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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 20, 2003
(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 21, 2002 (File No. 333-81862) and our Registration Statement on Form S-8 as filed with the Commission on May 14, 2001 (File No. 333-13506), in each case to the extent not superseded by documents or reports subsequently filed by us under the Securities Act of 1933 or the Securities Exchange Act of 1934, in each case as amended.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 Third Quarter 2003 Results Release, dated October 20, 2003

GRAPHIC   Novartis International AG
Novartis Communications
CH-4002 Basel
Switzerland


Tel + 41 61 324 2200
Fax + 41 61 324 3300
Internet Address:
http://www.novartis.com

 
 
MEDIA RELEASE • COMMUNIQUE AUX MEDIAS • MEDIENMITTEILUNG
 
 

Novartis outpaces the market with double-digit sales growth and further market share gains in the first nine months of 2003

First nine-months

 
   9M 2003
   9M 2002
   % Change
 
   USD m
   % of sales
   USD m
   % of sales
   USD
   local currencies
Group sales   18 134       15 308       18   11
  Pharmaceuticals sales   11 641       9 896       18   11
  Consumer Health sales   6 493       5 245 1     24   16
Operating income   4 283   23.6   3 738   24.4   15    
Net income   3 656   20.2   3 538   23.1   3    
Free cash flow   2 184       1 324       65    
 
   USD
    
   USD
    
    
    
Basic earnings per share/ADS   1.48       1.40       6    
1
Ongoing business excl. divested activities with 9-month sales of USD 167 million in 2002

Third quarter

 
   Q3 2003
   Q3 2002
   % Change
 
   USD m
   % of sales
   USD m
   % of sales
   USD
   local currencies
Group sales   6 210       5 373       16   11
  Pharmaceuticals sales   4 041       3 451       17   12
  Consumer Health sales   2 169       1 866 2     16   10
Operating income   1 469   23.7   1 320   24.6   11    
Net income   1 277   20.6   1 188   22.1   7    
Free cash flow   1 527       1 066       43    
2
Ongoing business excl. divested activities with 3rd quarter sales of USD 56 million in 2002

All product names appearing in italics are registered trademarks of the Novartis Group

Unless otherwise stated, growth rates are in USD and comments refer to nine-month figures

1

Basel, 20 October 2003—Commenting on Novartis' nine-month results published today, Dr. Daniel Vasella, Chairman and CEO, said: "I am pleased that we have succeeded in delivering sustained double-digit growth in both divisions. Pharmaceuticals is gaining share in all our key markets. The cardiovascular franchise, especially Diovan, achieved the top position in its fast-growing global segment, and oncology sustained its dynamic first-half growth rate. Our generics business grew to become a global leader, contributing a cost-effective solution to help meet patient needs, while addressing healthcare budgetary constraints. Our operating income rose 15%, even as we continued our strategic investments in R&D to maintain a top innovation position and secure a sustainable dynamic growth rate".

Sales

Group sales up 18% to USD 18.1 billion

Group sales climbed 18% or 11% in local currencies ("l.c.") above the comparative first nine months of last year. Expanding volumes contributed 8 percentage points of sales growth, whilst acquired businesses added 2 percentage points. Price increases added 1 percentage point and the impact of translations from local currencies into USD accounted for 7 percentage points of sales growth.

Pharmaceuticals sales up 18% to USD 11.6 billion

With nine-month revenues rising 18% (11% in l.c.), the core Pharmaceuticals business sustained above-market1 sales growth, posting a 17% (12% in l.c.) rise in the third quarter.

Pharmaceuticals captured further share of the key US market (sales: +15%, +15% in l.c.), Japan (sales: +21%; +14% in l.c.), the second largest single market, as well as in Europe (sales: +25%; +6% in l.c.). Based on latest available data (IMS, August), the company's overall share of the global healthcare market has risen to 4.35%.

The cardiovascular (+38%; +32% in l.c.) and oncology franchises (+36%; +27% in l.c.) continued to be the main drivers, sustaining their first-half growth rates through the third quarter led in particular by the flagship brands Diovan, Gleevec/Glivec, Lotrel, Zometa and Lescol.

Newly launched products made further in-roads: Zelmac/Zelnorm generated revenues of USD 104 million, with US total and new prescriptions recently growing more than 60%. Meanwhile, sales of Elidel reached USD 165 million, as the product maintained its position as the number-one branded eczema treatment worldwide.

Consumer Health sales up 24% to USD 6.5 billion

Sales of Consumer Health's ongoing business grew a substantial 24% (+16% in l.c.) driven mainly by Sandoz and fuelled by above-market sales growth throughout the other businesses, of which OTC, Medical Nutrition and CIBA Vision all delivered double-digit sales increases in USD.

2


Sandoz, a leading generics company, posted third-quarter sales far above (+36%; 28% in l.c.) the high level of the third quarter in 2002, which was characterized by the US launch of of the anti-infective AmoxC (a generic version of Augmentin®2). Nine-month sales at Sandoz (+67%; +54% in l.c.), were driven by the US retail pharmaceuticals business and the Lek acquisition, which contributed 39 percentage points to sales growth. The successful roll-out of prescription loratadine (a generic version of the allergy treatment Claritin®2), and of citalopram in the UK (a generic version of the anti-depressant Celexa®2) added further impetus to sales.

1
Based on IMS data January—August 2002/3, the global healthcare market grew approximately 8% compared with Novartis healthcare 18% (Pharmaceuticals 16%)

2
Augmentin®, Claritin® and Celexa® are registered trademarks of GlaxoSmithKline, Schering Plough, and Bayer respectively

3

In OTC (over-the-counter medicines) sales rose 15% (+6% in l.c.), led by Nicotinell/ Habitrol (smoking cessation) and Lamisil (topical antifungal), with US private-label loratadine also contributing to overall sales growth.

Medical Nutrition (+13%; +1% in l.c.) grew above the market, with sales benefiting from initiatives in the home-care channel.

CIBA Vision (+13%; +6% in l.c.) maintained double-digit sales growth in the third quarter, powered by the continued strong performance of the innovative disposable and continuous-wear lens business.

Operating income

First nine months

 
   9M 2003
   9M 2002
    
 
   USD m
   % of sales
   USD m
   % of sales
   Change
in %
Pharmaceuticals   3 249   27.9   2 850   28.8   14
Consumer Health (ongoing)   990   15.2   727   13.9   36
Divested Health & Functional Food activities           24        
Consumer Health   990   15.2   751   13.9   32
Corporate income/expense, net   44       137       -68
Total   4 283   23.6   3 738   24.4   15

Third quarter

 
   Q3 2003
   Q3 2002
    
 
   USD m
   % of sales
   USD m
   % of sales
   Change
in %
Pharmaceuticals   1 137   28.1   986   28.6   15
Consumer Health (ongoing)   326   15.0   285   15.3   14
Divested Health & Functional Food activities           8        
Consumer Health   326   15.0   293   15.2   11
Corporate income/expense, net   6       41       -85
Total   1 469   23.7   1 320   24.6   11

Group operating income rises 15% to USD 4.3 billion

As planned, Research & Development investments increased by a significant 31% to 15% of sales. Thanks to continued productivity gains and product-mix improvements, the cost of goods sold and Marketing & Sales investments grew slower than sales, offsetting an increase in General & Administration expenses, which grew owing to several factors including the write-down of certain investments in biotechnology ventures, exchange rate movements and royalty payments. As a result, nine-month operating income rose 15% and the operating margin remained at the six-month level of 23.6%.

4


Pharmaceuticals operating income climbs 14% to USD 3.2 billion

Earnings growth accelerated in the third quarter as sales continued to expand strongly. The cost of goods sold, as well as investments in Marketing & Sales and Research & Development, increased slower than in the first six months, when considerable payments related to development milestones and attractive in-licensing deals were completed. Over nine-months, product-mix changes and productivity gains in the cost of goods sold continued to drive gross profit improvements. Research & Development reached 19% of sales (reflecting the sustained high-level investment in the new Cambridge facilities) and Marketing & Sales declined slightly as a percentage of sales.

Consumer Health operating income rises 36% to USD 1.0 billion

Operating income from Consumer Health's ongoing business rose 36% in the first nine months, outpacing sales and driven in particular by Sandoz (+87%), where volume expansions and productivity gains, more than offset increased investments in Marketing & Sales and Research & Development. Apart from Sandoz, CIBA Vision (+38%), Medical Nutrition (+184%), and OTC (+34%), all achieved considerable increases in operating income, the latter benefiting from the exceptional contribution of loratadine.

Overall in Consumer Health, continued productivity gains, lower costs of certain raw materials, and product-mix improvements contributed to a reduction in the cost of goods sold as a percentage of sales. Marketing & Sales investments were increased in order to drive recently launched products and to support key brands, however the increase was slower than sales growth. The reduction of these costs as a proportion of sales partly offset the over-proportionate increase in Research & Development investments, which were mainly due to the expansion of Sandoz' internal R&D capabilities, licensing agreements and other initiatives to accelerate innovation. With almost all business units achieving margin improvements, the Division's ongoing profit margin improved 1.3 percentage points to 15.2%.

Group net income

Group net income reached USD 3.7 billion in the first nine months. At 3%, growth was less pronounced than at the operating income level because non-operating income from associated companies and financial investments was significantly reduced. Earnings per share expanded by 6% to USD 1.48 for the nine months.

Group outlook (barring any unforeseen events)

Novartis continues to benefit from a pharmaceutical product portfolio that covers both specialty and primary care products as well as from relatively low exposure to patent expiry. As a consequence, Novartis expects to deliver superior short- to mid-term sales growth in the high-single to low-double digit percent range in local currencies.

A sustainable increase can also be expected in operating income, although operating margins are expected to be slightly reduced in 2003 and 2004 as Pharmaceuticals continues to pursue its vigorous growth strategy to sustain market share gains and its innovation track record. As a result, Research & Development investments are projected to increase over-proportionately to sales in 2003 and in 2004, underscoring Novartis' commitment to bringing innovative therapies to patients.

As previously forecast, 2003 net financial income is expected to be below the previous year's level, reflecting the lower level of liquidity and the challenging economic conditions. However, with strong operational performance continuing, both full-year operating and net income are expected to exceed the previous year's levels, barring any unforeseen events.

5


Pharmaceutical business and product highlights

Primary Care

Diovan (+49%; +41% in l.c.; US: +45%), the world's leading angiotensin receptor blocker (ARB) captured further market share from its competitors and continued to outpace the fast-growing ARB segment in the third quarter.

The brand's excellent efficacy, its cardio-protective profile and comprehensive clinical program position it for continued strong growth. The results of VALIANT, which is examining Diovan in post-myocardial infarction patients, will be announced at the forthcoming American Heart Association Scientific Session in November.

Diovan HCT became the second most prescribed product in the combination ARB segment (mono and combination therapy) in the US. This rapid growth was powered by the roll-out of new dosage forms, the heart failure indication and new treatment guidelines.

Lotrel (US: +24%), the leading combination treatment for hypertension, posted strong sales over nine months. 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 Lotrel 10/20 dosage form, which adds efficacy and dosing flexibility. A DTC advertising campaign was launched in August to expand disease awareness.

Lescol (+28%; +19% in l.c.; US: +14%; cholesterol reduction) continued strong sales growth driven by proven benefits in high-risk patients and leveraged by the US approval in May of the secondary prevention indication.

Lamisil (+13%; +7% in l.c.; US: +5%; fungal infections) sales were lifted by strong demand, particularly in the US and Japan, resulting from increased disease awareness. Total prescription trends in the third quarter showed double-digit growth in the US, reflecting strong underlying demand for the product.

Trileptal (+51%; +48% in l.c.; US: +55%; epilepsy) clearly outpaced its market. In August, the FDA granted approval for the use of Trileptal as monotherapy in children, making it the only newer anti-epileptic drug indicated for the treatment of partial seizures as a mono-therapy and adjunctive therapy in adults and children of 4 years and upwards.

Elidel (eczema), now in its second year on the market, achieved nine-month sales of USD 165 million. Being a non-steroid, Elidel lacks typical steroid-induced side effects and so it continues its leadership as the number-one branded prescription treatment for eczema in the US. The product has now been launched in more than 30 markets.

Zelnorm/Zelmac (irritable bowel syndrome with constipation) revenues exceeded USD 104 million (US: USD 81 million) reflecting the product's therapeutic benefits and the increase in disease awareness. Total US prescriptions as well as new prescriptions recently increased more than 60%. Zelnorm/Zelmac has now been launched in 34 countries.

Oncology

Gleevec/Glivec (+91%; +75% in l.c.; US: +42%), 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 introduction of the new tablet in June and July in the US prompted a high level of purchasing followed by a decrease in wholesaler stocks in the third quarter. The new 100mg and 400mg tablets will make dosing more convenient. The number of patients on the Gleevec/Glivec Patient Assistance Program rose to more than 5000 worldwide, providing treatment to many needy patients who otherwise would not have access.

6


Zometa (+104%; +95% in l.c.; US: +75%), the most prescribed intravenous bisphosphonate for bone metastases, continued to post dynamic growth, with sales reaching USD 652 million. Several launches in Europe fuelled additional growth, as did the continued expanded use into a number of tumor types including lung, prostate, multiple myeloma, and breast. Sales of the combined Zometa/Aredia franchise reached USD 755 million, thanks to the superior therapeutic benefits of Zometa, which is successfully replacing Aredia.

Sandostatin franchise (+13%; +5% in l.c.; US: +9%; acromegaly and carcinoid syndrome) sales continued to grow, driven by the US. The LARformulation (+18%; +9% in l.c.; US: +14%) continues to grow, albeit at a slower rate as new competitors have entered the market.

Femara (first-line therapy for advanced breast cancer in postmenopausal women) achieved a 30% rise (+19% in l.c.; US: +27%) supported by its strong profile as the only aromatase inhibitor to show superiority to tamoxifen in the first-line metastatic setting.

Ophthalmics

Visudyne (+24%; +16% in l.c.; US: +6%; treatment in age-related macular degeneration) continued to post overall growth, benefiting from increased market penetration and strong sales in Europe, the LatAm and Asia Pacific regions.

Transplantation

Neoral/Sandimmun (immunosuppression) sales declined only modestly (-5%) despite the use of lower dosing regimens in the US, in addition to generic competition and compulsory price-cuts in Germany and Italy. Momentum was sustained in Japan even though reimbursement was reduced by the authorities.

Myfortic, the new enteric-coated formulation of mycophenolate sodium used to prevent organ rejection, has now gained approval in 27 countries.

Third-quarter regulatory and clinical highlights

Major approvals and launches

Novartis received several approvals in the third quarter, which will bring new treatments to patients suffering from diseases such as severe asthma, Parkinson's disease and cancer.

Xolair, the monoclonal antibody treatment for asthma, and Stalevo, the combination therapy for Parkinson's disease, were launched in the US in July and September, respectively.

Glivec won approval for GIST in Japan and was recommended by NICE in the UK for first-line treatment of CML, which would extend coverage to all stages of the disease.

Zometa: the FDA issued an approvable letter for a label update to include long-term data for broad range of advanced cancers involving bone.

Trileptal was approved in the US for monotherapy treatment of epilepsy in children.

Certican, which targets the primary causes of allograft dysfunction, including acute rejection, was approved in Sweden for the prevention of rejection in kidney and heart transplantation in combination with Neoral.

Prexige (symptomatic relief of osteoarthritis) received first European approval in the UK, whilst the FDA requested additional data. The timing for a pan-European launch has still to be decided, whilst a US launch cannot be expected before 2005.

7


Visudyne received a recommendation from the Medicare Coverage Advisory Committee in the US for reimbursement in the treatment of occult age-related macular degeneration.

Leponex (schizophrenia) was approved in Switzerland for long-term reduction of the risk of recurrent suicidal behavior in schizophrenia patients. This is the first time in Europe that any medication has been approved for use in specifically treating the risk of suicidal behavior.

Enablex has received an approvable letter from the FDA for the treatment of over-active bladder. The product's launch is expected in 2004.

Corporate

Corporate income/expense, net

Net corporate income totaled USD 44 million, USD 93 million less than in the first nine months of 2002 owing to increased investments in corporate research, the negative currency translation effects on non-US dollar costs, and lower pension income.

Financial income, net

Amid persistently challenging market conditions, lower interest rates and a lower level of net liquidity than in the prior year, net financial income declined 25% or USD 132 million in the first nine months—as expected, bringing the total to USD 395 million. The overall return on net liquidity amounted to 8%.

Result from associated companies

Novartis' stake in Chiron Corporation generated an income of USD 107 million, whereas the stake in Roche Holding AG yielded a nine-month pre-tax loss of USD 332 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, booked only in 2003. The remainder represents an estimate for the first nine months of the current year. In total, associated companies resulted in an overall expense of USD 212 million.

Strong balance sheet

In July 2002, Novartis started a third program to repurchase shares via a second trading line on the SWX Swiss Exchange. Since its initiation, 39.2 million shares have been repurchased in this program for a total of USD 1.57 billion. Of these, 16.51 million shares were repurchased in the first nine months of 2003 for an approximate total of USD 627 million. As of 30 September 2003, the Group held approximately 320.2 million shares in treasury.

Following changes in US GAAP and expected changes in IFRS (formerly IAS) accounting rules, Novartis decided in June 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 slightly from USD 28.3 billion at 31 December 2002 to USD 28.4 billion at 30 September 2003. The Group's first nine-month net income of USD 3.7 billion, translation gains of USD 1.3 billion and net proceeds from the disposal of treasury shares of USD 0.3 billion, offset payments for dividends (USD 1.7 billion) and equity instrument repayments (USD 3.5 billion). In the same period, total financial debts remained at the same level. The debt/equity ratio remained at the 31 December 2002 level of 0.20:1 on 30 September 2003.

Novartis thus maintained the strength of its balance sheet at 30 September 2003 and continues to be rated AAA by Standard & Poor's and Moody's.

8


Cash flow

The strong business expansion and good working capital management boosted cash flow from operating activities, which increased 50% to USD 4.8 billion.

Cash outflow for investing activities was USD 963 million. Capital expenditure increased 42% to USD 826 million and now represents 5% of sales, while USD 869 million was spent on the acquisition of subsidiaries, principally the 51% stake in Idenix acquired in the first half, and intangible and financial assets. This was offset by a significant inflow of USD 836 million from the sale of marketable securities and other assets.

Free cash flow was USD 2.2 billion, 65% up from the prior year level of USD 1.3 billion. The USD 1.6 billion increase in cash flow from operations more than offset the dividend increase of USD 357 million and additional fixed asset investments of USD 244 million.

Overall, liquidity (cash, cash equivalents and marketable securities including financial derivative assets) amounted to USD 11.9 billion at 30 September 2003. After deducting financial debt and derivative liabilities, net liquidity stood at USD 6.2 billion, USD 0.7 billion lower than at 31 December 2002, principally as a result of the redemption of the equity instruments.

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 "would have", "forecast", "Outlook", "expects", "projected", "expected" 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 2002, the Group's businesses achieved sales of USD 20.9 billion and a net income of USD 4.7 billion. The Group invested approximately USD 2.8 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

19 November 2003   R&D Day
22 January 2004   Full-year results
24 February 2004   Shareholders Annual General Meeting

9

Contacts

Media:   Investors:
+ 41 61 324 2200 (Mark Hill)   + 41 61 324 8433 (Karen Huebscher)
US: + 1 212 830 2457 (Sheldon Jones)   US: + 1 212 830 2433 (Kamran Tavangar)

10

Consolidated income statements (unaudited)

First nine months

 
   9M 2003
   9M 2002
   Change
 
   USD m
   USD m
   USD m
   %
Total sales   18 134   15 308   2 826   18
Cost of goods sold   -4 286   -3 734   -552   15
Gross profit   13 848   11 574   2 274   20
Marketing & Sales   -5 678   -4 980   -698   14
Research & Development   -2 664   -2 033   -631   31
General & Administration   -1 223   -823   -400   49
Operating income   4 283   3 738   545   15
Result from associated companies   -212   17   -229    
Financial income, net   395   527   -132   -25
Income before taxes and minority interests   4 466   4 282   184   4
Taxes   -760   -728   -32   4
Minority interests   -50   -16   -34   213
Net income   3 656   3 538   118   3

Third quarter

 
   Q3 2003
   Q3 2002
   Change
 
   USD m
   USD m
   USD m
   %
Total sales   6 210   5 373   837   16
Cost of goods sold   -1 500   -1 306   -194   15
Gross profit   4 710   4 067   643   16
Marketing & Sales   -1 850   -1 696   -154   9
Research & Development   -878   -730   -148   20
General & Administration   -513   -321   -192   60
Operating income   1 469   1 320   149   11
Result from associated companies   25   11   14   127
Financial income, net   96   112   -16   -14
Income before taxes and minority interests   1 590   1 443   147   10
Taxes   -271   -245   -26   11
Minority interests   -42   -10   -32   320
Net income   1 277   1 188   89   7

10

Condensed consolidated balance sheets (unaudited)

 
   30 Sept.
2003
   31 Dec.
2002
   Change
   30 Sept.
2002
 
   USD m
   USD m
   USD m
   USD m
Assets                
Total long-term assets   25 814   24 210   1 604   22 799
Current assets                
Inventories   3 231   2 963   268   2 771
Trade accounts receivable   4 253   3 697   556   3 633
Other current assets   1 180   1 613   -433   1 324
Cash, short-term deposits and marketable securities   11 851   12 542   -691   10 244
Total current assets   20 515   20 815   -300   17 972
Total assets   46 329   45 025   1 304   40 771

Equity and liabilities
 
 
 
 
 
 
 
 
Total equity   28 442   28 269   173   25 650
Long-term liabilities (including minority interests)                
Financial debts   3 042   2 729   313   1 572
Other long-term liabilities   6 500   5 755   745   5 337
Total long-term liabilities   9 542   8 484   1 058   6 909
Short-term liabilities                
Trade accounts payable   1 308   1 266   42   941
Financial debts and derivatives   2 582   2 841   -259   3 302
Other short-term liabilities   4 455   4 165   290   3 969
Total short-term liabilities   8 345   8 272   73   8 212
Total liabilities   17 887   16 756   1 131   15 121
Total equity and liabilities   46 329   45 025   1 304   40 771

Condensed consolidated changes in equity (unaudited)

First nine months

 
   9M 2003
USD m
   9M 2002
USD m
   Change
USD m
Consolidated equity at 1 January   28 269   25 161   3 108
Dividends   -1 724   -1 367   -357
Sale/purchase of treasury shares, net   269   -3 448   3 717
Translation effects   1 310   2 523   -1 213
Net income for first nine months   3 656   3 538   118
Redemption of equity instruments   -3 458       -3 458
Other equity movements   120   -757   877
Consolidated equity at 30 September   28 442   25 650   2 792

11

Third quarter

 
   Q3 2003
USD m
   Q3 2002
USD m
   Change
USD m
Consolidated equity at 1 July   26 419   27 790   -1 371
Sale/purchase of treasury shares, net   359   -3 090   3 449
Translation effects   449   18   431
Net income for July to September   1 277   1 188   89
Other equity movements   -62   -256   194
Consolidated equity at 30 September   28 442   25 650   2 792

Condensed consolidated cash flow statements (unaudited)

First nine months

 
   9M 2003
USD m
   9M 2002
USD m
   Change
USD m
Net income   3 656   3 538   118
Reversal of non-cash items            
  Taxes   760   728   32
  Depreciation, amortization and impairments   954   721   233
  Net financial income   -395   -527   132
  Other   35   -186   221
Net income adjusted for non-cash items   5 010   4 274   736
Interest and other financial receipts   470   307   163
Interest and other financial payments   -98   -114   16
Taxes paid   -690   -594   -96
Cash flow before working capital and provision changes   4 692   3 873   819
Restructuring payments and other cash payments out of provisions   -143   -126   -17
Change in net current assets and other operating cash flow items   218   -573   791
Cash flow from operating activities   4 767   3 174   1 593
Investments in tangible fixed assets   -826   -582   -244
Decrease/increase in marketable securities, intangible and financial assets   -137   -1 343   1 206
Cash flow used for investing activities   -963   -1 925   962
Cash flow used for financing activities   -5 176   -5 096   -80
Translation effect on cash and cash equivalents   258   471   -213
Change in cash and cash equivalents   -1 114   -3 376   2 262
Net cash and cash equivalents at 1 January   5 798   6 639   -841
Net cash and cash equivalents at 30 September   4 684   3 263   1 421

12

Third quarter

 
   Q3 2003
USD m
   Q3 2002
USD m
   Change
USD m
Net income   1 277   1 188   89
Reversal of non-cash items            
  Taxes   271   245   26
  Depreciation, amortization and impairments   361   242   119
  Net financial income   -96   -112   16
  Other   203   -49   252
Net income adjusted for non-cash items   2 016   1 514   502
Interest and other financial receipts   59   127   -68
Interest and other financial payments   -49   -57   8
Taxes paid   -156   -126   -30
Cash flow before working capital and provision changes   1 870   1 458   412
Restructuring payments and other cash payments out of provisions   -68   -49   -19
Change in net current assets and other operating cash flow items   76   -130   206
Cash flow from operating activities   1 878   1 279   599
Investments in tangible fixed assets   -311   -222   -89
Decrease/increase in marketable securities, intangible and financial assets   -614   1 555   -2 169
Cash flow used for investing activities   -925   1 333   -2 258
Cash flow used for financing activities   -879   -3 025   2 146
Translation effect on cash and cash equivalents   56   55   1
Change in cash and cash equivalents   130   -358   488
Net cash and cash equivalents at 1 July   4 554   3 621   933
Net cash and cash equivalents at 30 September   4 684   3 263   1 421

13

Sales by Business Unit (unaudited)

First nine months

 
    
    
   % change
 
   9M 2003
USD m
   9M 2002
USD m
   USD
   local
currencies
Pharmaceuticals   11 641   9 896   18   11
Sandoz (Generics)   2 138   1 280   67   54
OTC   1 273   1 108   15   6
Animal Health   502   470   7   1
Medical Nutrition   607   537   13   1
Infant & Baby   1 013   1 003   1   3
CIBA Vision   960   847   13   6
Consumer Health (ongoing)   6 493   5 245   24   16
Divested Health & Functional Food activities       167        
Consumer Health   6 493   5 412   20   12
Total   18 134   15 308   18   11

Third quarter

 
    
    
   % change
 
   Q3 2003
USD m
   Q3 2002
USD m
   USD
   local
currencies
Pharmaceuticals   4 041   3 451   17   12
Sandoz (Generics)   675   496   36   28
OTC   443   396   12   5
Animal Health   163   157   4   -1
Medical Nutrition   206   185   11   2
Infant & Baby   349   335   4   5
CIBA Vision   333   297   12   6
Consumer Health (ongoing)   2 169   1 866   16   10
Divested Health & Functional Food activities       56        
Consumer Health   2 169   1 922   13   7
Total   6 210   5 373   16   11

14

Operating income by Business Unit (unaudited)

First nine months

 
   9M 2003
   9M 2002
    
 
   USD m
   % of sales
   USD m
   % of sales
   Change
in %
Pharmaceuticals   3 249   27.9   2 850   28.8   14
Sandoz (Generics)   351   16.4   188   14.7   87
OTC   216   17.0   161   14.5   34
Animal Health   61   12.2   77   16.4   -21
Medical Nutrition   54   8.9   19   3.5   184
Infant & Baby   188   18.6   183   18.2   3
CIBA Vision   137   14.3   99   11.7   38
Divisional Management costs   -17                
Consumer Health (ongoing)   990   15.2   727   13.9   36
Divested Health & Functional Food activities           24        
Consumer Health   990   15.2   751   13.9   32
Corporate income/expense, net   44       137       -68
Total   4 283   23.6   3 738   24.4   15

Third quarter

 
   Q3 2003
   Q3 2002
    
 
   USD m
   % of sales
   USD m
   % of sales
   Change
in %
Pharmaceuticals   1 137   28.1   986   28.6   15
Sandoz (Generics)   94   13.9   75   15.1   25
OTC   82   18.5   84   21.2   -2
Animal Health   21   12.9   23   14.6   -9
Medical Nutrition   18   8.7   3   1.6   500
Infant & Baby   70   20.1   63   18.8   11
CIBA Vision   48   14.4   37   12.5   30
Divisional Management costs   -7                
Consumer Health (ongoing)   326   15.0   285   15.3   14
Divested Health & Functional Food activities           8        
Consumer Health   326   15.0   293   15.2   11
Corporate income/expense, net   6       41       -85
Total   1 469   23.7   1 320   24.6   11

15

Notes to the interim financial report for the first nine months ended 30 September 2003 (unaudited)

1.     Basis of preparation

This unaudited interim financial report has been prepared in accordance with the accounting policies set out in the 2002 Annual Report and International Accounting Standard 34 on Interim Financial Reporting.

The Novartis Group began presenting its results in US dollars with effect of 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 the fact that the majority of these entities' cash flows and transactions are 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' nine-month results.

Apart from these matters there were no significant changes in accounting policies or estimates. There have been no significant changes in any contingent liabilities from those disclosed in the 2002 Annual Report, other than those disclosed in the first-half 2003 interim report published on 21 July 2003.

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

The following significant transactions were made during the nine months to 30 September 2003 and in 2002:

2003

Pharmaceuticals

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 9 May, 51% of the capital stock of Idenix Pharmaceuticals Inc., Cambridge, Massachusetts 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 293 million has been recorded on this transaction.

Corporate

Following changes in US GAAP and expected changes in IFRS accounting rules, Novartis decided in June 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.

2002

Animal Health

In January, 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

16


minimum of USD 98 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.

Medical Nutrition

The sale of the Food & Beverage portion of the Health & Functional Food businesses to Associated British Foods for approximately USD 287 million was completed in November 2002. The divested businesses' sales were USD 209 million in 2002.

Sandoz

In November 2002, more than 99% of the shares of Lek, Slovenia's leading drug-maker, were acquired for approximately USD 0.9 billion. Only a provisional balance sheet has been included in the 31 December 2002 and 30 September 2003 consolidated financial statements. Lek sales and operating income have been consolidated from 1 January 2003.

Corporate

In the course of 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
9M 2003

USD
   Average rates
9M 2002

USD
   Period-end rates
30 Sept.
2003
USD
   Period-end rates
31 Dec.
2002
USD
   Period-end rates
30 Sept.
2002
USD
1 CHF   0.737   0.631   0.756   0.712   0.671
1 EUR   1.112   0.927   1.163   1.038   0.984
1 GBP   1.611   1.480   1.670   1.601   1.565
100 JPY   0.845   0.796   0.903   0.834   0.822

4.     Share information

 
   First
nine months
2003
   First
nine months
2002
Average number of shares outstanding (million)   2 474.8   2 528.0
Basic earnings per share (USD)   1.48   1.40
Diluted earnings per share (USD)   1.45   1.37

17


 
   Third quarter
2003
   Third quarter
2002
Average number of shares outstanding (million)   2 478.0   2 499.0
Basic earnings per share (USD)   0.52   0.48
Diluted earnings per share (USD)   0.51   0.47

 
   30 Sept.
2003
   30 Sept.
2002
Number of shares outstanding (million)   2 481.2   2 468.9
Registered share price (CHF)   51.10   58.25
ADS price (USD)   38.84   39.73
Market capitalization (USD billion)   96.4   98.1

5.     Condensed consolidated change in liquidity

First nine months

 
   9M 2003
USD m
   9M 2002
USD m
   Change
USD m
Change in cash and cash equivalents   -1 114   -3 376   2 262
Change in marketable securities, financial debt and financial derivatives  
369		  
720		  
-351
Change in net liquidity   -745   -2 656   1 911
Net liquidity at 1 January   6 972   8 026   -1 054
Net liquidity at 30 September   6 227   5 370   857

Third quarter

 
   Q3 2003
USD m
   Q3 2002
USD m
   Change
USD m
Change in cash and cash equivalents   130   -358   488
Change in marketable securities, financial debt and financial derivatives  
1 930		  
-2 087		  
4 017
Change in net liquidity   2 060   -2 445   4 505
Net liquidity at 1 July   4 167   7 815   -3 648
Net liquidity at 30 September   6 227   5 370   857

18

6.     Free cash flow

First nine months

 
   9M 2003
USD m
   9M 2002
USD m
   Change
USD m
Cash flow from operating activities   4 767   3 174   1 593
Purchase of tangible fixed assets   -826   -582   -244
Purchase of intangible and financial assets   -869   -659   -210
Sale of tangible, intangible and financial assets   836   758   78
Dividends   -1 724   -1 367   -357
Free cash flow (excl. acquisition of Roche shares)   2 184   1 324   860

Third quarter

 
   Q3 2003
USD m
   Q3 2002
USD m
   Change
USD m
Cash flow from operating activities   1 878   1 279   599
Purchase of tangible fixed assets   -311   -222   -89
Purchase of intangible and financial assets   -262   -305   43
Sale of tangible, intangible and financial assets   222   314   -92
Free cash flow (excl. acquisition of Roche shares)   1 527   1 066   461

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.

19


For further comments regarding the nature of these adjustments please consult Note 31 of the Novartis 2002 annual report.

 
   First nine months
2003
USD m
   First nine months
2002
USD m
Net income under IFRS   3 656   3 538
US GAAP adjustments:        
Purchase accounting: Ciba-Geigy   -252   -149
Purchase accounting: other acquisitions   -58   —
Purchase accounting: IAS goodwill amortization   128   96
Available-for-sale securities and financial instruments   -134   -367
Pension provisions   9   -1
Share-based compensation   -162   -108
Consolidation of share-based compensation foundations   -5   -16
Deferred taxes   -49   -91
In-process Research & Development   -296   -7
Other   -26   -54
Deferred tax effect on US GAAP adjustments   -96   -4
Net income under US GAAP   2 715   2 837
Basic earnings per share under US GAAP (USD)   1.14   1.17
Diluted earnings per share under US GAAP (USD)   1.12   1.14
 
   30 Sept. 2003
USD m
   30 Sept. 2002
USD m
Equity under IFRS   28 442   25 650
US GAAP adjustments:        
Purchase accounting: Ciba-Geigy   3 045   3 091
Purchase accounting: other acquisitions   2 945   3 195
Purchase accounting: IAS goodwill amortization   283   96
Pension provisions   1 148   960
Share-based compensation   -171   -126
Consolidation of share-based compensation foundations   -645   -431
Deferred taxes   -596   -508
In-process Research & Development   -1 334   -742
Other   -61   12
Deferred tax effect on US GAAP adjustments   -255   -399
Equity under US GAAP   32 801   30 798

20

Supplementary tables: First nine months 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   839   45   918   37   1 757   49   41
Gleevec/Glivec   Chronic myeloid leukemia   217   42   578   95   795   91   75
Neoral/Sandimmun   Transplantation   161   -25   583   -9   744   -5   -13
Lamisil (group)   Fungal infections   317   5   392   8   709   13   7
Zometa   Cancer complications   426   75   226   158   652   104   95
Lotrel   Hypertension   593   24   0       593   24   24
Lescol   Cholesterol reduction   214   14   308   22   522   28   19
Sandostatin (group)   Acromegaly   232   9   279   2   511   13   5
Voltaren (group)   Inflammation/pain   8   60   428   -6   436   -1   -5
Cibacen/Lotensin/Cibadrex   Hypertension   236   -7   92   -9   328   -5   -8
Top ten products total       3 243   23   3 804   21   7 047   29   22
Miacalcic   Osteoporosis   186   -5   109   -16   295   -5   -9
Trileptal   Epilepsy   218   55   66   30   284   51   48
Exelon   Alzheimer's disease   138   13   133   19   271   23   16
Tegretol (incl. CR/XR)   Epilepsy   84   -9   187   -2   271   0   -4
Visudyne   Macular degeneration   134   6   127   33   261   24   16
Leponex/Clozaril   Schizophrenia   64   -26   162   -1   226   -3   -10
Foradil   Asthma   7   -63   203   1   210   9   -5
HRT range   Hormone replacement   95   -17   80   -24   175   -15   -20
Famvir*   Viral infections   111   -5   62   15   173   5   1
Femara   Breast cancer   52   27   112   15   164   30   19
Top twenty products total       4 332   17   5 045   16   9 377   24   17
Rest of portfolio       541   -4   1 723   -11   2 264   -2   -9
Total       4 873   15   6 768   8   11 641   18   11

* 2002 restated because of transfers to other Business Units

21

Supplementary tables: Third 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   287   67   328   35   615   55   49
Gleevec/Glivec   Chronic myeloid leukemia   72   41   208   73   280   73   62
Neoral/Sandimmun   Transplantation   50   -22   197   -1   247   0   -7
Lamisil (group)   Fungal infections   130   -8   163   12   293   5   1
Zometa   Cancer complications   157   60   83   104   240   78   73
Lotrel   Hypertension   199   9   0       199   9   9
Lescol   Cholesterol reduction   83   12   101   22   184   23   17
Sandostatin (group)   Acromegaly   79   7   94   3   173   11   5
Voltaren (group)   Inflammation/pain   2   N.A.   146   -3   148   5   1
Cibacen/Lotensin/Cibadrex   Hypertension   75   -14   31   -4   106   -8   -10
Top ten products total       1 134   21   1 351   22   2 485   26   21
Miacalcic   Osteoporosis   65   -19   38   -12   103   -13   -17
Trileptal   Epilepsy   82   49   24   31   106   47   45
Exelon   Alzheimer's disease   46   12   47   23   93   21   17
Tegretol (incl. CR/XR)   Epilepsy   30   30   66   2   96   19   13
Visudyne   Macular degeneration   47   15   43   34   90   29   21
Leponex/Clozaril   Schizophrenia   23   -4   56   -2   79   4   -3
Foradil   Asthma   2   -71   66   7   68   6   -3
HRT range   Hormone replacement   39   22   25   -22   64   5   1
Famvir*   Viral infections   42   24   22   11   64   25   20
Femara   Breast cancer   20   67   36   5   56   33   25
Top twenty products total       1 530   19   1 774   18   3 304   23   18
Rest of portfolio       182   -10   555   -9   737   -4   -9
Total       1 712   15   2 329   11   4 041   17   12

* 2002 restated because of transfers to other Business Units

22

Sales by region (unaudited)

First nine months

 
    
    
   % change
    
    
 
   9M 2003
USD m
   9M 2002
USD m
   USD
   local
currencies
   9M 2003
% of total
   9M 2002
% of total
Pharmaceuticals                        
US   4 873   4 253   15   15   42   43
Rest of world   6 768   5 643   20   8   58   57
Total   11 641   9 896   18   11   100   100
Sandoz                        
US   826   476   74   72   39   37
Rest of world   1 312   804   63   43   61   63
Total   2 138   1 280   67   54   100   100
OTC                        
US   378   347   9   9   30   31
Rest of world   895   761   18   4   70   69
Total   1 273   1 108   15   6   100   100
Animal Health                        
US   179   176   2   2   36   37
Rest of world   323   294   10   1   64   63
Total   502   470   7   1   100   100
Medical Nutrition (incl. divested activities)                        
US   188   190   -1   -2   31   27
Rest of world   419   514   -18   -31   69   73
Total   607   704   -14   -23   100   100
Infant & Baby                        
US   816   785   4   4   81   78
Rest of world   197   218   -10   -3   19   22
Total   1 013   1 003   1   3   100   100
CIBA Vision                        
US   344   337   2   2   36   40
Rest of world   616   510   21   8   64   60
Total   960   847   13   6   100   100
Consumer Health                        
US   2 731   2 311   18   18   42   43
Rest of world   3 762   3 101   21   8   58   57
Total   6 493   5 412   20   12   100   100
Group                        
US   7 604   6 564   16   16   42   43
Rest of world   10 530   8 744   20   8   58   57
Total   18 134   15 308   18   11   100   100

23

Third quarter

 
    
    
   % change
    
    
 
   Q3 2003
USD m
   Q3 2002
USD m
   USD
   local
currencies
   Q3 2003
% of total
   Q3 2002
% of total
Pharmaceuticals                        
US   1 712   1 492   15   15   42   43
Rest of world   2 329   1 959   19   11   58   57
Total   4 041   3 451   17   12   100   100
Sandoz                        
US   221   212   4   3   33   43
Rest of world   454   284   60   46   67   57
Total   675   496   36   28   100   100
OTC                        
US   133   129   3   3   30   33
Rest of world   310   267   16   6   70   67
Total   443   396   12   5   100   100
Animal Health                        
US   68   67   1   1   42   43
Rest of world   95   90   6   -3   58   57
Total   163   157   4   -1   100   100
Medical Nutrition (incl. divested activities)                        
US   64   68   -6   -5   31   28
Rest of world   142   173   -18   -28   69   72
Total   206   241   -15   -21   100   100
Infant & Baby                        
US   281   268   5   5   81   80
Rest of world   68   67   1   4   19   20
Total   349   335   4   5   100   100
CIBA Vision                        
US   120   114   5   5   36   38
Rest of world   213   183   16   7   64   62
Total   333   297   12   6   100   100
Consumer Health                        
US   887   858   3   3   41   45
Rest of world   1 282   1 064   20   11   59   55
Total   2 169   1 922   13   7   100   100
Group                        
US   2 599   2 350   11   10   42   44
Rest of world   3 611   3 023   19   11   58   56
Total   6 210   5 373   16   11   100   100

24

Supplementary tables: Quarterly analysis

Key figures by quarter

Group

 
   Q3 2003
USD m
   Q2 2003
USD m
   Change
 
   USD m
   %
Total sales   6 210   6 203   7   0
Operating income   1 469   1 463   6   0
Financial income, net   96   119   -23   -19
Taxes   -271   -270   -1   0
Net income   1 277   1 316   -39   -3

Sales by region

 
   Q3 2003
USD m
   Q2 2003
USD m
   Change
 
   USD m
   %
US   2 599   2 524   75   3
Europe   2 157   2 253   -96   -4
Rest of world   1 454   1 426   28   2
Total   6 210   6 203   7   0

Sales by business units

 
   Q3 2003
USD m
   Q2 2003
USD m
   Change
 
   USD m
   %
Pharmaceuticals   4 041   3 991   50   1
Sandoz   675   702   -27   -4
OTC   443   429   14   3
Animal Health   163   182   -19   -10
Medical Nutrition   206   211   -5   -2
Infant & Baby   349   357   -8   -2
CIBA Vision   333   331   2   1
Consumer Health   2 169   2 212   -43   -2
Total   6 210   6 203   7   0

25

Operating income by business unit

 
   Q3 2003
USD m
   Q2 2003
USD m
   Change
 
   USD m
   %
Pharmaceuticals   1 137   1 012   125   12
Sandoz   94   145   -51   -35
OTC   82   82   0   0
Animal Health   21   17   4   24
Medical Nutrition   18   16   2   13
Infant & Baby   70   73   -3   -4
CIBA Vision   48   60   -12   -20
Divisional Management costs   -7   -6   -1   17
Consumer Health   326   387   -61   -16
Corporate income/expense, net   6   64   -58   -91
Total   1 469   1 463   6   0

26


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: October 21, 2003
 
By:
/s/  MALCOLM CHEETHAM      
    Name: Malcolm Cheetham
    Title: Head Group Financial Reporting and Accounting

27



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SIGNATURES