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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 October 19, 2005
(Commission File No. 1-15024)

This Report on Form 6-K shall be incorporated by reference in our Registration Statements on Form F-3 as filed with the Commission on May 11, 2001 (File No. 333-60712) and on January 31, 2002 (File No. 333-81862) and our Registration Statements on Form S-8 as filed with the Commission on October 1, 2004 (File No. 333-119475) and on May 14, 2001 (File No. 333-13506), in each case to the extent not superseded by documents or reports subsequently filed by us under the Securities Act of 1933 or the Securities Exchange Act of 1934, in each case as amended

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:        Novartis AG Announces Results for the Third Quarter of 2005

        Novartis International AG
Novartis Global Communications
CH-4002 Basel
Switzerland
GRAPHIC     
http://www.novartis.com

 
 
John Gilardi
Novartis Global Media Relations
+41 61 324 3018 (direct)
+41 61 324 2200 (main)
john.gilardi@novartis.com
 
Corinne Hoff
Novartis Global Media Relations
+ 41 61 324 9577 (direct)
+ 41 61 324 2200 (main)
corinne.hoff@novartis.com
MEDIA RELEASE • COMMUNIQUE AUX MEDIAS • MEDIENMITTEILUNG

Novartis delivers strong growth in first nine months of 2005, on track to achieve full-year sales and earnings objectives

Key figures

Nine months to September 30

 
   YTD 2005

   YTD 2004

   % Change
 
   USD m

   % of
net sales

   USD m

   % of
net sales

   USD

   lc
Net sales   23 555       20 669       14   12
  Pharmaceuticals   15 014       13 528       11   9
  Sandoz   3 121       2 178       43   40
  Consumer Health   5 420       4 963       9   7
Operating income   5 417   23.0   4 789 (1) 23.2   13    
Net income   4 789   20.3   4 247 (1) 20.5   13    
Basic earnings per share/ADS   USD 2.05       USD 1.79 (1)     15    

1

Third quarter

 
   Q3 2005

   Q3 2004

   % Change
 
   USD m

   % of
net sales

   USD m

   % of
net sales

   USD

   lc
Net sales   8 415       7 057       19   18
  Pharmaceuticals   5 093       4 646       10   9
  Sandoz   1 486       722       106   104
  Consumer Health   1 836       1 689       9   8
Operating income   1 888   22.4   1 620 (1) 23.0   17    
Net income   1 666   19.8   1 469 (1) 20.8   13    
Basic earnings per share/ADS   USD 0.71       USD 0.62 (1)     15    
(1)
Pro forma basis: This report reflects the adoption of new IFRS accounting standards that became effective on January 1, 2005, and other presentational changes. In order to provide a comparable basis, the 2004 pro forma statements reflect these changes as if they had been in effect already during 2004.

All product names appearing in italics are trademarks of Novartis Group Companies.

Basel, October 18, 2005—Commenting on the results, Dr. Daniel Vasella, Chairman and CEO of Novartis, said, "I am pleased with the overall strong performance of our business in the third quarter, particularly the dynamic growth of Pharmaceuticals and with the positive late-stage results for first-in-class compounds such as LAF237 for diabetes, SPP100 for hypertension, and FTY720 for multiple sclerosis. These medicines address significant patient needs and provide a platform for continued strong growth. Sandoz performed well, especially in key markets, as the integration of Hexal and Eon Labs into Sandoz progressed at a fast pace. Based on the robust results, we are confident of achieving our full-year objectives for new record sales and earnings."

Net sales

Nine months to September 30

2

Third quarter

Group net sales up 19% to USD 8.4 billion

Key factors for the 19% increase in third-quarter sales were ongoing high growth in Pharmaceuticals as well as the contributions of Hexal and Eon Labs to Sandoz. Consumer Health sales rose at a high-single-digit rate. Excluding acquisitions, Group sales rose 9% in USD for the quarter.

Novartis increased its share of the global health-care market (including Pharmaceuticals and Sandoz) to 5.27% for the first eight months of 2005, an increase from 5.04% in the 2004 period, which has been restated to include the contributions of Hexal and Eon Labs, according to IMS Health. Pharmaceuticals increased its share of the global health-care market to 3.91% compared to 3.82% for the same period in 2004.

Pharmaceuticals net sales rise 10% to USD 5.1 billion

Strong performances by many leading products—particularly Gleevec/Glivec, Diovan, Lotrel, Femara and Zometa—as well as robust growth in the US and other markets such as France, Germany and key emerging markets underpinned the 10% (+9% lc) increase in third-quarter net sales.

General Medicines (excluding Mature Products) delivered a net sales increase of 9% (+9% lc) as strategic Cardiovascular franchise brand sales rose 14% (+14% lc) and the Neuroscience franchise also delivered double-digit net sales gains. Net sales in Specialty Medicines (Oncology, Transplantation and Ophthalmics) were up 16% (+15% lc) as Oncology net sales rose 20% (+19% lc) based on Femara, Gleevec/Glivec and Zometa.

In the US, third-quarter sales advanced 11% to USD 2.1 billion as strong performances by the Cardiovascular and Oncology franchises as well as Zelnorm/Zelmac offset lower sales of Elidel. Net sales in Europe rose 4% (+5% lc), supported particularly by Diovan but offset by launches of generic terbinafine in key markets, while Japan grew 4% (+5% lc) and emerging growth markets reported an increase of 22% (+19% lc), thanks to dynamic performances in China, Russia and Turkey.

Sandoz net sales more than double to USD 1.5 billion

Excluding the Hexal and Eon Labs acquisitions, sales were up 10% (+9% lc), driven in particular by volume expansions in France, Russia, India and Italy. Sales in Germany and the US were also higher, but price erosion had an adverse impact. The consolidation of Hexal and Eon Labs for the first time led to a 106% (+104% lc) increase in sales for the third quarter as these businesses performed significantly better than initially expected.

Consumer Health net sales rise 9% to USD 1.8 billion

Net sales for the third quarter rose 9% (+8% lc), helped by a strong double-digit performance from OTC thanks to its focus on seven strategic brands. CIBA Vision delivered high-single- digit growth from the successful roll-out of O2OPTIX contact lens and in other market segments in Europe. Medical Nutrition grew at a low-single-digit rate, reflecting renewed competition in the US and France as well as changing reimbursement rules in Germany. Animal Health benefited from its focus on core brands, but the performance was broadly in line with last year following a reduction in net sales from the fall US sales offer. Infant & Baby benefited from new product launches in the US and Mexico.

3

Operating income

Nine months to September 30

 
   YTD 2005

   YTD 2004(1)

    
 
   USD m

   % of
net sales

   USD m

   % of
net sales

   Change
in %
Pharmaceuticals   4 656   31.0   4 025   29.8   16
Sandoz   223   7.1   235   10.8   -5
Consumer Health   865   16.0   831   16.7   4
Corporate income & expense, net   -327       -302        
Total   5 417   23.0   4 789   23.2   13
(1)
Pro forma basis

Third quarter

 
   Q3 2005

   Q3 2004(1)

    
 
   USD m

   % of
net sales

   USD m

   % of
net sales

   Change
in %
Pharmaceuticals   1 681   33.0   1 401   30.2   20
Sandoz   34   2.3   12   1.7   183
Consumer Health   290   15.8   292   17.3   -1
Corporate income & expense, net   -117       -85        
Total   1 888   22.4   1 620   23.0   17
(1)
Pro forma basis

Nine months to September 30


Third quarter

Group operating income rises 17% to USD 1.9 billion

Operating income rose at a slightly slower pace than net sales in the third quarter as the dynamic performance of Pharmaceuticals as well as the operating and acquisition-related contributions in Sandoz partially offset a modest decline in Consumer Health. Cost of Goods Sold (COGS) was higher,

4

owing to purchase price accounting and increased amortization of intangible assets in Sandoz related to acquisitions.

Pharmaceuticals operating income up 20% to USD 1.7 billion

Operating income growth continued to outpace sales, rising 20% in the third quarter based on sustained profitability improvements that led to a 2.8 percentage point improvement in the operating margin to 33.0% of net sales compared to the year-ago quarter. Productivity gains, especially in the US, led to a 1.5-percentage-point improvement in Marketing & Sales, offsetting investments in Oncology related to Femara in the US and Europe, Enablex launches as well as Diovan and Lotrel investments in the US. R&D expenses rose at a slower pace than sales, contributing 0.5 percentage points to the improved margin, mainly the result of the timing of expenses compared to the 2004 third quarter. Costs of Goods Sold (COGS) was in line with year-ago levels as a percentage of sales, while General & Administrative expenses contributed 0.3 percentage points to the improvement based on cost-containment measures. A slight decline in Other Income & Expenses compared to the 2004 period also contributed to the higher operating income.

In the third quarter, Novartis recorded an impairment of USD 66 million related to the acquired and capitalized marketing rights for NKS104, a statin no longer being developed for potential use in combination with Diovan. Further development of this compound is being assessed as additional data will become available during the fourth quarter of 2005, which could result in additional impairments.

Sandoz operating income rises to USD 34 million

Operating income rose significantly in the third quarter based on the first-time operating income contributions of USD 122 million from Hexal and Eon Labs as well as volume expansion and cost-containment efforts. This was offset by USD 129 million in purchase accounting and restructuring costs related to the acquisitions. Underlying operating income (excluding Hexal and Eon Labs acquisition effects) increased to USD 41 million.

Consumer Health operating income declines 1% to USD 290 million

The decline in operating income reflected strong investments in key brands as well as one-time costs of USD 16 million related to the acquisition of the BMS product portfolio in OTC in the third quarter. Also negatively impacting the performance were higher production and distribution costs as well as a reduction in net sales from the US fall sales offer in Animal Health.

Group net income advances 13% to USD 1.7 billion

Net income rose 13% to USD 1.7 billion in the third quarter from USD 1.5 billion (pro forma) in the 2004 third quarter. Net income as a percentage of net sales declined to 19.8% from 20.8% in the year-ago period due to the one-time acquisition-related purchase accounting and restructuring costs.

Sandoz positioned for dynamic growth

The integration of Hexal and Eon Labs with Sandoz has made rapid progress, positioning Sandoz for dynamic growth with combined pro forma 2004 sales of USD 5.1 billion and a portfolio of over 600 active ingredients in more than 5,000 dosage forms. Sandoz has a number of advantages, particularly strong positions in key markets such as the US and Germany, a broad technology portfolio, a competitive cost structure with its global production network and a pipeline covering many of the major substances expected to become generic in the coming years with a goal of 80 product introductions annually.

5


As Hexal and Eon Labs are performing well and exceeding expectations, Novartis now expects for the full year from these acquisitions a sales contribution in excess of USD 1.3 billion and that the net negative effect on operating income will be reduced to between USD 75 million and USD 150 million, a decline from the initial estimate of USD 150 million to USD 250 million made at the end of the second quarter. As a result, the estimated negative impact on Group net income will be reduced to between USD 175 million and USD 250 million from the earlier estimate of USD 250 million to USD 350 million.

Group outlook (barring any unforeseen events)

Based on the outstanding performance to date in 2005, Novartis reaffirms its confidence in achieving the full-year objectives to deliver high-single-digit net sales growth for the Group and Pharmaceuticals in local currencies as well as record levels of operating and net income on a comparable basis to 2004. (This full-year outlook excludes the impact of the Hexal and Eon Labs acquisitions.)

Pharmaceutical business and key product highlights

(Note: All net sales and percentage figures refer to third-quarter 2005 results)

General Medicines

Diovan (USD 925 million) (+17% worldwide; +17% lc; +14% US), the most prescribed angiotensin-receptor blocker (ARB) worldwide, maintained strong growth rates in both the US and Europe in the third quarter, in part supported by two recently approved indications and the global rollout of Co-Diovan, a combination of Diovan and a diuretic. Growth and market share gains in Europe have been driven mainly by Co-Diovan and the launch of new indications. Diovan is the only agent in its class worldwide indicated to treat high blood pressure, high-risk heart attack survivors (VALIANT trial) and patients with heart failure (Val-HeFT trial). In the US, Diovan remained the leader with a 38% share of the ARB market (Source: IMS) despite increased competition. Supporting Diovan in the US has been disease-awareness and education initiatives ("BP Success Zone") that also underpinned Lotrel sales.

Lotrel (USD 269 million only in the US) (+23% US), the No. 1 fixed combination treatment for hypertension in the US since 2002, delivered its strongest growth of the year in the third quarter, in part helped by increasing awareness about the benefits of therapies like Lotrel that combine an ACE inhibitor with a calcium channel blocker (CCB).

Lamisil (USD 318 million) (-8% worldwide; -7% lc; -1% US), the leading treatment worldwide for fungal nail infections, posted modest decline in sales following the expiry of patent protection in most major European markets, including the UK, Germany, the Netherlands and Italy. In the US, Lamisil has maintained market leadership although a generic version of the competitor itraconazole has been introduced.

Zelnorm/Zelmac (USD 113 million) (+36% worldwide; +34% lc +37% US), a novel therapy for irritable bowel syndrome with constipation (IBS-C) and the first and only prescription medicine for chronic idiopathic constipation, maintained robust double-digit growth rates in the US and key markets in Latin America. More than 2.5 million patients have been treated to date with Zelnorm.

Elidel (USD 53 million) (-36% worldwide; -37% lc; -43% US) reported lower sales for the second consecutive quarter following a decline in US prescriptions for the eczema treatment. Novartis is in product labeling discussions with the US Food and Drug Administration (FDA) following the FDA's health advisory statement earlier this year relating to a theoretical risk of lymphoma. Novartis remains confident in the safety and efficacy of Elidel in its approved indications.

6


Specialty Medicines

(Note: All net sales and percentage figures refer to third-quarter 2005 results)

Oncology

Gleevec/Glivec (USD 547 million) (+33% worldwide; +31% lc; +46% US), indicated for all stages of Philadelphia-chromosome positive (Ph+) chronic myeloid leukemia (CML) and certain forms of gastro-intestinal stromal tumors (GIST), again delivered strong growth rates in the third quarter. This dynamic performance was achieved through further penetration of both the CML and GIST markets as well as an increase in the average daily dose. Gleevec/Glivec recently received EU approval for increasing the average daily dose to 800 mg from 400 mg or 600 mg in patients with chronic phase CML and in GIST patients whose cancer is progressing on the lower dose. Gleevec/Glivec is on track to be submitted by the end of 2005 in the US, EU and Japan as a treatment for Ph+ acute lymphoblastic leukemia (ALL) and other rare diseases.

Zometa (USD 302 million) (+15% worldwide; +14% lc; +13% US), the leading intravenous bisphosphonate for bone metastases, reached a record 74% market share in a maturing US market during the third quarter. Greater use in prostate and lung cancer was somewhat offset by slowing growth in breast cancer and myeloma due to high penetration rates. In the EU, Zometa is growing market share despite new competition.

Femara (USD 136 million) (+35% worldwide; +33% lc; +26% US), a leading therapy for early and advanced breast cancer in postmenopausal women, continued to grow strongly based on increased use in the extended adjuvant setting (after standard tamoxifen treatment), an indication approved in more than 75 countries, including the US. In August, the FDA granted priority review to Femara for adjuvant (post-surgery) treatment of postmenopausal women with hormone receptor-positive early breast cancer. Regulatory action is now expected before the end of the year. Novartis asked for priority review based on enhanced efficacy in subgroups who may be at an increased risk of relapse for which existing therapies have not demonstrated benefit. Applications for the adjuvant indication have also been filed in Europe. In addition, Femara was recently submitted for approval in Japan for treatment of postmenopausal women with breast cancer, and a decision is expected by the end of 2005 or in early 2006.

Sandostatin (USD 219 million) (+6% worldwide; +5% lc; -7% US), a leading treatment for patients with the hormone condition acromegaly as well as for symptoms of gastro-entero-pancreatic neuroendocrine tumors, achieved positive growth rates due to the performance of the long-acting LAR version, which reported a double-digit increase in the US while the subcutaneous version continued to face generic competition. Sandostatin LAR growth is driven by increasing penetration in carcinoid tumors and acromegaly.

Ophthalmics

Visudyne (USD 124 million) (+9% worldwide; +8% lc; -9% US), the top treatment for "wet" AMD (age-related macular degeneration), the leading cause of blindness for people over age 50, continued to grow in the third quarter, helping the business unit to report a 5% (+3% lc) rise in third-quarter sales. In the US, sales declined due to new competition, but Visudyne sales growth was strong in other key markets worldwide, including the UK, Germany and France, with sales outside the US up 25%.

Transplantation

Sales for the third quarter were up 7% (+6% lc), supported by unchanged sales of Neoral/Sandimmun (+0% worldwide, +0% lc, -12% US) amid generic competition. Myfortic sales continued to grow in the third quarter, supported by accelerated growth in new prescriptions in the US. Certican was launched in

7

Italy during the third quarter, continuing the global rollout. An FDA Advisory Committee is scheduled for November 16 to review the use of Certican in heart transplantation.

Product and regulatory update

Novartis provided an update on its industry-leading pipeline in September, presenting positive pivotal Phase III data on the potentially first-in-class compounds LAF237 (diabetes) and SPP100 (hypertension) as well as an overview of other key projects in late-stage development. With one of the highest R&D productivity rates in the pharmaceutical industry, Novartis currently has 75 projects in clinical development, including 52 in Phase II, Phase III or registration and of which 46 are new molecular entities (NMEs).

Among the recent highlights:

8

(1)
Zoledronic acid (5 mg) is authorized to be marketed under the name Aclasta in Europe and is awaiting US approval of a different trademark.

•
Xolair (omalizumab), a first-in-class therapy for the treatment of severe persistent allergic asthma, is awaiting EU regulatory approval after the Committee for Medicinal Products for Human Use (CHMP) issued a positive opinion in July 2005. First approved in the US in 2003 with partner Genentech, Xolair is set to become the first humanized antibody to be approved for the treatment of asthma in Europe, representing a highly innovative approach to controlling this disease.

•
Exjade (deferasirox) (ICL670) received a unanimous recommendation for approval by an FDA Advisory Committee in September. Exjade is awaiting US regulatory approval after being granted a six-month priority review in June 2005 as well as in the EU, where Exjade also has orphan drug status, and in Switzerland. As a once-daily oral formulation, Exjade offers the potential to improve treatment compliance and quality of life of patients with chronic transfusional iron overload—a potentially life-threatening condition—compared to deferoxamine, the current cumbersome infusion therapy standard of care.

•
AMN107, a novel investigational oral compound being developed as a new treatment for advanced chronic myeloid leukemia (CML) patients, is planned to be submitted for regulatory approval in 2007. Enrollment in a pivotal Phase II study of patients with CML resistant or intolerant to Gleevec/Glivec began in April 2005, with a Phase III study in chronic phase CML patients initiating treatment planned to begin in the first quarter of 2006. AMN107 further expands the Novartis franchise for helping patients with CML and GIST (gastrointestinal stromal tumors).

•
PTK/ZK is a new oral targeted therapy designed to block the growth of blood and lymphatic vessels in development with Schering AG. Interim analyses of two Phase III studies in metastatic colorectal cancer (CONFIRM1 and CONFIRM2) showed that the benefits of combining PTK/ZK with the FOLFOX4 regimen did not achieve statistical significance, but showed a benefit in a subset of patients with elevated lactate dehydrogenase (LDH). In light of these findings this program will be delayed. Schering and Novartis are reviewing the development strategy and timeline.

•
Lucentis (ranibizumab), the potential new "gold standard" treatment for wet age-related macular degeneration (AMD), has shown strong efficacy and a good safety profile in recent clinical trials. Lucentis is being developed with Genentech, which retains the right to develop and market the product in North America. Regulatory submission is expected in mid 2006 in the EU.

•
All key filings for LDT600 (telbivudine) are planned to be completed by the end of the first quarter of 2006. The once-daily treatment for chronic hepatitis B infections successfully reached its primary composite efficacy endpoint of therapeutic response in the Phase III GLOBE

9

Corporate

        Corporate income & expense, net

Net corporate expenses were an expense of USD 117 million in the third quarter, an increase from an expense of USD 85 million in the 2004 third quarter, mainly on account of increased charges for legal expenses. In the first nine months, net corporate expenses were USD 327 million compared to an expense of USD 302 million in the year-ago period.

        Financial income, net

Net financial income in the third quarter was USD 18 million, a decline from USD 35 million in the year-ago quarter as average net liquidity declined due to acquisitions. The overall return on net liquidity was 8.7% compared to 2.5% in the year-ago period, principally due to currency gains. Net financial income for the first nine months was USD 124 million, down from USD 161 million in the same period of 2004, but the return on net liquidity remained steady at 3.7%.

        Result from associated companies

Associated companies provided a net contribution of USD 65 million in the third quarter, a decline from USD 98 million in the 2004 third quarter, mainly the result of a profit contribution from Roche during the exceptional first half of 2004. The Group's 42% investment in Chiron Corporation contributed income of USD 17 million in the third quarter compared with income of USD 4 million in the prior-year period. The investment in Roche resulted in income of USD 47 million. This amount consists of an estimated share of USD 76 million of Roche's net income for the third quarter of 2005, partially offset by charges of USD 29 million related to amortization of intangible assets. Associated companies provided income of USD 126 million in the first nine months of 2005, down from USD 154 million in the year-ago period.

        Balance sheet

The Group's equity increased by USD 0.4 billion in the first nine months to USD 31.7 billion at September 30, 2005, as a result of the net income of USD 4.8 billion and USD 0.3 billion for share-based compensation, which were partly offset by the dividend payment of USD 2.1 billion, a total of USD 0.3 billion for the purchase of treasury shares, USD 1.8 billion of translation losses and USD 0.5 billion in actuarial net losses.

Reflecting the acquisitions made to date in 2005, net liquidity fell by USD 6.0 billion to USD 1.0 billion at September 30, 2005, from USD 7.0 billion at January 1, 2005, which includes the outlay of USD 8.6 billion to acquire Hexal and Eon Labs as well as the North American OTC business of BMS. The debt/equity ratio at the end of the first nine months remained steady at 0.22:1, the same level as at December 31, 2004.

10


Novartis repurchased no shares in the third quarter through its share repurchase program via a second trading line on the SWX Swiss Exchange, leaving the total of shares repurchased to date in 2005 unchanged at 10.2 million for USD 0.5 billion. A total of 25.4 million shares have been repurchased for USD 1.2 billion following the start of the fourth share-repurchase program in August 2004.

Novartis is one of the few non-financial companies worldwide to have attained the highest credit ratings from Standard & Poor's and Moody's, the two benchmark rating agencies. S&P rates Novartis as AAA for long-term maturities and A1+ for short-term maturities, while Moody's has rated the company as Aaa and P1, respectively.

        Cash flow

Cash flow from operating activities rose by USD 1.0 billion in the first nine months of 2005 to USD 5.8 billion, reflecting the strong business expansion and strict management of working capital. In the third quarter, cash flow from operating activities increased by USD 0.4 billion to USD 2.5 billion. Free cash flow (excluding the impact of acquisitions) in the first nine months of the year rose to USD 3.1 billion, an increase of USD 1.0 billion.

        Disclaimer

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 "on track", "is set to become", "holds great promise", "will", "anticipate", "outlook", "expect", "pipeline", "potential", "planned", "will be", "intends to", or similar expressions, or by express or implied discussions regarding potential future sales of new or 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 any 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 Group's ability to obtain or maintain patent or other proprietary intellectual property protection; competition in general; government, industry, and general public pricing pressures and other risks and factors referred to in the Group'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.

        About Novartis

Novartis AG (NYSE: NVS) is a world leader in pharmaceuticals and consumer health. In 2004, the Group's businesses achieved net sales of USD 28.2 billion and pro forma net income of USD 5.6 billion. The Group invested approximately USD 4.1 billion in R&D. Headquartered in Basel, Switzerland, Novartis Group companies employ about 91,700 people and operate in over 140 countries around the world.

For further information please consult http://www.novartis.com.

11


Further Important Dates

January 19, 2006   Full-year 2005 results
February 28, 2006   Annual General Meeting

Contacts

Media:   Investors:
+41 61 324 2200   +41 61 324 7944
(John Gilardi or Corinne Hoff—Basel)   (Karen Huebscher—Basel)

+1 212 830 2457
 
+1 212 830 2433
(Sheldon Jones—US)   (Ronen Tamir—US)

12

Consolidated income statements (unaudited)

Third quarter

 
    
    
    
    
   Restated
historical
Q3 2004(2)
USD m
 
   Q3 2005
USD m

   Q3 2004(1)
USD m

   Change
 
   USD m

   %
Total net sales   8 415   7 057   1 358   19   7 057
Other revenues   74   43   31   72   43
Cost of Goods Sold   -2 450   -1 765   -685   39   -1 765
Gross profit   6 039   5 335   704   13   5 335
Marketing & Sales   -2 393   -2 109   -284   13   -2 109
Research & Development   -1 191   -1 044   -147   14   -1 053
General & Administration   -428   -361   -67   19   -361
Other income & expense   -139   -201   62   -31   -211
Operating income   1 888   1 620   268   17   1 601
Result from associated companies   65   98   -33   -34   70
Financial income, net   18   35   -17   -49   34
Income before taxes   1 971   1 753   218   12   1 705
Taxes   -305   -284   -21   7   -266
Net income   1 666   1 469   197   13   1 439
Attributable to:                    
  Equity holders of the parent   1 659   1 470   189   13   1 440
  Minority interests   7   -1   8       -1
Average number of shares outstanding—Basic (million)   2 333.8   2 348.4   -14.6   -1   2 348.4
Basic earnings per share (USD)(3)   0.71   0.62   0.09   15   0.61
Average number of shares outstanding—Diluted (million)   2 344.0   2 357.1   -13.1   -1   2 357.1
Diluted earnings per share (USD)(3)   0.71   0.62   0.09   15   0.61
(1)
Pro forma basis: This report reflects the adoption of new IFRS accounting standards that became effective on January 1, 2005, and other presentational changes. In order to provide a comparable basis, the 2004 pro forma statements reflect these changes as if they had been in effect already during 2004. (As part of the IFRS restatement communication, please find further information on the reconciliation of the pro forma 2004 figures to the 2004 actual figures reported in the Investor Relations website at www.novartis.com)

(2)
Restated historical basis (see notes to the interim financial statements for further information)

(3)
Earnings per share (EPS) is calculated on the amount of net income attributable to the equity holders of the parent

13

Consolidated statement of recognized income and expense (unaudited)

Third quarter

 
   Q3 2005
USD m

   Q3 2004(1)
USD m

   Change
USD m
Net income   1 666   1 439   227
Actuarial gains/losses   -458   -257   -201
Fair value adjustments on financial instruments   54   -33   87
Translation movements   -71   115   -186
Recognized income and expense   1 191   1 264   -73
(1)
Restated historical basis (see notes to the interim financial statements for further information)

14

Consolidated income statements (unaudited)

Nine months to September 30

 
    
    
    
    
   Restated
historical
YTD 2004(2)
USD m
 
   YTD 2005
USD m

   YTD 2004(1)
USD m

   Change
 
   USD m

   %
Total net sales   23 555   20 669   2 886   14   20 669
Other revenues   218   102   116   114   102
Cost of Goods Sold   -6 351   -5 217   -1 134   22   -5 217
Gross profit   17 422   15 554   1 868   12   15 554
Marketing & Sales   -7 173   -6 373   -800   13   -6 373
Research & Development   -3 374   -2 937   -437   15   -2 946
General & Administration   -1 234   -1 088   -146   13   -1 088
Other income & expense   -224   -367   143   -39   -406
Operating income   5 417   4 789   628   13   4 741
Result from associated companies   126   154   -28   -18   71
Financial income, net   124   161   -37   -23   158
Income before taxes   5 667   5 104   563   11   4 970
Taxes   -878   -857   -21   2   -857
Net income   4 789   4 247   542   13   4 113
Attributable to:                    
  Equity holders of the parent   4 780   4 235   545   13   4 101
  Minority interests   9   12   -3   -25   12
Average number of shares outstanding—Basic (million)   2 332.0   2 361.0   -29.0   -1   2 361.0
Basic earnings per share (USD)(3)   2.05   1.79   0.26   15   1.74
Average number of shares outstanding—Diluted (million)   2 340.4   2 369.3   -28.9   -1   2 369.3
Diluted earnings per share (USD)(3)   2.04   1.79   0.25   14   1.73
(1)
Pro forma basis: This report reflects the adoption of new IFRS accounting standards that became effective on January 1, 2005, and other presentational changes. In order to provide a comparable basis, the 2004 pro forma statements reflect these changes as if they had been in effect already during 2004. (As part of the IFRS restatement communication, please find further information on the reconciliation of the pro forma 2004 figures to the 2004 actual figures reported in the Investor Relations website at www.novartis.com)

(2)
Restated historical basis (see notes to the interim financial statements for further information)

(3)
Earnings per share (EPS) is calculated on the amount of net income attributable to the equity holders of the parent

15

Consolidated statement of recognized income and expense (unaudited)

Nine months to September 30

 
   YTD 2005
USD m

   YTD 2004(1)
USD m

   Change
USD m
Net income   4 789   4 113   676
Actuarial gains/losses   -514   -769   255
Fair value adjustments on financial instruments   -24   219   -243
Translation movements   -1 751   -522   -1 229
Recognized income and expense   2 500   3 041   -541
(1)
Restated historical basis (see notes to the interim financial statements for further information)

Condensed consolidated balance sheets (unaudited)

 
   Sept 30,
2005
USD m

   Dec 31,
2004(1)
USD m

   Sept 30,
2004(1)
USD m
Assets            

Total long-term assets
 
36 194
 
28 568
 
27 004
Current assets            
Inventories   3 889   3 558   3 440
Trade accounts receivable   5 137   4 851   4 492
Other current assets   1 503   1 619   1 446
Cash, short-term deposits and marketable securities   7 947   13 892   11 534
Total current assets   18 476   23 920   20 912
Total assets   54 670   52 488   47 916

Equity and liabilities
 
 
 
 
 
 

Total equity
 
31 738
 
31 305
 
28 918
Long-term liabilities            
Financial debts   2 435   2 736   2 915
Other long-term liabilities   8 040   6 494   6 401
  Total long-term liabilities   10 475   9 230   9 316
Short-term liabilities            
Trade accounts payable   1 773   2 020   1 568
Financial debts and derivatives   4 467   4 119   2 616
Other short-term liabilities   6 217   5 814   5 498
  Total short-term liabilities   12 457   11 953   9 682
Total liabilities   22 932   21 183   18 998
Total equity and liabilities   54 670   52 488   47 916
(1)
Restated historical basis (see notes to the interim financial statements for further information)

16

Condensed consolidated changes in equity (unaudited)

Third quarter

 
   Q3 2005
USD m

   Q3 2004(1)
USD m

   Change
USD m
Consolidated equity at July 1(1)   30 393   28 298   2 095
Total recognized income and expense   1 191   1 264   -73
Purchase of treasury shares, net   95   -780   875
Share-based compensation   111   90   21
Changes in minorities   -12   52   -64
Other   -40   -6   -34
Consolidated equity at September 30   31 738   28 918   2 820
(1)
Restated historical basis (see notes to the interim financial statements for further information)

Nine months to September 30

 
   YTD 2005
USD m

   TTD 2004(1)
USD m

   Change
USD m
Consolidated equity at January 1(1)   31 305   29 117   2 188
Total recognized income and expense   2 500   3 041   -541
Dividends   -2 107   -1 896   -211
Purchase of treasury shares, net   -281   -1 640   1 359
Share-based compensation   314   228   86
Changes in minorities   -27   34   -61
Other   34   34    
Consolidated equity at September 30   31 738   28 918   2 820
(1)
Restated historical basis (see notes to the interim financial statements for further information)

17

Condensed consolidated cash flow statements (unaudited)

Third quarter

 
   Q3 2005
USD m

   Q3 2004(1)
USD m

   Change
USD m

   Restated
historical
Q3 2004(2)
USD m
Net income   1 666   1 469   197   1 439
Reversal of non-cash items                
  Taxes   305   284   21   266
  Depreciation, amortization and impairments   498   379   119   403
  Net financial income   -13   -35   22   -34
  Other   6   10   -4   23
Net income adjusted for non-cash items   2 462   2 107   355   2 097
Interest and other financial receipts   116   119   -3   119
Interest and other financial payments   -67   -49   -18   -49
Taxes paid   -306   -158   -148   -158
Cash flow before working capital and provision changes   2 205   2 019   186   2 009
Restructuring payments and other cash payments out of provisions   -61   -56   -5   -56
Change in net current assets and other operating cash flow items   394   184   210   185
Cash flow from operating activities   2 538   2 147   391   2 138
Investments in property, plant & equipment   -285   -297   12   -297
Acquisitions/divestments of subsidiaries   -3 245   -574   -2 671   -574
Decrease/increase in marketable securities, intangible and financial assets   198   -716   914   -707
Cash flow used for investing activities   -3 332   -1 587   -1 745   -1 578
Cash flow used for financing activities   -597   -946   349   -946
Translation effect on cash and cash equivalents   -16   -4   -12   -4
Change in cash and cash equivalents   -1 407   -390   -1 017   -390
Cash and cash equivalents at July 1   4 939   3 571   1 368   3 571
Cash and cash equivalents at September 30   3 532   3 181   351   3 181
(1)
Pro forma basis

(2)
Restated historical basis (see notes to the interim financial statements for further information)

18

Condensed consolidated cash flow statements (unaudited)

Nine months to September 30

 
   YTD 2005
USD m

   YTD 2004(1)
USD m

   Change
USD m

   Restated
historical
YTD 2004(2)
USD m
Net income   4 789   4 247   542   4 113
Reversal of non-cash items                
  Taxes   878   857   21   857
  Depreciation, amortization and impairments   1 077   955   122   1 028
  Net financial income   -119   -161   42   -158
  Other   -132   -19   -113   28
Net income adjusted for non-cash items   6 493   5 879   614   5 868
Interest and other financial receipts   441   352   89   352
Interest and other financial payments   -151   -106   -45   -107
Taxes paid   -982   -886   -96   -886
Cash flow before working capital and provision changes   5 801   5 239   562   5 227
Restructuring payments and other cash payments out of provisions   -253   -162   -91   -162
Change in net current assets and other operating cash flow items   272   -212   484   -209
Cash flow from operating activities   5 820   4 865   955   4 856
Investments in property, plant & equipment   -770   -882   112   -882
Acquisitions/divestments of subsidiaries   -8 542   -1 031   -7 511   -1 031
Decrease/increase in marketable securities, intangible and financial assets   3 135   -1 553   4 688   -1 544
Cash flow used for investing activities   -6 177   -3 466   -2 711   -3 457
Cash flow used for financing activities   -2 067   -3 857   1 790   -3 857
Translation effect on cash and cash equivalents   -127   -7   -120   -7
Change in cash and cash equivalents   -2 551   -2 465   -86   -2 465
Cash and cash equivalents at January 1   6 083   5 646   437   5 646
Cash and cash equivalents at September 30   3 532   3 181   351   3 181
(1)
Pro forma basis

(2)
Restated historical basis (see notes to the interim financial statements for further information)

19

Net sales by Division

Third quarter (unaudited)

 
   Q3 2005
USD m

   Q3 2004
USD m

   % change
 
   USD

   lc
Pharmaceuticals   5 093   4 646   10   9
Sandoz   1 486   722   106   104
Consumer Health   1 836   1 689   9   8
Total   8 415   7 057   19   18

Nine months to September 30 (unaudited)

 
   YTD 2005
USD m

   YTD 2004
USD m

   % change
 
   USD

   lc
Pharmaceuticals   15 014   13 528   11   9
Sandoz   3 121   2 178   43   40
Consumer Health   5 420   4 963   9   7
Total   23 555   20 669   14   12

Operating income by Division

Third quarter (unaudited)

 
   Q3 2005

   Q3 2004(1)

    
   Restated
historical
Q3 2004(2)
USD m
 
   USD m

   % of net
sales

   USD m

   % of net
sales

   Change
in %
Pharmaceuticals   1 681   33.0   1 401   30.2   20   1 387
Sandoz   34   2.3   12   1.7   183   6
Consumer Health   290   15.8   292   17.3   -1   279
Corporate income & expense, net   -117       -85           -71
Total   1 888   22.4   1 620   23.0   17   1 601
(1)
Pro forma basis

(2)
Restated historical basis (see notes to the interim financial statements for further information)

20

Nine months to September 30 (unaudited)

 
   YTD 2005

   YTD 2004(1)

    
   Restated
historical
YTD 2004(2)
USD m
 
   USD m

   % of net
sales

   USD m

   % of net
sales

   Change
in %
Pharmaceuticals   4 656   31.0   4 025   29.8   16   4 001
Sandoz   223   7.1   235   10.8   -5   217
Consumer Health   865   16.0   831   16.7   4   791
Corporate income & expense, net   -327       -302           -268
Total   5 417   23.0   4 789   23.2   13   4 741
(1)
Pro forma basis

(2)
Restated historical basis (see notes to the interim financial statements for further information)

21

Consolidated income statements—Divisional segmentation

Third quarter (unaudited)

 
   Pharmaceuticals
Division

   Sandoz
Division

   Consumer Health
Division

   Corporate

   Total
 
   Q3 2005
USD m

   Q3 2004(1)
USD m

   Q3 2005
USD m

   Q3 2004(1)
USD m

   Q3 2005
USD m

   Q3 2004(1)
USD m

   Q3 2005
USD m

   Q3 2004(1)
USD m

   Q3 2005
USD m

   Q3 2004(1)
USD m
Net sales to third parties   5 093   4 646   1 486   722   1 836   1 689           8 415   7 057
Sales to other Divisions   39   38   30   26   7   9   -76   -73        
Sales of Divisions   5 132   4 684   1 516   748   1 843   1 698   -76   -73   8 415   7 057
Other revenues   57   40   7   2   10   1           74   43
Cost of Goods Sold   -808   -737   -952   -434   -766   -674   76   80   -2 450   -1 765
Of which amortization and impairments of product and patent rights and trademarks   -42   -40   -82   -15   -17   -13           -141   -68
Gross profit   4 381   3 987   571   316   1 087   1 025       7   6 039   5 335
Marketing & Sales   -1 520   -1 452   -273   -122   -600   -535           -2 393   -2 109
Research & Development   -934   -872   -157   -64   -71   -69   -29   -39   -1 191   -1 044
General & Administration   -160   -157   -77   -42   -106   -86   -85   -76   -428   -361
Other income & expense   -86   -105   -30   -76   -20   -43   -3   23   -139   -201
Of which amortization and impairments of capitalized intangibles included in function costs   -68   -8   -52   -85   -9   -19   -3   -2   -132   -114
Operating income   1 681   1 401   34   12   290   292   -117   -85   1 888   1 620
Result from associated companies                                   65   98
Financial income, net                                   18   35
Income before taxes                                   1 971   1 753
Taxes                                   -305   -284
Net income                                   1 666   1 469
(1)
Pro forma basis

22

Consolidated income statements—Divisional segmentation

Nine months to September 30 (unaudited)

 
   Pharmaceuticals
Division

   Sandoz
Division

   Consumer Health
Division

   Corporate

   Total
 
   YTD
2005
USD m

   YTD
2004(1)
USD m

   YTD
2005
USD m

   YTD
2004(1)
USD m

   YTD
2005
USD m

   YTD
2004(1)
USD m

   YTD
2005
USD m

   YTD
2004(1)
USD m

   YTD
2005
USD m

   YTD
2004(1)
USD m
Net sales to third parties   15 014   13 528   3 121   2 178   5 420   4 963           23 555   20 669
Sales to other Divisions   99   108   118   61   22   23   -239   -192        
Sales of Divisions   15 113   13 636   3 239   2 239   5 442   4 986   -239   -192   23 555   20 669
Other revenues   174   89   13   4   31   9           218   102
Cost of Goods Sold   -2 415   -2 195   -1 954   -1 252   -2 204   -1 982   222   212   -6 351   -5 217
Of which amortization and impairments of product and patent rights and trademarks   -127   -132   -117   -45   -46   -43           -290   -220
Gross profit   12 872   11 530   1 298   991   3 269   3 013   -17   20   17 422   15 554
Marketing & Sales   -4 779   -4 340   -550   -376   -1 844   -1 657           -7 173   -6 373
Research & Development   -2 756   -2 448   -300   -183   -213   -194   -105   -112   -3 374   -2 937
General & Administration   -474   -454   -179   -133   -314   -269   -267   -232   -1 234   -1 088
Other income & expense   -207   -263   -46   -64   -33   -62   62   22   -224   -367
Of which amortization and impairments of capitalized intangibles included in function costs   -72   -22   -53   -105   -29   -53   -15   -8   -169   -188
Operating income   4 656   4 025   223   235   865   831   -327   -302   5 417   4 789
Result from associated companies                                   126   154
Financial income, net                                   124   161
Income before taxes                                   5 667   5 104
Taxes                                   -878   -857
Net income                                   4 789   4 247
(1)
Pro forma basis

23

Notes to the interim financial report for the nine months ended September 30, 2005 (unaudited)

1. Basis of preparation

This unaudited financial report has been prepared in accordance with the accounting policies set out in International Accounting Standard 34 on Interim Financial Reporting and in the 2004 Annual Report, except that the Group has adopted the following new IFRS rules or made other improvements to its financial statements presentation from January 1, 2005:

IFRS 2 (Share-based compensation)

IFRS 3 (Business combinations)

IAS 1 (Associated companies, minority interests)

IAS 38 (Intangibles)

24

IAS 19 (Employee post-employment benefits)

SIC-12 (Employee post-employment benefits)

In addition, the Group has introduced the following changes:

The above-mentioned changes to goodwill amortization and capitalization of R&D intangibles prior to 2005 and share-based compensation prior to November 7, 2002, are not required to be included retroactively in the historical consolidated financial statements. In order to assist our investors and analysts in their understanding of our results by having comparable information, we have also produced pro forma 2004 income and cash flow statements that include all of these adjustments.

In the nine months to September 30, 2005, there was a change in accounting for Pharmaceutical division sales rebates in the US on inventory held by wholesalers and retailers, which resulted in an expense relating to prior years of USD 62 million being recorded in the current year.

Apart from these matters, and the legal and product liability matters discussed in Note 5, there were no other significant changes in accounting policies or estimates or in any contingent liabilities from those disclosed in the 2004 Annual Report.

25


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

The following significant transactions were made during the nine months to September 30, 2005, and in 2004:

2005

Sandoz

On February 21, Novartis announced it was acquiring two leading generics companies in a series of transactions. Novartis signed definitive agreements to acquire 100% of Hexal AG and a 67.7% stake (65.4% fully diluted) in Eon Labs, Inc. (NASDAQ: ELAB) for a total of EUR 5.65 billion in cash.

On June 6, Novartis completed the acquisition of Hexal AG for USD 5.3 billion in cash. The third-quarter 2005 results include the consolidated income statement and cash flows of Hexal AG from June 6, 2005, to September 30, 2005. Preliminary goodwill at September 30, 2005, amounted to USD 2.7 billion.

On July 20, 2005, Novartis completed the cash tender offer for the outstanding shares of Eon Labs, Inc., with the result that it was possible to acquire all of the company's outstanding shares for USD 31.00 per share. The total acquisition costs of Eon Labs amounted to USD 2.6 billion. The third-quarter 2005 results include the consolidated balance sheet, income statements and cash flows of Eon Labs from July 20, 2005, to August 31, 2005. Preliminary goodwill of USD 1.9 billion has been included.

Consumer Health

On July 14, 2005, the Novartis OTC Business Unit announced the acquisition of a business including the rights to produce and market a portfolio of over-the-counter (OTC) brands from the Bristol-Myers Squibb Company that are principally sold in the US for USD 660 million in cash. The third-quarter 2005 results include the consolidated income statement and cash flows for the North American portion of this acquisition from its completion date of August 31, 2005, up to September 30, 2005. The closing date for the South American portion of this transaction was September 30, 2005, while the remaining portion in Europe, the Middle East and Africa (EMEA) is planned to be completed by December 31, 2005. A provisional balance sheet has been consolidated that includes USD 226 million of goodwill.

Corporate

On September 1, 2005, Novartis announced its intention to acquire all of the remaining shares of Chiron Corporation in addition to the 42.5% stake that it already owns for USD 40.00 per share. The independent directors of Chiron subsequently said the offer was inadequate. There can be no assurance that an agreement will be reached on this transaction.

2004

Sandoz

On June 30, Novartis acquired 100% of the shares of the Danish generics company Durascan A/S from AstraZeneca. Goodwill of USD 23 million has been recorded on this transaction.

On August 13, Novartis completed the acquisition of 100% of the shares of Sabex Inc., a Canadian generic manufacturer with a leading position in generic injectables, for USD 565 million in cash. Goodwill of USD 311 million has been recorded on this transaction.

26


Medical Nutrition

On February 13, Novartis completed the acquisition of Mead Johnson & Company's global adult medical nutrition business for USD 385 million in cash. These activities are included in the consolidated financial statements from that date with USD 220 million of net sales and a USD 31 million operating loss being recorded in 2004. Goodwill of USD 183 million has been recorded on this transaction.

3. Principal currency translation rates

Third quarter

 
   Average rates
Q3 2005 USD

   Average rates
Q3 2004 USD

   Period-end rates
September 30,
2005 USD

   Period-end rates
September 30,
2004 USD
1 CHF   0.785   0.795   0.772   0.794
1 EUR   1.220   1.222   1.203   1.233
1 GBP   1.784   1.818   1.760   1.798
100 JPY   0.899   0.910   0.883   0.903

Nine months to September 30

 
   Average rates
YTD 2005 USD

   Average rates
YTD 2004 USD

   Period-end rates
September 30,
2005 USD

   Period-end rates
September 30,
2004 USD
1 CHF   0.816   0.792   0.772   0.794
1 EUR   1.264   1.226   1.203   1.233
1 GBP   1.844   1.821   1.760   1.798
100 JPY   0.929   0.918   0.883   0.903

4. Condensed consolidated change in liquidity (unaudited)

Third quarter

 
   Q3 2005
USD m

   Q3 2004(1)
USD m

   Change
USD m
Change in cash and cash equivalents   -1 407   -390   -1 017
Change in marketable securities, financial debt and financial derivatives   706   738   -32
Change in net liquidity   -701   348   -1 049
Net liquidity at July 1(1)   1 746   5 655   -3 909
Net liquidity at September 30   1 045   6 003   -4 958
(1)
Restated historical basis (see notes to the interim financial statements for further information)

27

Nine months to September 30

 
   YTD 2005
USD m

   YTD 2004(1)
USD m

   Change
USD m
Change in cash and cash equivalents   -2 551   -2 465   -86
Change in marketable securities, financial debt and financial derivatives   -3 441   1 817   -5 258
Change in net liquidity   -5 992   -648   -5 344
Net liquidity at January 1(1)   7 037   6 651   386
Net liquidity at September 30   1 045   6 003   -4 958
(1)
Restated historical basis (see notes to the interim financial statements for further information)

5. Legal and product liability update

Litigation: A number of our affiliates are the subject of litigation arising out of the normal conduct of their business. As a result, claims could be made against them which, in whole or in part, might not be covered by insurance. In our opinion, however, the outcome of these actions will not materially affect our financial condition but could be material to our results of operations in a given period. Developments in these cases in the third quarter of 2005 are as follows:

28

6. Significant differences between IFRS and US Generally Accepted Accounting Principles (US GAAP) (unaudited)

The Group's consolidated financial statements have been prepared in accordance with IFRS, 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.

The adjustments have been explained in note 32 of the Novartis 2004 annual report. Adoption of new IFRS and US GAAP standards from January 1, 2005, have led to the following additional adjustments being recorded:

Pension and other post-employment benefits

29

Research & Development

Inventory

Share-based compensation

Minority interests

 
   YTD 2005
USD m

   YTD 2004(1)
USD m
Net income under IFRS   4 789   4 113
US GAAP adjustments:        
Purchase accounting: Ciba-Geigy   -388   -270
Purchase accounting: Other acquisitions   -6   16
Purchase accounting: IFRS goodwill amortization   -21   131
Purchase accounting: Purchase cost differences   -118    
Available-for-sale securities and financial instruments   253   18
Pension and other post-employment benefits   -153   75
Share-based compensation   -43   -86
In-Process and other Research & Development   -1 521 (2) 34
Minority interests   -9   -12
Other   57   -266
Deferred tax   -24   118
Net income under US GAAP   2 816   3 871

Basic earnings per share under US GAAP (USD)
 
1.21
 
1.64
Diluted earnings per share under US GAAP (USD)   1.20   1.63
(1)
Restated historical basis (see notes to the interim financial statements for further information)

(2)
Includes a preliminary estimate of the Hexal and Eon Labs charge for acquired In-Process R&D

30

 
   September 30, 2005
USD m

   September 30, 2004(1)
USD m
Equity under IFRS   31 738   28 918
US GAAP adjustments:        
Purchase accounting: Ciba-Geigy   1 891   2 413
Purchase accounting: Other acquisitions   2 797   2 826
Purchase accounting: IFRS goodwill amortization   519   486
Purchase accounting: Purchase cost differences   -118    
Available-for-sale securities and derivative financial instruments   -25    
Pension and other post-employment benefits   3 559   2 798
In-Process and other Research & Development   -2 877   -1 297
Minority interests   -117   -136
Other   181   -247
Deferred tax   -1 202   -656
Equity under US GAAP   36 346   35 105
(1)
Restated historical basis (see notes to the interim financial statements for further information)

Supplementary information (unaudited)

Free cash flow

Third quarter

 
   Q3 2005
USD m

   Q3 2004(1)
USD m

   Change
USD m
Cash flow from operating activities   2 538   2 147   391
Purchase of property, plant & equipment   -285   -297   12
Purchase of intangible and financial assets   -227   -292   65
Sale of intangible and financial assets   234   155   79
Free cash flow   2 260   1 713   547
(1)
Pro forma basis

Nine months to September 30

 
   YTD 2005
USD m

   YTD 2004(1)
USD m

   Change
USD m
Cash flow from operating activities   5 820   4 865   955
Purchase of property, plant & equipment   -770   -882   112
Purchase of intangible and financial assets   -745   -683   -62
Sale of intangible and financial assets   870   618   252
Dividends paid to third parties   -2 107   -1 896   -211
Free cash flow   3 068   2 022   1 046
(1)
Pro forma basis

31

Share information

 
   September 30, 2005

   September 30, 2004

  
 
Number of shares outstanding (million)   2 334.8   2 339.2  
Registered share price (CHF)   65.65   58.20  
ADS price (USD)   51.00   46.20  
Market capitalization (USD billion)   118.3   108.1 (1)
Market capitalization (CHF billion)   153.3   136.1 (1)
 
(1)
Restated historical basis

32

Supplementary tables: Third Quarter 2005—Net sales of top 20 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   Hypertension   402   14   523   19   925   17   17
Gleevec/Glivec   Chronic myeloid leukemia   136   46   411   27   547   33   31
Lamisil (group)   Fungal infections   156   -1   162   -13   318   -8   -7
Zometa   Cancer complications   172   13   130   15   302   15   14
Lotrel   Hypertension   269   23           269   23   23
Neoral/Sandimmun   Transplantation   36   -12   206   2   242   0   0
Sandostatin (group)   Acromegaly   89   -7   130   16   219   6   5
Lescol   Cholesterol reduction   70   -10   124   6   194   -1   -1
Voltaren (group)   Inflammation/pain   2   0   172   8   174   9   7
Trileptal   Epilepsy   125   19   40   20   165   20   19
Top ten products total       1 457   10   1 898   13   3 355   13   13
Femara   Breast cancer   58   26   78   39   136   35   33
Visudyne   Macular degeneration   51   -9   73   25   124   9   8
Exelon   Alzheimer's disease   42   -9   77   21   119   11   9
Zelnorm/Zelmac   Irritable bowel syndrome   97   37   16   18   113   36   34
Tegretol (incl. CR/XR)   Epilepsy   29   16   70   -5   99   1   0
Miacalcic   Osteoporosis   62   -2   32   -7   94   -2   -3
Foradil   Asthma   3   0   74   -5   77   -3   -4
Comtan/Stalevo Group   Parkinson's disease   36   24   38   55   74   42   39
Famvir   Viral infections   41   -7   27   10   68   1   -1
Elidel   Eczema   38   -43   15   -8   53   -36   -37
Top 20 products total       1 914   10   2 398   13   4 312   12   11
Rest of portfolio       180   14   601   -9   781   -4   -5
Total Division net sales       2 094   11   2 999   7   5 093   10   9

33

Supplementary tables: Nine months to September 30—Net sales of top 20 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   1 134   13   1 548   19   2 682   18   16
Gleevec/Glivec   Chronic myeloid leukemia   371   38   1 209   29   1 580   35   31
Zometa   Cancer complications   517   11   393   16   910   15   13
Lamisil (group)   Fungal infections   411   2   471   1   882   3   1
Lotrel   Hypertension   778   17           778   17   17
Neoral/Sandimmun   Transplantation   111   -18   601   -4   712   -4   -7
Sandostatin (group)   Acromegaly   281   5   391   13   672   12   9
Lescol   Cholesterol reduction   187   -11   384   8   571   3   0
Voltaren (group)   Inflammation/pain   5   -29   515   11   520   14   10
Trileptal   Epilepsy   343   20   115   20   458   21   20
Top ten products total       4 138   12   5 627   14   9 765   15   13
Femara   Breast cancer   175   52   215   33   390   44   41
Visudyne   Macular degeneration   152   -1   225   27   377   16   14
Exelon   Alzheimer's disease   127   -6   219   17   346   11   7
Tegretol (incl. CR/XR)   Epilepsy   81   8   216   0   297   5   2
Zelnorm/Zelmac   Irritable bowel syndrome   251   31   44   19   295   30   29
Miacalcic   Osteoporosis   178   -2   102   -4   280   -1   -3
Foradil   Asthma   11   22   240   1   251   7   2
Elidel   Eczema   156   -24   61   14   217   -15   -16
Comtan/Stalevo Group   Parkinson's disease   97   24   106   58   203   43   40
Famvir   Viral infections   110   -8   78   5   188   -1   -3
Top 20 products total       5 476   10   7 133   14   12 609   15   12
Rest of portfolio       515   2   1 952   -7   2 467   -2   -5
Total Division sales excluding accounting adjustment       5 991   9   9 085   9   15 076   11   9
Prior-years' US sales rebate accounting adjustment       -62               -62        
Total Division net sales       5 929   8   9 085   9   15 014   11   9

34

Pharmaceutical Division therapeutic area net sales (unaudited)

Third quarter (unaudited)

 
   Q3 2005
USD m

   Q3 2004
USD m

   Change
USD (%)
Cardiovascular            
Strategic franchise products            
Diovan   925   788   17
Lotrel   269   218   23
Lescol   194   195   -1
Other   23   33   -30
Total strategic franchise products   1 411   1 234   14
Mature products   166   183   -9
Total Cardiovascular products   1 577   1 417   11
Oncology            
Strategic franchise products            
Gleevec/Glivec   547   412   33
Zometa   302   262   15
Sandostatin (group)   219   207   6
Femara   136   101   35
Other   54   62   -13
Total Oncology products   1 258   1 044   20
Neuroscience            
Strategic franchise products            
Trileptal   165   137   20
Exelon   119   107   11
Tegretol   99   98   1
Other   186   172   8
Total strategic franchise products   569   514   11
Mature products   131   130   1
Total Neuroscience products   700   644   9
Respiratory & Dermatology            
Strategic franchise products            
Lamisil   318   344   -8
Foradil   77   79   -3
Elidel   53   83   -36
Other   15   10   50
Total strategic franchise products   463   516   -10
Mature products   24   30   -20
Total Respiratory & Dermatology products   487   546   -11
Arthritis/Bone/Gastrointestinal/Hormonal/ Infectious diseases/other (ABGHI)            
Strategic franchise products            
Zelnorm/Zelmac   113   83   36
Other   86   69   25
Total strategic franchise products   199   152   31
Mature products   390   396   -2
Total ABGHI products   589   548   7
Transplantation            
Neoral/Sandimmun   242   241   0
Other   36   19   89
Total Transplantation products   278   260   7
Ophthalmics            
Visudyne   124   114   9
Other   80   81   -1
Total Ophthalmics products   204   195   5
Total strategic franchise products   4 382   3 915   12
Total mature products   711   739   -4
Prior-years' US sales rebate accounting adjustment   0   -8    
Total Division net sales   5 093   4 646   10

35

Pharmaceutical Division therapeutic area net sales (unaudited)

Nine months to September 30 (unaudited)

 
   YTD 2005
USD m

   YTD 2004
USD m

   Change
USD (%)
Cardiovascular            
Strategic franchise products            
Diovan   2 682   2 268   18
Lotrel   778   666   17
Lescol   571   556   3
Other   89   85   5
Total strategic franchise products   4 120   3 575   15
Mature products   507   611   -17
Total Cardiovascular products   4 627   4 186   11
Oncology            
Strategic franchise products            
Gleevec/Glivec   1 580   1 168   35
Zometa   910   789   15
Sandostatin (group)   672   602   12
Femara   390   271   44
Other   199   213   -7
Total Oncology products   3 751   3 043   23
Neuroscience            
Strategic franchise products            
Trileptal   458   377   21
Exelon   346   313   11
Tegretol   297   284   5
Other   554   502   10
Total strategic franchise products   1 655   1 476   12
Mature products   376   390   -4
Total Neuroscience products   2 031   1 866   9
Respiratory & Dermatology            
Strategic franchise products            
Lamisil   882   860   3
Foradil   251   234   7
Elidel   217   255   -15
Other   42   31   35
Total strategic franchise products   1 392   1 380   1
Mature products   108   110   -2
Total Respiratory & Dermatology products   1 500   1 490   1
Arthritis/Bone/Gastrointestinal/Hormonal/ Infectious diseases/other (ABGHI)            
Strategic franchise products            
Zelnorm/Zelmac   295   227   30
Other   232   198   17
Total strategic franchise products   527   425   24
Mature products   1 187   1 151   3
Total ABGHI products   1 714   1 576   9
Transplantation            
Neoral/Sandimmun   712   743   -4
Other   96   56   71
Total Transplantation products   808   799   1
Ophthalmics            
Visudyne   377   324   16
Other   268   247   9
Total Ophthalmics products   645   571   13
Total strategic franchise products   12 898   11 269   14
Total mature products   2 178   2 262   -4
Prior-years' US sales rebate accounting adjustment   -62   -3    
Total Division net sales   15 014   13 528   11

36

Net sales by region (unaudited)

Third quarter

 
    
    
   % change

    
    
 
   Q3 2005
USD m

   Q3 2004
USD m

   USD

   local
currencies

   Q3 2005
% of total

   Q3 2004
% of total
Pharmaceuticals                        
  US   2 094   1 895   11   11   41   41
  Rest of world   2 999   2 751   9   7   59   59
Total   5 093   4 646   10   9   100   100
Sandoz                        
  US   314   219   44   44   21   30
  Rest of world   1 172   503   133   130   79   70
Total   1 486   722   106   104   100   100
Consumer Health                        
  US   820   767   7   7   45   45
  Rest of world   1 016   922   10   9   55   55
Total   1 836   1 689   9   8   100   100
Group                        
  US   3 228   2 881   12   12   38   41
  Rest of world   5 187   4 176   24   23   62   59
Total   8 415   7 057   19   18   100   100

Nine months to September 30

 
    
    
   % change

    
    
 
   YTD 2005
USD m

   YTD 2004
USD m

   USD

   local
currencies

   YTD 2005
% of total

   YTD 2004
% of total
Pharmaceuticals                        
  US   5 929   5 474   8   8   39   40
  Rest of world   9 085   8 054   13   9   61   60
Total   15 014   13 528   11   9   100   100
Sandoz                        
  US   824   709   16   16   26   33
  Rest of world   2 297   1 469   56   52   74   67
Total   3 121   2 178   43   40   100   100
Consumer Health                        
  US   2 361   2 160   9   9   44   44
  Rest of world   3 059   2 803   9   6   56   56
Total   5 420   4 963   9   7   100   100
Group                        
  US   9 114   8 343   9   9   39   40
  Rest of world   14 441   12 326   17   13   61   60
Total   23 555   20 669   14   12   100   100

37

Quarterly analysis

Key figures by quarter

 
    
    
   Change
 
   Q3 2005
USD m

   Q2 2005
USD m

   USD m

   %
Total sales   8 415   7 799   616   8
Operating income   1 888   1 849   39   2
Financial income, net   18   61   -43   -70
Taxes   -305   -292   -13   4
Net income   1 666   1 646   20   1

Sales by region

 
    
    
   Change
 
   Q3 2005
USD m

   Q2 2005
USD m

   USD m

   %
US   3 228   3 069   159   5
Europe   3 208   2 812   396   14
Rest of world   1 979   1 918   61   3
Total   8 415   7 799   616   8

Sales by division

 
    
    
   Change
 
   Q3 2005
USD m

   Q2 2005
USD m

   USD m

   %
Pharmaceuticals   5 093   5 132   -39   -1
Sandoz   1 486   832   654   79
Consumer Health   1 836   1 835   1    
Total   8 415   7 799   616   8

Operating income by division

 
    
    
   Change
 
   Q3 2005
USD m

   Q2 2005
USD m

   USD m

   %
Pharmaceuticals   1 681   1 611   70   4
Sandoz   34   79   -45   -57
Consumer Health   290   289   1    
Corporate income/expense, net   -117   -130   13    
Total   1 888   1 849   39   2

38


SIGNATURES

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

    Novartis AG

 
 
 
 
Date: October 19, 2005   By: /s/ MALCOLM CHEETHAM
    Name: Malcolm Cheetham
    Title: Head Group Financial Reporting and Accounting



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SIGNATURES