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 25, 2011

(Commission File No. 1-15024)

Novartis AG

(Name of Registrant)

Lichtstrasse 35

4056 Basel

Switzerland

(Address of Principal Executive Offices)

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

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):

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):

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.

- Investor Relations Release -

Novartis achieves strong third quarter financial performance and pipeline progress

·                  Novartis sales rose 12% and core operating income grew 15% in constant currencies in the third quarter, delivering operating leverage

·                  Net sales increased 18% (+12% in constant currencies, or cc) to USD 14.8 billion; nine months up 20% (+15% cc) to USD 43.8 billion

·                  Core operating income grew 11% (+15% cc) to USD 4.1 billion; core margin of 27.7% up 0.6 percentage points in cc; nine months core margin of 28.2% up 0.5 percentage points in cc

·                  Core EPS advanced 7% to USD 1.45 (+10% cc) from USD 1.36 in previous-year period

·                  Free cash flow grew 27% to USD 3.7 billion

·                  Industry-leading pipeline results in new approvals, further expanding our ability to meet patient needs and sustain growth long-term

·                  In the EU, Afinitor/Votubia was approved for two additional indications; positive CHMP opinion was granted for Rasitrio for high blood pressure

·                  Gilenya, our breakthrough multiple sclerosis treatment, won approval in Japan

·                  Pivotal Phase III study of Afinitor plus exemestane demonstrates that the treatment significantly lengthens the amount of time women with advanced breast cancer live without the disease progressing

·                  Novartis to take further action to improve productivity and to absorb pricing pressures

·                  Novartis is announcing today additional cost reduction activity, which will be executed over three to five years. Elements of the activity to include: reallocation of production within the Novartis network resulting in closure of two sites in Switzerland and one in Italy; restructuring the development organization largely in Switzerland and the US and relocating some research activities from Switzerland to the US

·                  In total, approximately 2,000 positions will be reduced in the Group, subject to required employee consultation, mostly in Switzerland and the US offset by 700 new positions in low cost and other countries.

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Key figures

(1) See page 45 for further information and definition of core results

All product names appearing in italics are trademarks owned by or licensed to Novartis Group Companies.

Basel, October 25, 2011 — Commenting on the results, Joseph Jimenez, CEO of Novartis, said:

“Once again, the breadth of our business and product portfolio allowed us to deliver strong financial results and operating leverage, as well as significantly advancing the pipeline in the quarter. To strengthen our future, we have accelerated actions to reduce our cost base over the next few years. These actions are necessary to ensure that we adapt our organization to continue delivering on our mission of bringing innovative new drugs to patients.”

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GROUP REVIEW

Third quarter

Strong net sales growth driven by recently launched products

Net sales rose 18% (+12% cc) to USD 14.8 billion in the third quarter. Sales were up mainly due to a strong performance from recently launched products, which contributed USD 3.6 billion or 25% to total net sales for the Group and grew 31% over the previous-year quarter. The weakness of the US dollar against most major currencies benefited sales by 6%.

Pharmaceuticals net sales grew 9% (+3% cc) to USD 8.2 billion, driven by 10 percentage points of volume growth, partly offset by a negative pricing impact of 1 percentage point and the effect of generic entries and product divestments of 6 percentage points. Recently launched products contributed USD 2.4 billion or 29% of Pharmaceuticals sales, an increase of 36% in constant currencies over the third quarter of 2010.

Alcon pro forma net sales rose 12% (+7% cc) to USD 2.5 billion, with particularly strong performance in non-US markets (+17%, +9% cc), and key contributions from the pharmaceutical and surgical product categories. Sales in the top six emerging markets, which include Brazil, China, India, Russia, South Korea and Turkey, increased by 29% (+24% cc).

Sandoz net sales grew 6% (+1% cc) to USD 2.3 billion, mainly driven by sales of recently launched products, good performances in North America, Western Europe and Latin America, and strong growth in biosimilars sales. This growth rate was suppressed by the enoxaparin launch in the year-ago base. Vaccines & Diagnostics sales rose 4% (-2% cc) to USD 655 million. Continued growth of the meningococcal disease franchise compensated for the weakness of the 2011 flu season to-date and the delay of some product shipments. Consumer Health — which comprises OTC and Animal Health — grew 8% (+3% cc) to USD 1.2 billion.

Operating income growing ahead of sales

Operating income was up 14% (+22% cc) to USD 3.0 billion. The weakness of the US dollar, combined with the strong Swiss franc, resulted in a negative currency impact of 8 percentage points. Exceptional items in operating income in the third quarter of 2011 include intangible asset impairment charges of USD 134 million (including USD 87 million in Pharmaceuticals for the discontinuation of the agomelatine development program), USD 69 million for the impairment of financial assets (including USD 52 million in Vaccines & Diagnostics), USD 80 million of Alcon integration costs, and USD 93 million of restructuring charges (mainly for the streamlining of our manufacturing network).

Core operating income, which excludes exceptional items and amortization of intangible assets, increased 11% (+15% cc) to USD 4.1 billion. Core operating income margin in constant currency increased by 0.6 percentage points; however, this was offset by currency impact of 2.3 percentage points, resulting in a net decrease of 1.7 percentage points to 27.7%.

Pharmaceuticals core operating income increased by 1% (+6% cc). Core operating income margin improved by 0.7 percentage points in constant currency due to continuing productivity efforts. Alcon pro forma core operating income increased by 20% (+13% cc) to USD 909 million. Productivity gains resulted in a core margin improvement of 2.1 percentage points in constant currencies.

Sandoz core operating income was down 12% (-10% cc), with core margin declining 2.6 percentage points in constant currencies, principally due to a very strong quarter last year that included the launch and initial supply chain filling of enoxaparin, as well as increased investments in the development of differentiated products (biosimilars and respiratory products).

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Vaccines & Diagnostics core operating income was USD 147 million compared to USD 126 million for the same period in 2010, with continued investment in the pipeline and expansion of the meningococcal disease franchise. Consumer Health was down by 21% (-16% cc), with core margin declining 4.6 percentage points in constant currencies, mainly due to a planned increase in Marketing & Sales expenses to better balance spending in the second half.

Substantial increase in net income and cash flow

Net income increased 7% (+15% cc) on strong operating income growth. Income from associated companies was lower, mainly due to the full consolidation of Alcon from August 25, 2010. The related exceptional revaluation gain of USD 204 million also contributed to the reduced income from associated companies. Additionally, higher net financial expenses due to financing costs related to the Alcon acquisition impacted net income. The tax rate improved to 14.4% from 17.0%. Core net income grew 12% (+16% cc).

EPS advanced 3% (+9% cc) at a lower rate than net income as a result of the increase in issued shares following the Alcon merger. Core EPS was up by 7% (+10% cc).

Free cash flow of USD 3.7 billion was 27% higher than in the third quarter last year.

Nine months

Double-digit net sales growth

Net sales rose 20% (+15% cc) to USD 43.8 billion, with a 5% benefit arising from the weakness of the US dollar against most major currencies. Recently launched products (excluding the A(H1N1) pandemic flu vaccine) grew 41% over the previous-year period, contributing USD 10.7 billion or 24% to total net sales for the Group.

Pharmaceuticals net sales grew 8% (+3% cc) to USD 24.2 billion, with 9 percentage points of volume growth partly offset by a negative pricing impact of 1 percentage point and the effect of generic entries and product divestments of 5 percentage points. Recently launched products contributed USD 6.7 billion or 28% of Pharmaceuticals sales, compared to 21% in the 2010 period.

Alcon pro forma net sales rose 11% (+7% cc) to USD 7.5 billion. The strong performance was driven by robust growth in global pharmaceutical products of 14% (+10% cc). The top six emerging markets also delivered a strong performance with 28% (+22% cc) growth over the previous-year period.

Sandoz net sales grew 16% (+12% cc) to USD 7.2 billion, driven by volume expansion due to new product launches, strong growth in US retail generics and biosimilars, Canada, Western Europe and emerging markets. Vaccines & Diagnostics sales were down 48% (-51% cc) to USD 1.3 billion, mainly due to USD 1.3 billion of A(H1N1) pandemic flu vaccine sales in 2010. The two Consumer Health businesses grew 11% (+6% cc) to USD 3.6 billion.

Operating leverage delivered

Operating income was up 7% (+11% cc) to USD 9.7 billion. The weakness of the US dollar, combined with the strong Swiss franc, resulted in a negative currency impact of 4 percentage points.

Exceptional items in operating income in the first nine months of 2011 include divestment gains of USD 382 million (including USD 324 million net from the sale of Elidel® in Pharmaceuticals and USD 44 million in Consumer Health). These positive items were offset by intangible asset impairment charges of USD 243 million (including USD 194 million in Pharmaceuticals), financial asset impairment charges of USD 167 million (including USD 133 million in Vaccines & Diagnostics), acquisition-related exceptional charges of USD 87 million (mainly from Alcon integration costs of USD 151 million offset by divestment gains of USD 81 million in Pharmaceuticals), and restructuring costs of USD 187 million (mainly for the streamlining of our manufacturing network).

Core operating income, which excludes exceptional items and amortization of intangible assets, increased 14% (+16% cc) to USD 12.4 billion. Core operating income margin in constant currency increased by 0.5 percentage points; however, this was offset by currency impact of 2.1 percentage points, resulting in a net decrease of 1.6 percentage points to 28.2%.

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Pharmaceuticals core operating income grew 5% (+7% cc) to USD 7.8 billion, with core operating income margin up 1.3 percentage points in constant currencies, mainly due to continuing productivity efforts, while making significant investments in new product launches. Alcon pro forma core operating income increased by 13% (+9% cc) to USD 2.7 billion. Core operating income margin in constant currencies increased by 0.9 percentage points.

Sandoz core operating income rose 14% (+17% cc), growing ahead of sales, with core margin in cc increasing by 1.0 percentage point as declining prices were more than offset by volume growth and productivity improvements. Vaccines & Diagnostics had a core operating income of USD 34 million, compared to USD 1.2 billion for the same period in 2010, largely due to income from A(H1N1) pandemic flu vaccine sales in the prior year. Consumer Health was up by 1% (+9% cc), impacted by higher sales force investments and the phasing of advertising and promotion expenses. Core operating income margin improved by 0.6 percentage points in constant currencies.

Net income and cash flow up

Net income increased 4% (+9% cc) to USD 8.0 billion, following lower income from associated companies and higher net financial expenses due to financing costs related to the Alcon acquisition, partially offset by an improved tax rate of 15.5%. Core net income grew 14% (+16% cc) to USD 10.5 billion.

EPS was flat (+5% cc), but lower than net income growth, mainly as a result of the increase in issued shares following the Alcon merger. Core EPS was up by 9% (+11% cc).

Free cash flow of USD 8.6 billion grew 5% against an exceptionally strong performance in the nine months period last year.

Delivering against strategic priorities of innovation, growth and productivity

The Novartis growth strategy is based on scientific excellence leveraged across high-growth sectors of the healthcare industry. Novartis maintains a leading position in pharmaceuticals, eye care, generics, vaccines and diagnostics, over-the-counter medicines and animal health, and continually launches innovative new offerings in each of these sectors. We believe the breadth of our medicines will allow us to capture the opportunities of the expanding global healthcare market, while protecting us from some of the macroeconomic trends that are negatively impacting our industry. In addition, we expect that the diversity of our business and product portfolio will help us maintain growth despite the loss of revenues due to patent expiration. Further, our incorporation of Alcon gives us an even larger footprint in the attractive, high-growth sector of eye care, the acceleration of which is driven by the aging global population and increasing demand in emerging markets.

In all its operations, Novartis remains focused on three key priorities:

·                  Innovation. Our commitment to R&D gives us the capability to develop new products that expand our portfolio of medicines and address the unmet needs of patients.

·                  Growth. We have positioned ourselves to capture significant marketplace opportunities by establishing our presence in high-growth segments of healthcare and in emerging markets.

·                  Productivity. We continually seek to operate as efficiently as possible to provide flexibility to invest for the future and increase returns to shareholders.

Innovation: Bringing new innovative medicines to patients

Novartis leads the industry in our clinical trial success rate in R&D. This track record of innovation excellence has resulted in a robust pipeline that we expect to support long-term growth. Just as importantly, Novartis continues its efforts to develop new, targeted therapies for patients with unmet needs.

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Three new approvals and a positive CHMP recommendation in Europe

In the third quarter, everolimus received two important approvals in the EU. First, everolimus was approved as Afinitor for the treatment of patients with advanced pancreatic neuroendocrine tumors (NET). Pancreatic NET is an aggressive cancer type for which there had been only limited treatment options. In addition, everolimus was approved as Votubia for the treatment of subependymal giant cell astrocytoma (SEGA) associated with tuberous sclerosis complex (TSC). Votubia is an oral medication that represents the first treatment alternative to brain surgery for patients with SEGA associated with TSC. In addition, the EMA’s Committee for Medicinal Products for Human Use (CHMP) gave a positive opinion for Rasitrio, the first Rasilez-based triple combination pill to treat high blood pressure in Europe. Up to 85% of those who suffer from high blood pressure require multiple medications as part of their treatment, highlighting the importance of an effective combination medicine such as Rasitrio.

In Alcon, Dailies Total 1, a daily disposable contact lens that uses silicone hydrogel technology, was also approved in the EU, with a fourth quarter launch target for select European markets.

Two new approvals in Japan

Gilenya (fingolimod), our breakthrough oral multiple sclerosis treatment, and Ilaris (canakinumab), for the treatment of cryopyrin-associated periodic syndrome (CAPS), both gained approval in Japan in the third quarter. Gilenya is the first oral therapy for multiple sclerosis patients approved in Japan, while Ilaris represents the first approved drug of any kind for CAPS patients. These approvals demonstrate our ongoing commitment to developing our product portfolio globally to better meet the needs of patients.

Positive results of ACZ885 Phase III study

There were several important results in Phase III studies presented in the third quarter. First, a study of ACZ885 (canakinumab) showed it provided significant relief for patients with systemic juvenile idiopathic arthritis (SJIA). This is a rare and serious childhood auto-inflammatory disease, and the positive results of this study represent another success in the ongoing attempts by Novartis to provide treatments for rare diseases. For the use of ACZ885 in the treatment of gouty arthritis patients, the FDA requested further clinical data and issued a Complete Response letter requesting more data to support approval. Novartis is currently working with the agency on next steps.

Afinitor Phase III data shows promise for several indications

Afinitor (everolimus) demonstrated strong Phase III data for several new treatment indications. When combined with the hormonal therapy exemestane, it was found to significantly lengthen the time without disease progression for women with advanced breast cancer. This result offers the promise of an important new treatment option for breast cancer patients. In a separate study, Afinitor also showed success in reducing the size of subependymal giant cell astrocytomas — non-cancerous tumors — in patients with tuberous sclerosis. Prior to the development of everolimus, brain surgery had been the only treatment option for TSC patients with growing SEGAs. Finally, Afinitor was also found to be effective in treating TSC patients with non-cancerous kidney tumors, which are present in up to 80% of this patient group.

Strong news flow at the European Respiratory Society Congress

Novartis made several major announcements at the annual European Respiratory Society Congress in Amsterdam, the Netherlands. These included reporting the results of a major Phase III study of QTI571 (imatinib), which found the treatment significantly increased the exercise capacity of patients with pulmonary arterial hypertension (PAH). PAH is a debilitating disease of the heart and lungs that affects more than a quarter million people around the world. In addition, Novartis announced the results of a Phase III study that showed NVA237 improved lung function and helped reduce the symptoms associated with chronic obstructive pulmonary disease (COPD). NVA237 has recently been submitted for approval in the EU under the brand name Seebri Breezhaler. Further, Novartis presented new data analyses that confirm the efficacy of Onbrez Breezhaler, currently approved in more than 70 countries, in the treatment of COPD. These results suggest that the Novartis portfolio is well positioned to continue to address the needs of COPD patients.

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Phase III study of rituximab underlines Sandoz continued leadership in biosimilars

As of October, Sandoz has initiated patient recruitment for a Phase III clinical study for its biosimilar monoclonal antibody rituximab (Rituxan®/MabThera®). This milestone study in patients suffering from first-line follicular lymphoma complements an ongoing Phase II study initiated in December 2010 in rheumatoid arthritis patients. Follicular lymphoma is one of the most common forms of non-Hodgkin’s lymphoma (NHL), a blood cancer that affects the lymphatic system, which helps the body filter out bacteria and fight disease. The most recent data indicate that more than 300,000 new cases of NHL develop around the world each year, and we look forward to bringing rituximab to market and driving patient access to this critical biologic medicine.

Growth: Meeting healthcare needs worldwide

Novartis achieved growth of net sales of 18% (+12% cc) in the third quarter, with the weakness of the US dollar against most major currencies benefiting sales by 6%. The breadth of our business portfolio allowed us to maintain strong sales momentum with net sales rising 20% (+15% cc) to USD 43.8 billion for the nine-month period. Our investments in R&D also continued to yield results, as recently launched products excluding A(H1N1) for the Group grew 31% over previous-year quarter and 41% over the nine-month period. We believe our ability to innovate through the delivery of new medicines will enable us to absorb the impact of patent loss.

Accelerated growth in emerging markets

Consistent with our long-term growth strategy, we continue to build our presence in fast-growing emerging markets, delivering new medicines and initiating collaborations with local governments and customers. Net sales in our top six emerging markets rose 23% (+19% cc) to USD 1.5 billion in the third quarter of 2011. These six markets represented 10% of total net sales in the quarter, and the same percentage of net sales in the nine-month period. We have had particular success in China, where the Group grew 42% (+35% cc) in the third quarter. In order to maintain this growth, we continue to develop our Pharmaceuticals portfolio in China, with key brands like Diovan performing strongly.

Solid performance across divisions

Pharmaceuticals net sales volume grew 10% in the third quarter. Performance was mainly driven by growth of recently launched products (USD 2.4 billion, +36%), now representing 29% of total sales for the quarter. Among our recently launched products, Gilenya had another quarter of strong growth (USD 153 million), with sales in the nine-month period reaching USD 291 million. Lucentis (USD 515 million, +19% cc) benefited from strong growth in the current indication of wet age-related macular degeneration and first expansion in the recently approved indications related to diabetic macular edema and retinal vein occlusion.

Oncology, the largest Pharmaceuticals franchise, continued to grow, underpinned by Glivec (USD 1.1 billion, +6% cc) and growth in Tasigna (USD 186 million, +63% cc) as a treatment alternative in CML. Afinitor (USD 118 million, +69% cc) continues to perform well, and we anticipate it will play an increasingly large role in Oncology sales as studies suggest the possibility of further expansion in indications.

Alcon, which operates in the highly attractive eye care segment, continued its strong 2011 performance in the third quarter, with pro forma net sales rising 12% (+7% cc). Sales in non-US markets rose 17% (+9% cc) to USD 1.5 billion with key contributions from the ophthalmic pharmaceutical and surgical product categories. Sales in the top six emerging markets increased 29% (+24% cc), led by China, South Korea and India. US sales increased 4%, led by the strong performance of the ophthalmic pharmaceutical franchise (mainly glaucoma, infection/inflammation, and dry eye products), offset by lower multi-purpose lens care solution sales.

In the third quarter, Sandoz net sales grew 6% (+1% cc) to USD 2.3 billion versus the prior year, with 5 percentage points of volume expansion and 2 percentage points from the addition of Falcon more than compensating for price erosion of 6 percentage points. The growth rate was suppressed by the enoxaparin launch in the year-ago period. Growth was driven by sales of recently launched products, including gemcitabine (generic Gemzar®), as well as the successful launch of docetaxel (Taxotere®) in the US, strong performances in Canada, France, Spain, Russia and Japan, and strong global biosimilars growth.

Vaccines & Diagnostics grew 4% (-2% cc). Lower flu sales compared to the exceptionally strong 2010 levels and the impact of the delay of some product shipments to key customers were partially offset by growth in the meningococcal disease franchise.

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Consumer Health, including our over-the-counter and animal health products, grew 8% (+3% cc). OTC’s continued strong performance in the third quarter was driven by double-digit growth in priority brands, partially offset by a weak summer season (primarily in Germany and Poland). Animal Health performed strongly outside the US, with growth outpacing the market.

Productivity: Increasing value and optimizing performance

In order to serve patients as effectively as possible, Novartis seeks to make continual improvements in productivity. While net sales grew 12% in constant currencies in the third quarter, core operating income was up 15% in constant currencies, delivering strong operating leverage primarily due to Pharmaceuticals and Alcon as a result of their continuing productivity efforts. This was partially offset by Sandoz and Consumer Health, which both had an exceptionally high previous-year base.

The core operating income margin in constant currencies improved by 0.6 percentage points in the quarter. Productivity savings for the quarter contributed 3.9 percentage points, underlining the progress the Group continues to make to drive productivity and improve operating performance; however, this was offset by 3.3 percentage points to compensate for price erosion and reinvest in R&D and Marketing & Sales. For the first nine months, core operating income margin increased by 0.5 percentage points in constant currencies. Productivity savings contributed 4.1% percentage points before reinvestments.

We made further progress in our efforts to optimize our manufacturing footprint, announcing the exit of our chemical operations site in Torre, Italy. Subject to required employee consultation, we also plan to close the OTC manufacturing site in Nyon, Switzerland and a chemical operations site in Basel, Switzerland and transfer this production to other Novartis locations in the network. With these steps we are reducing excess capacity and enabling the shift of strategic production to technology competence centers.

We recorded charges related to exits, impairment charges and inventory write-offs of USD 77 million in the third quarter, USD 176 million in the first nine months, and USD 239 million cumulatively since the program began in the fourth quarter of 2010.

Novartis has also accelerated the implementation of a series of actions to further streamline and simplify the organization. These include consolidation, planned reduction and outsourcing of select development functions largely across our US and Swiss operations, including technical research and development, data management, clinical trial monitoring, drug safety and epidemiology and drug regulatory affairs as well as the relocation of some research activities from Switzerland to the US.

Novartis is committed to maintaining its output from R&D at the high end of the industry. This requires us to find the appropriate balance between where talent and projects are located and our existing cost structures so that we can continue to grow our pipeline. The measures we are taking to streamline our organization and enhance productivity will further allow Novartis to reinvest resources into new scientific platforms for future growth.

Following required employee consultation, these changes, when completed, will result in reduced headcount of approximately 2,000 mostly in Switzerland and the US (offset by 700 new positions created in low cost and other countries) and annual savings of over USD 200 million. A restructuring charge of around USD 300 million will be taken in the fourth quarter of 2011 in respect of these initiatives.

Cash flow

The sustainability of our strategy lies with the generation of cash flow that provides the resources for reinvestment and returns to shareholders. Cash flow is driven by a continued focus on the cash conversion cycle and operational cash flow improvements. Free cash flow was USD 3.7 billion for the third quarter, an increase of 27% over the previous year. For the first nine months free cash flow was USD 8.6 billion, an increase of 5% over an exceptionally high base in the previous year.

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Capital structure and net debt

Strong cash flows and a sound capital structure have allowed Novartis to invest in the future of its business through R&D and acquisitions even in turbulent times while keeping its double-A rating as a reflection of financial strength. Retaining a good balance between attractive shareholder returns, investment in the business and a sound capital structure will remain a priority in the future.

Novartis has carried out the share repurchases committed to at the time of the Alcon merger announcement. These share purchases (including the purchase of Alcon shares and a repurchase of 39.4 million Novartis shares) aggregated approximately USD 5 billion. All of the Novartis shares were purchased on the second trading line during the first six months of 2011. No shares were acquired on the second trading line in the third quarter of 2011. In the third quarter, Novartis purchased 8.2 million of own shares on the first trading line for a total amount of USD 0.5 billion. These shares will be kept as treasury shares to cover future employee participation programs.

As of September 30, 2011, net debt stood at USD 18.3 billion, with USD 5.4 billion outstanding on the commercial paper programs. This represents a net increase of USD 3.4 billion since December 31, 2010, mainly as a result of the cash used for the dividend payment (USD 5.4 billion), Alcon-related share repurchases and contingent value amount (USD 5.3 billion), as well as own share purchases on the first trading line (USD 0.5 billion). The long-term credit rating for the company continues to be double-A (Moody’s Aa2; Standard & Poor’s AA-; Fitch AA).

2011 Group outlook

(Barring unforeseen events)

During the third quarter, Novartis once again achieved strong growth and expanded our product portfolio to address unmet patient needs. Our track record of successfully developing and launching new medicines shows that we have the capacity to offset revenue lost due to patent expiration through the revenue of new and recently launched products.

Group constant currency sales growth is expected to be in the low double-digits, based on the consolidation of Alcon for four months in 2010.

Pharmaceuticals is expected to deliver sales growth in the low- to mid-single digits, with volume growth more than offsetting the impact of generic competition and price pressures. In the fourth quarter, Diovan, as expected, will lose exclusivity in Europe. Alcon sales are expected to increase at a mid- to high-single digit rate on a pro forma basis. Sandoz is expected to deliver high-single digit sales growth, with the impact of the annualization of sales and increased competition for enoxaparin expected to dampen fourth quarter sales growth.

With the continuing drive to generate productivity improvements across the Group, we expect to improve constant currency core operating income margin while absorbing price cuts, generic competition and the loss of sales from the A(H1N1) pandemic flu vaccine, and while investing for the future.

During the third quarter, the US dollar weakened against most currencies and experienced significant volatility within the quarter. If end of September exchange rates prevail for the remainder of the year, we expect that the impact would be positive (+4%) on sales and negative (-6%) on operating income for the full year.

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HEALTHCARE BUSINESS REVIEW

Pharmaceuticals

Third quarter

Net sales

Net sales grew 9% (+3% cc) to USD 8.2 billion, driven by 10 percentage points of volume growth, partly offset by a negative pricing impact of 1 percentage point (mainly due to healthcare cost-containment measures) and a combined effect of generic entries and product divestments of an additional 6 percentage points. Products launched since 2007 generated USD 2.4 billion of net sales, growing 36% in constant currencies over the same period last year. These recently launched products — Lucentis, Exforge, Exelon Patch, Exjade, Reclast/Aclasta, Tekturna/Rasilez, Tasigna, Afinitor, Onbrez Breezhaler, Ilaris, Fanapt and Gilenya — now comprise 29% of division sales, compared to 22% in the same period last year.

Europe (USD 2.9 billion, +4% cc) maintained strong volume growth of 11 percentage points, more than offsetting a negative pricing impact of 4 percentage points and the effect of generic entries of 3 percentage points. Recently launched products continued to grow strongly, now contributing 36% of net sales in the region. US sales (USD 2.5 billion, -2% cc), while benefitting from strong launches for Tasigna and Gilenya, decreased versus the same period last year due to generic competition for Femara and high-dose Lotrel, as well as the Enablex® divestment. Latin America and Canada (USD 0.8 billion, +9% cc) achieved solid growth rates. Japan’s sales (USD 1.0 billion, +11% cc) improved versus the same period last year primarily due to new launches. The top six emerging markets (USD 0.8 billion, +7% cc) were led by particularly strong growth in China and India.

All strategic franchises contributed to the business expansion. Oncology (USD 2.6 billion, +1% cc), the largest franchise, was underpinned by the sustained growth of Gleevec/Glivec and Tasigna (USD 1.3 billion, +12% cc), as well as Sandostatin (USD 367 million, +11% cc) and the recently launched Afinitor, which added USD 118 million (+69% cc). Femara (USD 182 million, -51% cc) was negatively impacted by generics entry in the US and some European countries. The Cardiovascular and Metabolism franchise (USD 2.1 billion, +4% cc) maintained solid momentum supported by the continued strong uptake of Galvus (USD 181 million, +65% cc). The Neuroscience and Ophthalmics franchise (USD 1.2 billion, +28% cc) saw strong growth from Lucentis (USD 515 million, +19% cc) and the recently launched Gilenya (USD 153 million), which has shown strong sales following successful launches in both the US and Europe.

Operating income

Operating income increased 26% (+35% cc) to USD 2.2 billion, including restructuring charges of USD 92 million mainly related to the streamlining of our manufacturing network and impairment charges of USD 87 million for the discontinuation of the agomelatine development program (compared to impairment charges of USD 592 million in 2010).

Core operating income increased by 6% in constant currency to USD 2.5 billion. Core operating income margin in constant currency increased by 0.7 percentage points; however, this was offset by a currency impact of 3.1 percentage points, resulting in a net decrease of 2.4 percentage points to 30.8%. Gross margin declined by 1.2 percentage points before negative currency effects of 1.2 percentage points due to unfavorable product mix and increased royalties. R&D expenses reduced by 0.6 percentage points of net sales in constant currencies. Marketing & Sales and General & Administration expenses improved margin by 1.2 percentage points (cc), benefiting from continuing productivity efforts despite significant investments in new product launches. Other Income & Expense, net, improved margin slightly by 0.1 percentage points (cc).

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Nine months

Net sales

Net sales expanded 8% (+3% cc) to USD 24.2 billion driven by 9 percentage points of volume growth, partly offset by a negative pricing impact of 1 percentage point and the impact of generic entries and product divestments of an additional 5 percentage points. Recently launched products provided USD 6.7 billion of net sales, representing 28% of net sales compared to 21% in the 2010 period.

Europe remained the largest region (USD 8.8 billion, +3% cc) for Pharmaceuticals, particularly benefiting from recently launched products, which generated 34% of net sales. The US (USD 7.4 billion, -1% cc) contributed 31% of total sales for the division. Japan’s performance (USD 2.8 billion, 6% cc) improved versus prior year due to new launches. Latin America and Canada (USD 2.3 billion, +10% cc) maintained solid growth rates. The top six emerging markets (USD 2.4 billion, +6% cc) were led by double-digit growth from China and India.

Operating income

Operating income grew 19% (+23% cc) to USD 7.5 billion, including divestment income from Elidel® (USD 324 million) and ophthalmic pharmaceutical products related to the Alcon acquisition (USD 81 million), more than offsetting impairment charges of USD 194 million.

Core operating income grew 5% (+7% cc) to USD 7.8 billion. In constant currency, core operating income margin increased by 1.3 percentage points due to continuing productivity efforts; however, this was offset by a currency impact of 2.4 percentage points, resulting in a net decrease of 1.1 percentage points to 32.0%. The underlying gross margin decreased slightly by 0.1 percentage points (cc) mainly driven by increased royalties. Functional costs improved by 1.9 percentage points from continuing productivity efforts despite significant investments in new product launches. In Other Income & Expense, net, expenses increased by 0.5 percentage points (cc), mainly due to a fee associated with healthcare reform in the US.

Pharmaceuticals product review

All comments below focus on third quarter movements.

Cardiovascular and Metabolism

Our Hypertension franchise, consisting of the Valsartan Group (which includes the Diovan Group and Exforge) and Tekturna/Rasilez, maintained its strong position in the third quarter in line with expectations as our hypertension portfolio continued to shift from Diovan to Exforge and Tekturna/Rasilez. The Valsartan Group declined 2% (cc) on a global basis, but showed strong growth in Japan and emerging markets.

Diovan Group (USD 1.4 billion, -7% cc) worldwide sales declined due to the first quarter entry of generic valsartan in select markets. The Diovan Group maintained its position as the top-selling branded anti-hypertensive medication worldwide, with global market share of 13.5% of the hypertension market in YTD August 2011 versus 13.4% in YTD August 2010.

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Exforge Group (USD 317 million, +36% cc) showed strong worldwide growth fueled by continued prescription demand in the EU, US and other key regions, as well as ongoing Exforge HCT launches in Europe, Asia and Latin America. Exforge, a single-pill combination of Diovan and the calcium channel blocker amlodipine, has delivered excellent growth globally since its launch in 2007. Exforge launches are ongoing in China and Japan, two key markets with particularly high use of calcium channel blockers. Exforge HCT, the first modern triple hypertension medication that includes a diuretic in a single pill, is now available for patients in over 40 countries with additional launches expected over 2011 and 2012.

Tekturna/Rasilez (USD 159 million, +34% cc) maintained strong growth globally, including in the EU, US, Latin America and Japan. The Tekturna/Rasilez market share of the total anti-hypertensive market has increased 0.3 ppts to reach 1.1% (YTD August 2011). In the third quarter, the EMA’s Committee for Medicinal Products for Human Use granted a positive opinion for Rasitrio, the Rasilez-based triple combination medicine with amlodopine and hydrochlorothiazide.

Galvus Group (USD 181 million, +65% cc), which comprises oral treatments containing vildagliptin for type 2 diabetes, continued to deliver strong growth, driven partly by Japan, where the two-week prescription restriction was lifted. The single-pill combination Eucreas/Galvus (vildagliptin and metformin) contributed 65% of total sales, growing 48% over the third quarter of 2010. In many markets (where available), the Galvus Group grew faster than the market leader in the third quarter.

Oncology

Our Bcr-Abl franchise, consisting of Gleevec/Glivec and Tasigna, continued to grow strongly, reaching USD 1.3 billion (+12% cc) in the third quarter.

Gleevec/Glivec (USD 1.1 billion, +6% cc) continued to grow as a targeted therapy for Philadelphia chromosome-positive chronic myeloid leukemia (Ph+ CML), and as a treatment for metastatic, unresectable and adjuvant (post-surgery) gastrointestinal stromal tumors.

Tasigna (USD 186 million, +63% cc) has been growing rapidly as a next-generation targeted therapy for adult patients with Ph+ CML in chronic phase. We have achieved regulatory approvals for Tasigna in the first-line indication in 50 markets globally, including the US, EU, Japan and Switzerland, with additional submissions pending worldwide. Tasigna market share continues to rise in Ph+ CML in the second-line indication with approvals in over 90 countries.

Zometa (USD 370 million, -3% cc) is a leading treatment to reduce or delay skeletal-related events in patients with bone metastases from solid tumors and multiple myeloma. While sales in Europe grew, competition in the US caused a 3% decline in total in the third quarter.

Sandostatin (USD 367 million, +11% cc) continues to benefit from the increasing use of Sandostatin LAR in key markets for the treatment of symptoms associated with neuroendocrine tumors, as well as approvals in 19 countries for the delay of tumor progression in patients with midgut carcinoid tumors. Sandostatin LAR is also approved as treatment for patients with acromegaly.

Femara (USD 182 million, -51% cc), a treatment for early stage and advanced breast cancer in postmenopausal women, experienced a decline in sales due to multiple generic entries in the US, Europe and other key markets.

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Exjade (USD 210 million, +10% cc) reached double-digit growth in the third quarter. It is currently approved in 108 countries as the only once-daily oral therapy for transfusional iron overload.

Afinitor (USD 118 million, +69% cc), an oral inhibitor of the mTOR pathway, continued to achieve strong growth in key markets as the only approved treatment for patients with advanced renal cell carcinoma following VEGF-targeted therapy. Afinitor is also approved in the US and EU for the treatment of pancreatic neuroendocrine tumors. The active ingredient in Afinitor/Votubia, everolimus, is also approved in the US, EU, Switzerland and Canada for the treatment of subependymal giant cell astryocytomas associated with tuberous sclerosis. Everolimus is exclusively licensed to Abbott and sublicensed to Boston Scientific for use in drug-eluting stents.

Neuroscience and Ophthalmics

nm — not meaningful

Lucentis (USD 515 million, +19% cc) continued to show strong growth as the only approved medicine in more than 100 countries to significantly improve vision in patients with wet age-related macular degeneration, for which it is established as the standard of care. Lucentis is also approved for the treatment of visual impairment due to diabetic macular edema and macular edema secondary to retinal vein occlusion in more than 50 countries. Genentech/Roche holds the rights to Lucentis in the US.

Exelon/Exelon Patch (USD 281 million, +10% cc) combined sales were impacted by the entry of oral generic competition in the US despite continued conversion from oral to transdermal therapy. Exelon Patch, the transdermal form of the medicine, grew 17% and generated more than 75% of total Exelon sales in the third quarter. Exelon Patch is approved for the treatment of mild-to-moderate Alzheimer’s disease dementia in more than 80 countries, including more than 20 countries where it is also approved for Parkinson’s disease dementia.

Gilenya (USD 153 million) showed continued rapid growth as a once-daily, oral disease-modifying treatment for relapsing remitting and/or relapsing forms of multiple sclerosis (MS) in adult patients. With US sales driving overall growth, Gilenya is now approved in more than 50 countries with regulatory reviews pending in other countries around the world. Novartis received approval for Gilenya in the third quarter in Japan for prevention of relapse and delay of progression of physical disability in adults with MS. Gilenya is licensed from Mitsubishi Tanabe Pharma Corporation.

Extavia (USD 37 million, +34% cc), the Novartis-branded version of Betaferon®/Betaseron® (interferon beta-1b) for relapsing forms of multiple sclerosis, continued to grow in key markets. Extavia has been approved in over 35 countries since it received EU approval in 2008. Betaferon® and Betaseron® are registered trademarks of Bayer.

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Respiratory

nm — not meaningful

Onbrez Breezhaler (USD 25 million) continued to grow strongly across markets. The drug was first approved in the EU in November 2009 as a once-daily long-acting beta2-agonist for the maintenance bronchodilator treatment of airflow obstruction in adult patients with chronic obstructive pulmonary disease (COPD). Onbrez Breezhaler is now approved in more than 70 countries, including the US and Japan as of July 2011, with further approvals and launches anticipated in the fourth quarter of 2011. In Germany, the reimbursed price of Onbrez Breezhaler was reduced below that of generic LABAs from October 1, following a reference pricing review. Novartis will maintain current prices in Germany, as we remain convinced that once-daily Onbrez Breezhaler offers additional benefits over existing LABAs, as described in the EU-approved label. Consequently an additional co-payment for Onbrez Breezhaler will be required for many patients in Germany.

Xolair (USD 116 million, +17% cc), a biotechnology drug approved for severe persistent allergic asthma in Europe and for moderate-to-severe persistent allergic asthma in the US, continued to grow strongly in Europe, major Latin American markets and Japan. Xolair is approved in more than 85 countries and a Phase III trial to support registration in China is ongoing. Launches are continuing across Europe for Xolair Liquid, a new formulation in pre-filled syringes that enables easier administration over the original lyophilized formulation. Novartis co-promotes Xolair with Genentech/Roche in the US and shares a portion of the operating income.

Integrated Hospital Care

Zortress/Certican (USD 46 million, +22% cc) is indicated to prevent organ rejection in adult heart and kidney transplant recipients and is now available in more than 85 countries. It continues to generate solid growth, particularly in the US market, where it has been available since April 2010 for adult kidney transplantation under the trade name Zortress. It is exclusively licensed to Abbott and sublicensed to Boston Scientific for use in drug-eluting stents.

Ilaris (USD 13 million, +86% cc) is available in over 50 countries for the treatment of adults and children four years of age and older who suffer from cryopyrin-associated periodic syndrome (CAPS), a group of rare auto-inflammatory disorders. Ilaris was recently approved for the treatment of CAPS in Japan.

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Alcon

As the restated net sales figures only include CIBA Vision and Pharmaceuticals Division Ophthalmics activities through August 25, 2010, all of the following comments are based on pro forma figures.

Third quarter

Net sales

Pro forma net sales rose 12% (+7% cc) to USD 2.5 billion. This continued strong performance was seen across all key geographies and products.

Sales in non-US markets rose 17% (+9% cc) to USD 1.5 billion driven by the pharmaceutical and surgical product categories. Sales in the top six emerging markets increased 29% (+24% cc), led by China, South Korea and India. US sales increased 4%, led by the strong performance of the pharmaceuticals franchise (mainly glaucoma, infection/inflammation and dry eye products), offset by lower multi-purpose lens care solution sales.

Operating income

Pro forma operating income rose 24% (+6% cc) to USD 341 million. Third quarter operating income includes amortization of intangible assets (USD 484 million) and integration costs (USD 80 million).

Pro forma core operating income increased by 20% (+13% cc) to USD 909 million. Alcon delivered strong operating leverage through productivity gains and the realization of post-integration synergies (USD 21 million). Core operating income margin in constant currency increased by 2.1 percentage points, with a positive currency impact of 0.4 percentage points, resulting in a net increase of 2.5 percentage points to 36.5%. Gross margin was 74.6% of net sales and broadly in line with 2010. R&D expenses represented 8.5% of net sales, also in line with prior year. Marketing & Sales, which represented 24.8% of net sales, improved by 1.5 percentage points despite increased investments in key emerging markets. General & Administration expenses declined from 5.4% to 4.7% of net sales in the 2011 period, as a result of good cost management and merger-related cost synergies.

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Nine months

Net sales

Pro forma net sales rose 11% (+7% cc) to USD 7.5 billion, driven by strong global pharmaceutical product growth of 14% (+10% cc), as well as by the top six emerging markets at 28% (+22% cc).

Operating income

Pro forma operating income rose 29% (+20% cc) to USD 1.2 billion. Operating income for the first nine months was impacted by the inclusion of exceptional income from a legal settlement (USD 183 million), amortization of intangible assets (USD 1.5 billion), integration costs (USD 160 million) and the impact of streamlining our manufacturing network (USD 42 million).

Pro forma core operating income increased by 13% (+9% cc) to USD 2.7 billion. Core operating income margin in constant currency increased by 0.9 percentage points; however, this was offset by a negative currency impact of 0.3 percentage points, resulting in a net increase of 0.6 percentage points to 35.8%.

Alcon product review (pro forma)

All comments below focus on third quarter movements.

Surgical

In the third quarter, global surgical sales were USD 887 million, an increase of 16% (+11% cc) over the previous-year quarter. Emerging markets showed strong sales growth, while the US cataract procedural volume was lower than expected. The US also continued to be impacted by the expiration of the new technology reimbursement program for intraocular lenses. Global sales of advanced technology intraocular lenses rose 23% (+20% cc), mostly due to increased adoption by cataract surgeons of the AcrySof IQ Toric and AcrySof IQ ReSTOR+3.0 intraocular lenses. Sales of AcrySof IQ ReSTOR Toric intraocular lenses, which are currently only available outside the US, contributed to the more rapid growth of advanced technology lenses in international markets. The Constellation vitreoretinal surgical system contributed to robust sales growth within the Vitreoretinal product category. Strong growth in the Refractive segment was driven both by sales of equipment and increased market share in the US.

Ophthalmic Pharmaceuticals

Global sales of ophthalmic pharmaceutical products increased 13% (+9% cc) to USD 979 million. Glaucoma product sales rose 16% (+11% cc), with growth driven by combination products DuoTrav and Azarga, with a combined growth of 35% (+25% cc), as well as through the continued solid performance of Travatan and Travatan Z ophthalmic solutions. Infection/inflammation product sales advanced 15% (+12% cc), led by strong growth of Nevanac ophthalmic suspension, as well as the solid performance of Durezol ophthalmic suspension. Dry eye products Systane and the new Systane Balance were key contributors to growth in that product segment.

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Vision Care

Global sales of vision care products rose 5% (-1% cc) to USD 626 million. Contact lens growth was driven by the continued strong performance of Air Optix, which leads the marketplace in the multifocal segment and achieved 14% growth (cc) versus the third quarter of 2010, as well as strong Dailies growth in the US. Sales of contact lenses were impacted by the discontinuation of the Specialty contact lens business as well as slower market growth in European markets. Contact lens solutions sales were impacted by weakness in multi-purpose product sales, partially offset by strong double-digit growth of the Clear Care hydrogen peroxide solution.

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Sandoz