Medical Nutrition (incl. divested activities)                        
  US   255   256   0   0   31   28
  Rest of world   560   664   -16   -29   69   72
Total   815   920   -11   -21   100   100
Infant & Baby                        
  US   1 096   1 047   5   5   81   79
  Rest of world   265   286   -7   -2   19   21
Total   1 361   1 333   2   3   100   100
CIBA Vision                        
  US   461   444   4   4   35   39
  Rest of world   847   691   23   9   65   61
Total   1 308   1 135   15   7   100   100
Consumer Health                        
  US   3 696   3 172   17   16   42   43
  Rest of world   5 148   4 177   23   10   58   57
TOTAL   8 844   7 349   20   12   100   100
Group                        
  US   10 280   8 906   15   15   41   43
  Rest of world   14 584   11 971   22   9   59   57
TOTAL   24 864   20 877   19   11   100   100

22

Fourth quarter (unaudited)

 
    
    
   % change
    
    
 
   Q4 2003
USD m

   Q4 2002
USD m

   USD

   local
currencies

   Q4 2003
% of total

   Q4 2002
% of total
Pharmaceuticals                        
  US   1 711   1 481   16   16   39   41
  Rest of world   2 668   2 151   24   9   61   59
TOTAL   4 379   3 632   21   12   100   100
Sandoz                        
  US   272   230   18   16   35   43
  Rest of world   496   307   62   42   65   57
Total   768   537   43   31   100   100
OTC                        
  US   153   138   11   11   31   33
  Rest of world   346   275   26   11   69   67
Total   499   413   21   11   100   100
Animal Health                        
  US   76   58   31   31   42   38
  Rest of world   104   95   9   -4   58   62
Total   180   153   18   9   100   100
Medical Nutrition (incl. divested activities)                        
  US   67   66   2   5   32   31
  Rest of world   141   150   -6   -20   68   69
Total   208   216   -4   -13   100   100
Infant & Baby                        
  US   280   262   7   7   80   79
  Rest of world   68   68   0   4   20   21
Total   348   330   5   6   100   100
CIBA Vision                        
  US   117   107   9   9   34   37
  Rest of world   231   181   28   11   66   63
Total   348   288   21   11   100   100
Consumer Health                        
  US   965   861   12   12   41   44
  Rest of world   1 386   1 076   29   14   59   56
TOTAL   2 351   1 937   21   13   100   100
Group                        
  US   2 676   2 342   14   14   40   42
  Rest of world   4 054   3 227   26   10   60   58
TOTAL   6 730   5 569   21   12   100   100

23

Supplementary tables: Quarterly analysis (unaudited)

Key figures by quarter

Group

 
    
    
   Change
 
   Q4 2003
USD m

   Q3 2003
USD m

   USD m

   %
Total sales   6 730   6 210   520   8
Operating income   1 606   1 469   137   9
Financial income, net   -16   96   -112   -117
Taxes   -248   -271   -23   -8
Net income   1 360   1 277   83   6

Sales by region

 
    
    
   Change
 
   Q4 2003
USD m

   Q3 2003
USD m

   USD m

   %
US   2 676   2 599   77   3
Europe   2 371   2 157   214   10
Rest of world   1 683   1 454   229   16
Total   6 730   6 210   520   8

Sales by business units

 
    
    
   Change
 
   Q4 2003
USD m

   Q3 2003
USD m

   USD m

   %
Pharmaceuticals   4 379   4 041   338   8
Sandoz   768   675   93   14
OTC   499   443   56   13
Animal Health   180   163   17   10
Medical Nutrition   208   206   2   1
Infant & Baby   348   349   -1   0
CIBA Vision   348   333   15   5
Consumer Health   2 351   2 169   182   8
Total   6 730   6 210   520   8

Operating income by business unit

 
    
    
   Change
 
   Q4 2003
USD m

   Q3 2003
USD m

   USD m

   %
Pharmaceuticals   1 174   1 137   37   3
Sandoz   122   94   28   30
OTC   93   82   11   13
Animal Health   27   21   6   29
Medical Nutrition   28   18   10   56
Infant & Baby   66   70   -4   -6
CIBA Vision   16   48   -32   -67
Divisional Management costs   -22   -7   -15   214
Consumer Health   330   326   4   1
Corporate income/expense, net   102   6   96   —
Total   1 606   1 469   137   9

24


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

    NOVARTIS AG

Date: January 23, 2004
 
By:
 
/s/  MALCOLM CHEETHAM      
Name: Malcolm Cheetham
Title: Head Group Financial Reporting
          and Accounting


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SIGNATURES