Novartis AG (NOVN) Earnings Call Transcript & Summary

[Interpreted] So good morning, ladies and gentlemen, shareholders. I'd like to welcome you most warmly to our 27th Ordinary General Assembly of Novartis AG. And after that long break enforced by COVID, I'm delighted to see so many shareholders here in the St. Jakobshalle in Basel again. I'd also like to welcome the members of the executive team who are here in the room as well as our new candidate for the Board of Directors, John Young; and the members of the Executive Committee who have joined us. Here in the room, we also have the representatives of KPMG, our auditors; our notary, Ms. Andrea Schmutz; and our independent proxy, Mr. Peter Andreas Zahn. I hereby appoint Frau Charlotte Pamer, as the minute taker. She's the Secretary of the Board of Directors. And as tellers, I appoint the following gentlemen: Thomas Aegerter from UBS in Basel; Stephanino Isele from the Zürcher Kantonalbank and Marco Superina from Credit Suisse in Zurich. This AGM was announced by publication in the Swiss commercial gazette, #27 dated 8th of February 2023, and we published the full agenda with all the items. The Annual General Assembly shall take its decisions unless otherwise provided for by the law by an absolute majority of the shareholder votes represented here. Ms. Pamer will, in a moment, announce the number of shareholders who are present and the number of shares that they together represent. Our resolutions will be taken electronically, and before the first vote, Ms. Pamer will explain how you should use your voting device. Shareholders who wish to take the floor today should please proceed to the speakers' registration desk, taking their voting papers with them if you haven't already registered yourself, that is, and your speaking time will be limited to 5 minutes. I'd also like to inform you that the Annual General Assembly is being recorded and webcast. I hereby note that the Annual General Assembly was called in due time and due form and is, therefore, authorized to take decisions on all items on the agenda. On behalf of Mr. Zahn, our independent proxy, I'd like to announce that, last Friday, he communicated to the Board of Directors aggregated information about the voting instructions that he had already been given. Now this brings us on then to agenda item 1, which concerns the approval of the operating and financial review of Novartis AG, the financial statements of Novartis AG and the group consolidated financial statement for the year 2022, the annual report and the auditor's reports were available for inspection at the company's headquarters and were also available on the Novartis website. We also published our report called Novartis in Society Integrated Report. KPMG has approved -- has audited the accounts of the Novartis Group and the financial report of the group and has nothing to add to its report. So allow me now and our CEO, Mr Narasimhan, to make a few comments about the past year and about our company. Shareholders, ladies and gentlemen. 2022 was an eventful and difficult year, but Novartis met its targets and set the course for the future. We started the extensive transformation of our operative and commercial activities in order to focus our company on the pharma business and to make it more efficient. The transformation of our business activities is set to support us in consolidating our market position in the relevant therapeutic areas while boosting the resilience of our organization. The spin-off of our generics division, Sandoz, is also part of these efforts. It is another important element of the focusing process we started in 2014, which I will discuss in more detail in connection with the strategy and future direction of Novartis. Novartis delivered a solid result in 2022 despite the difficult economic situation, which was marked by the aftermath of the pandemic, increasing geopolitical tensions as well as the energy crisis triggered by the war in Ukraine. The constant exchange rate -- at constant exchange rates, group sales rose by 4% to $51.63 billion. Although net income fell by 67% at constant exchange rates to $6.96 billion due to the onetime effect of the proceeds from the Roche share deal booked in 2021. But thanks to continued efficiency gains, the core net income rose by 3% to $13.35 billion at constant exchange rates. Our product portfolio has run a positive development. Sales of the heart medication Entresto and the psoraisis therapeutic Cosentyx continues to grow. The launch of Kesimpta for multiple sclerosis has taken up speed. The newly launched targeted radioligand therapy Pluvicto for prostate cancer and Scemblix for blood cancer are quickly becoming established in the market. With a view to the future of the company and in an effort to focus fully on our Pharmaceuticals business, we carried out a far-reaching group reorganization last year and launched the Transforming for Growth program. Key measures include the consolidation of our commercial business units, Oncology and Innovative Medicines, and the establishment of a separate commercial business unit in the U.S. With these measures, we expect to strengthen our market presence and gain further momentum, particularly in core markets such as the U.S., China, Japan and Germany. Furthermore, we have combined our manufacturing and service activities in the new Novartis Operations business unit. The aim is to simplify and digitize work processes throughout the group in order to make Novartis more efficient in the area of drug production and also with regard to all internal processes. The transformation is a painful step that comes with a cut of around 8,000 jobs, and we are aware of the scope of this decision. While we are committed to making this process as fair and smooth as possible for the associates affected, we do believe that it is necessary and will strengthen Novartis in the long term. In a market environment characterized by ever-fiercer competition and in an industry that is developing technologically at a rapid pace and requires extreme specialization, we can only be successful if we focus on our core competencies. Against this background, we are also considering divesting our generics business and listing Sandoz at the Swiss Stock Exchange as part of a spin-off. You will be able to vote on this proposal at an extraordinary general meeting to be held later this year. We will inform about the date in due course. In our view, this step is in the long-term interest of our shareholders and should help Novartis to further bundle is forces and expand its innovation capabilities. Sandoz should also benefit. The company has a strong generics and biosimilars portfolio. And as an independent group, it is likely to be in a better position to expand its leading global market position. This is also because the company will be able to prioritize the use of capital and labor for its own strategic needs. As with our former eye care division, Alcon, which has been able to increase its market value since 2019 as an independent company, we expect that Sandoz will also deliver growing shareholder returns in the long term. The continued focus on our core activities has had a positive impact. The gradual dissolution of the broadly diversified life sciences structure and the focus on highly innovative pharmaceutical activities has allowed Novartis to achieve good results and to continuously increase its margin in recent years. This is also thanks to efficiency programs that include the simplification and digitalization of our processes. Since we started our portfolio transformation, we have divested several noncore business units such as in consumer health, animal health and vaccines as well as the spin-off of Alcon. At the same time, we strengthened our Pharmaceuticals business through numerous acquisitions. We have moved into new therapeutic areas that we believe will generate long-term value and strengthen Novartis as a science-based pharmaceutical company. These include gene and cell therapy, nuclear medicine and our foray into RNA technologies. The positive results to date, both in terms of innovation and business development, encourage us to continue our focused strategy and drive it forward. This gives us the necessary freedom and flexibility, on the one hand, to focus management capacities on our core business and, on the other hand, to promote scientific innovation, which is central to us [indiscernible] ultimately to further strengthen our pipeline. By pooling our strengths and increasing our focus on innovation, we will also be able to further increase our productivity, aiming for a margin target of around 40% in the medium term. Last year, we also initiated measures to increase the productivity of our research and development efforts. In the future, we will concentrate on research and development of 5 future-oriented and high-growth therapeutic areas. These are cardiovascular disease, immunology, neuroscience, solid tumors and hematology. In each of these medical fields, we have drugs with high growth potential. These include the multiple sclerosis drug, Kesimpta; the cancer treatments, Pluvicto and Kisqali; and our novel cholesterol drug, Leqvio. To accelerate this transformation, we have established a new leadership team for our research and development organizations and have also introduced a new governance structure for research. This is to ensure that we are even more results-oriented in the early stage of research and that our choice of research projects is more closely aligned with our product portfolio. The main aim is to better integrate promising early-stage molecules into the development organization where they can be more rapidly incorporated into clinical trials. We firmly believe that prioritizing 5 therapeutic areas is the right approach. We have extensive expertise in various technology areas and employ world-leading specialists, and we have invested around $9 billion. In Basel, for example, we have recently opened a state-of-the-art laboratory for the development of new radioligand therapies. In addition, we have consolidated our traditional medicinal chemistry activities in a single newly designed building in Basel to enhance the quality of collaboration between the various research groups. Over the past 10 years, we have been able to obtain more than 40 approvals in the most important market, clearly establishing ourselves as a global -- as the global innovation leader in our industry. We want to continue to build on this. Ladies and gentlemen, in recent months, Novartis has developed itself with great intensity to further development of the group. Notwithstanding these challenging tasks, we continue to grow our operating business, and we're able to show that we have a higher level of resilience, which is so important in our time. This is an impressive achievement, and I would like to take this opportunity to express my sincere thanks and great respect to all our associates for this. Thank you. In the past year, we also worked to integrate our environmental, social and corporate governance activities even more closely into our day-to-day business. Among other things, we are intensifying our decades-long efforts to develop new therapies for neglected tropical diseases, which affect around 1.7 billion people worldwide every year. As part of the 2022 Kigali Declaration on Neglected Tropical Diseases, we have agreed to commit $250 million to research and development over the next 5 years. In addition to investing in research into diseases that are difficult to treat, such as the infectious disease leishmaniasis, we also intend to continue developing malaria therapies. We are working with our partner, Medicines for Malaria Venture to work against sickle cell disease in Africa. This is in collaboration with the American Society of Hematology. Ladies and gentlemen, despite the major internal and external challenges, we are still in a very good financial position. Our balance sheet is strong. And thanks to the strong cash flow, we are able to continue to make substantial investments and issue reliable dividends. I'm, therefore, pleased to announce at today's Annual General Meeting, another increase of dividend of 3.2% to CHF 3.2, which corresponds to a dividend yield of 3.8% as at the end of 2022. Let me now briefly turn to the situation in Switzerland. The major geopolitical upheavals in the past year, above all the war in Ukraine and the increasing tensions between China and the U.S., have not left Switzerland unscathed. Even though inflation and higher energy prices could be cushioned, the country is still in a difficult situation. The question about political neutrality is currently being widely discussed. The relationship with the European Union also remains unresolved. And with its withdrawal from the European Horizon research program, academic research in the country has been dealt a hard blow. We need to counteract this and ensure that the framework conditions remain stable and provide planning security. In an increasingly fragile world, Switzerland cannot afford to muddle through and leave things vague. Clear decisions are needed to help the economy and the population to move forward to look to the future with courage and confidence. This includes clarity on future corporate tax practices in Switzerland and the ability of the economy to continue to attract the necessary skilled workers to the country. Even though the situation is anything but rosy at the moment, I don't have any doubt that Switzerland will find solutions to return to its usual stability. Ladies and gentlemen, let me conclude by talking briefly about the Board of Directors. In recent years, we have worked continuously on improving our governance and further strengthen the Board. I'm, therefore, pleased to be able to announce that John Young, another proven executive, is going to be proposed for election to the Board of Directors. Mr. Young can look back on a long and successful career in the pharmaceutical industry. During his more than 30 years at Pfizer, he was able to gain extensive experience in the health care sector and in trade at an international level. Previously, Mr. Young was a member of the Pfizer Executive Committee for 10 years, most recently as Chief Business Officer and consultant to the CEO. In these roles, he made important contributions to the development and provision of the COVID-19 vaccine by Pfizer and BioNTech. I would also like to take this opportunity to talk -- to thank Mr. Andreas von Planta, who is retiring from the Board after more than 16 years. Mr. von Planta provided important impetus to Novartis over the years and helped leading the company also through difficult times. His achievements in the areas of risk management and governance, in particular, have been immense. Novartis has greatly benefited from a sense of duty and his personal devotion for the company. This is why we are very appreciative of the fact that Mr. von Planta will continue to contribute his knowledge and experience as a member of the Board of the independent Novartis Foundation. I will now pass over to our CEO, Vas Narasimhan. Thank you very much for your attention.

[Interpreted] Thanks a lot, Mr. Reinhardt. Ladies and gentlemen, a warm welcome, and thanks a lot attending today's event. Thank you again for joining us for our Annual General Meeting. We are a company that has always had the courage to transform itself to meet the needs of changing times. As we reimagine medicine today, we navigate a complex external ecosystem. The pandemic has continued to evolve. There is a war in Ukraine. Technology is progressing rapidly. There's hyperinflation and geopolitical instability. But through it all, we continue to transform to stay on the cutting edge of science and deliver for patients and society. I want to begin by reminding ourselves of the extraordinary journey Novartis has been on as an institution for 250 years. Right now, we are in a historic moment as we evolve into a pure-play medicines company. When we look back 10 to 15 years, this will be seen as a moment. Novartis took important steps to continue our long legacy of making contributions to the world. Decades ago, who would have imagined that a dye-making company would later make gene therapies? Who would have imagined that a chemicals company would transform into a small molecules company, a large molecules company and then a large health care conglomerate with over 8 divisions? Now keeping up with the unprecedented pace of biomedical innovation, we are entering our next phase as a fully focused medicines company. In the past few years, we've completed over $100 billion in transactions, including one of the largest European market spin-offs ever with Alcon to focus the company and bring in new technologies that put us at the leading edge of innovation. This sets Novartis up to be the largest pure-play medicines company in the world. As part of that journey last year, we announced the intended spin-off of Sandoz, which, as a stand-alone company, would have the long-term potential to be a leader in generics and biosimilars. Sandoz is the #1 generics company in Europe and leads in multiple other geographies and is a global leader in biosimilars. We believe 100% spin-off to our shareholders is the right thing to do and will give Sandoz increased flexibility to make the right investments to win in the long run in generics. We are now working on the details and logistics of the proposed spin-off, which is planned for later this year and will be voted on at an extraordinary general meeting in the coming months. This would enable Novartis to exclusively focus on our Innovative Medicines portfolio and have an improved financial profile and return on capital. We will focus all our time and energy on finding extraordinary medicines, leaving them in a world -- launching them in a world-class way and getting them to as many people as possible. I'm pleased with our solid 2022 performance. We delivered 4% sales growth, with 2022 sales coming in at $51 billion. We posted $17 billion in core profit, growing at 18%, beating external expectations. And we continue to grow our Innovative Medicines margin, proving that we are becoming more and more productive as an organization. Now we delivered that goal, that performance while embarking on one of the most ambitious transformations in recent memory. We made the decisions we need to make to simplify the company, and I believe this will put us on the right path going forward to achieve outstanding results. Along the way, we kept reimagining medicine for patients. The launch of Pluvicto, the first radioligand therapy is far exceeding our expectations. It could fundamentally change the care of prostate cancer and set us on a course to transform the treatment of solid tumors over time with radioligand therapies. We released very strong data for the first oral factor B inhibitor, iptacopan, in paroxysmal nocturnal hemoglobinuria, a rare disease. That's the first indication of many to come, where we have the opportunity to reset the standard of care on a range of rare diseases in hematology and kidney disease and expand to others over time. And not to be lost is our deep commitment to neglected tropical diseases. Once again, we've been able to discover a new anti-malarial that will now enter Phase III, building on the legacy of Coartem. Looking ahead, Novartis has a renewed strategy to drive growth and performance. Our strategy is to deliver high-value medicines that alleviate society's greatest disease burdens through technology leadership in R&D and novel access approaches. As we execute this strategy, we have clear focus areas that determine where we invest our time, energy and resources. I'd like to go through each. Starting with our focus areas, we now have an even more clarified view on our key therapeutic areas, as Herr Reinhardt mentioned: cardiovascular, immunology, neuroscience, solid tumors and hematology. We chose these based on where there is significant disease burden and where our commercial and pipeline assets and expertise may give us a leadership position. We will also focus on technology platforms where we have the depth and scale to discover, develop and commercialize breakthrough therapies. There are 2 established platforms, chemistry and biotherapeutics, plus 3 newer platforms that give us technology leadership in exRNA, radioligand therapy and gene and cell therapy. We continue our focus on priority geographies. Novartis is the #1 biopharma company in Europe. And we're one of the leaders in many of the emerging markets that we are in. When you look at the statistics, we likely reach more patients with our Innovative Medicines portfolio than any other company on the planet. At the same time, we expect 75% of our growth in the coming years to come from the United States, Germany, China and Japan. We will continue to focus on and invest in these priority markets while maintaining our leadership position in Europe and advancing access for patients in low- and middle-income countries. Moving to our priorities, you'll see we have 3: to accelerate growth, deliver returns and strengthen our foundations. First is accelerating growth by delivering high-value medicines, which includes the entire continuum of our medicines from R&D to launch. In the short term, our growth will come from effective life cycle management and launch excellence to maximize the value of our in-market assets. Each asset that you see on the slide here has multibillion-dollar potential. These medicines will contribute the vast majority of our growth in the next 5 years. We also have several exciting pipeline readouts on the horizon that could transform the care for patients. We have one of the best development organizations in the industry, delivering around 40 new drug approvals over the past 20 years, and they are focused on delivering these priorities. I also want to highlight that our commitment to R&D remains unwavering. We invest $9 billion to $10 billion every year. That is one of the highest levels of R&D investment across any industry. And we do it because we believe the heart of the company is our science and the discoveries we make in our laboratories. With our renewed strategy, we are focusing our R&D efforts even more on bringing forward high-value new molecular entities. Now turning to our priority to deliver returns by embedding operational excellence, our strong performance on this priority is a testament to the hard work of Novartis associates across the world, particularly in our operations and in our corporate centers. Our core margin in Innovative Medicines has gone up 5%, which is significant for a company of our size. And we're on track to exceed 40% as a new Novartis entity, which would put us in the top quartile of our peer set. Our third priority in strengthening our foundations is to scale our data science and technology across Novartis, while innovating for the future. Now building trust with society remains a key priority as well. Our biggest contributions to the world are the medicines we create, and we're proud to have reached around 290 million patients through our Innovative Medicines and global health portfolios. Sandoz reached more than 450 million patients. Whether it's through our leading pipeline or our efforts to improve diversity in clinical trials, we're doing the right things for society in the long run. Within that, we're making strong and measurable progress on our commitment to becoming carbon-neutral in our own operations by 2025 and net zero by 2040. We also want to have our water and waste by 2025. You'll see here the solid progress we're making across each of these areas. And finally, unleashing the power of our people remains a top priority. Based on decades of research into what motivates knowledge workers, we are confident our culture is the right one to fuel our long-term success as we keep building an inspired, curious and unbossed organization. In summary, we have clear priorities for 2023. We will advance our new strategy and embed it into our organization. We're working to deliver on the pipeline and drive R&D productivity. We're focused on maintaining the growth momentum of our in-market brands and ensuring successful launches of our new medicines, and we'll continue delivering operational excellence and strengthening our foundations. We do all of this because humanity is counting on us. Patients need new and better therapies and greater access to medicines. And we have the opportunity to continue making an extraordinary difference in the world and help realize a healthier future. I'll close here with our vision. Novartis continues our journey to become the most valued and trusted medicines company in the world. It will be a long journey, but Novartis has been at it for 250 years. And we're confident this next era will be another historic chapter for our company. Thank you very much.

[Interpreted] Thank you very much, Mr. Narasimhan. We now have the attendance figures for you.

[Interpreted] Yes, ladies and gentlemen, allow me to tell you the attendance figures at today's AGM on the 7th of March 2023. So present here today at the AGM are 1,507 shareholders as well as the independent proxy. Together, they represent 1,346,326,217 votes. And this equates to 56.01% of the 2,403,721,252 shares, which have been issued. The representation of these vote is as follows: the independent proxy represents 1,263,927,711 votes, and the shareholders present here in the room today together represent 82,398,506 votes.

[Interpreted] Thank you, Ms. Pamer. So I would like to open the discussion on the first agenda item. And we have received 7 requests for the floor. And therefore, we will start with the first speaker, who is Mr. Rudolf Rechsteiner. Please approach the speakers rostrum. I believe you've already registered.

[Interpreted] Thank you, Chairman. Ladies and gentlemen, members of the Board of Directors, shareholders, the Ethos Foundation represents many long-standing Swiss shareholders of Novartis today, including pension funds. And on behalf of those people, allow me to make the following comments. We are delighted after 3 years to be able to come and participate directly at this AGM. Ethos is in agreement with hybrid events so that people can also participate from overseas. Purely virtual events, however, don't allow for spontaneous and personal exchanges of views with the leadership team, and therefore, Ethos rejects the amendment to the Articles of Incorporation under item 6, which would allow the Board of Directors to organize fully virtual AGMs in the future without any particular reason. Ethos is of the view that this proposal takes away shareholders' choice and is, therefore, an unjustified restriction of their rights as shareholders. Ethos would prefer hybrid events to be organized. And this, of course, does not require any amendment to the Articles of Incorporation. The project to spin off Sandoz, the generics business is one that we take note of. We do have some questions about it, however. Security of supply of medicines is, in some areas, no longer secured these days, generic medicines for basic care, pediatric medicine, medicines for epilepsy, Parkinson's disease, high blood pressure and so on as well as important antibiotics are all in short supply. This crisis isn't just affecting hospitals but also the pharmacy on your nearest street corner. And of course, Sandoz is an important producer of generics. It's the largest in Europe, and it's the largest producer of antibiotics in the world. Although Sandoz is rather less profitable than the other divisions of Novartis, its margins are still very healthy compared to other sectors of the economy and, of course, the potential for generics increases every year as patent protection expires on proprietary medicines. Sandoz has an enormous amount of expertise. It can build up partnerships with governments in Switzerland and around Europe and would be able to close up many of these supply gaps that we're suffering at the moment. The COVID pandemic has shown us the dangers of our global logistics arrangements. We need to keep control of logistics chains and strengthen our European base. We ought to be able to produce more medicines for ourselves here in Europe, and this could best be achieved if Sandoz would remain independent when it's spun off from Novartis rather than coming under any kind of governmental control as we saw with Syngenta. The supply issues with medicines is something that we see as a business opportunity. There's an opportunity for European governments to support European production. Let me say something about sustainability as well. We see the efforts that Novartis is making to become more sustainable. We welcome those efforts, particularly your efforts to reduce CO2 emissions and to enhance access to medicines. The Board's efforts to improve ethics, though, has also borne fruit in the last few years. We welcome that as well. The environmental targets need to be shaped up a bit and made more concrete. They need to span the entire supply chain as well. You've talked about reducing carbon emissions by 49%. That's significant, but we would like to have a bit more explanation of the individual measures involved there. When it comes to digital responsibility, we welcome Novartis, its code on the use of artificial intelligence. Now I realize I'm running out of time, so I will conclude. Under agenda item 6.1, we are opposed to fully virtual AGMs, and under item 6.3, we would like to see the importance of the quorum remaining with the shareholders, and we suggest that you vote against the payments of bonuses if they're not properly justified. Thank you.

[Interpreted] Thank you very much, Mr. Rechsteiner, for your largely positive comments on our performance. You've made a few -- you've said you have a few concerns about various points. Let me say something about that. We'll come back to talk about the idea of hybrid meetings in the future. We see this as something that should be possible. Whether or not we will actually avail also of that possibility, we'll have to see, but we'll talk about that later on. Now as to Sandoz, you've very nicely sketched out the options available to Sandoz in the future. It is the leading -- the world's leading generics business. And it should be able to focus fully on its own role, its own job without having a big brother breathing down its neck all the time. This will enable it, we believe, to focus on what it really needs to do and improve its performance over the years. You've also mentioned the possibility of closing up these many gaps in the supply of medicines. These gaps are not new, of course. Now one issue, and I'm sure we may come back to this in our discussion, is antibiotics and why there's such a shortage of them. I can explain that later. We welcome your positive comments about our sustainability efforts. Of course, we can always provide more information, more details. When we publish, we don't want to overwhelm people with information, but certainly, further details can be provided as time goes on. But I appreciate the fact that you seem to approve of the decision that we're taking. We certainly do believe it's the right direction. So thank you very much for your comments there, Mr. Rechsteiner. Let's hear now from the second speaker, who is Rolf Kurath.

[Interpreted] Chairman, ladies and gentlemen. My name is Rolf Kurath. I come from the Zurich area, and I'm the President of Actares. Our foundation focuses on ethical investment and advises private individuals. I'm representing 1,100 members today with 60,000 votes. We're really pleased to be here at an AGM for the first time in 3 years, and we hope it won't be the last time that we get to come. Actares would like to congratulate the management on the robust results from the last year. We are pleased to see the progress that's being made with access to new products and with the flagship programs, and it's nice to hear that the CEO's variable pay is going to depend to the tune of 16% on the sustainability criteria and that he has exceeded his goals there. I must say, though, that the compensation of the leadership of the company is still too high, but that's a different matter that I don't want to go into right now. Novartis intends to increase its yields and to become the most trusted pharmaceutical company in the world. Now that means, of course, that share profits should continue to be delivered. Sandoz, as a basic provider, has a very nice margin of 20% and plays a central role here. Now I understand that we're not debating the spin-off of Sandoz here today, but nevertheless, I think 6 months after the announcement of the proposed spin-off, we ought to be able to hear the main details of actually how this rather risky amputation, if you like, is going to be carried out as painlessly as possible. We need some information about what options might be on the table and about the criteria that will be used to decide what to do. We need to know how you're going to ensure that Sandoz can continue to ensure the supply of life-saving medicines and that its production operations should remain in Europe. And thirdly, we need to know how you weight -- how much weight you attached to social responsibility when you're designing the spin-off, how will you deal with the transfer of assets and responsibilities. Now we can see a business logic behind this spin-off. We are assuming that Sandoz can be an interesting investment opportunity for investors who want to put their money into basic supplies of good and inexpensive products. If the conditions are right, then the demand for Sandoz shares should be high. However, if it's all just about profits, then Actares won't be able to be -- to approve the project. Now we think it's very important to be able to debate here eye to eye. And that is why we would be opposed to the authorization to allow fully virtual AGMs. Thank you very much for listening to me today. I'm really looking forward to hearing from the Board on how you intend to manage the risks associated with the spin-off of Sandoz. Thank you.

[Interpreted] Thank very much, Mr. Kurath. Well, in principle, you focused on the future of Sandoz. You had 3 questions or areas where you're concerned. And your first question was what options do we have on the table. Well, until we've made a decision, then all options remain on the table. As already announced, we will most likely call an extraordinary general assembly in the summer -- in the early summer, where we'll be able to explain the whole process in greater detail. Until then, all options remain open, and we will be looking at them all carefully. Now as to global supply, you've talked about security of supply, ensuring that we still make sure that these medicines can be supplied after the spin-off of Sandoz. Well, there is no reason to doubt that there'll be a problem with this that the spin-off won't be positive because Sandoz will be able to focus entirely on itself, on its core business once it's spun off, which, in my experience, is always an advantage and will enable Sandoz to close up these gaps, these -- to deal with these bottlenecks that we're suffering at the moment. Our biochemicals plant in Kundl is the biggest factory of its type in the Western world. That will remain the case. Sandoz will continue to invest. We will ensure that Sandoz has everything it needs, not just to be able to invest in its own business but also to continue growing in the generics business. Potential -- there's a potential for additional consolidation in the generics industry. And of course, since Sandoz is the biggest generics company in the world, it's certainly going to be fully involved there so we can really make sure that Sandoz is a strong company and that it can truly take advantage of all the opportunities that there are in the generics market. I think those were the 3 points that you raised. At least that's what I noted. I expect the other speakers will address this Sandoz issue as well. So I don't want to keep repeating myself, but we do think that this is the best solution, not just for Sandoz but also for Novartis as a whole. So let's hear from the next speaker, who is Mr. Beat Ringger.

[Interpreted] Chairman, ladies and gentlemen, I am here on behalf of a new group that formed at the beginning of the year here in Basel. It's called Pharma für Alle -- Pharma for All. Some of you may have seen our banner when -- as you came in. We are here because we want to make an offer to buy Sandoz from Novartis. My colleague, [ Nikola Goeppert ] will explain what we are planning to do with Sandoz in a moment, and I will tell you why we are making this offer. As you all know, we are facing a lot of problems with developing new antibiotics. And you all know how urgently they are needed. The new figures are frightening. Almost 5 million people died last year due to antibiotic resistance. These resistance are spreading more widely and are presenting a risk that is comparable to the COVID pandemic. Already half as many people have died from antibiotic resistance as they did during the COVID pandemic. We urgently have to address these issues with force, and we need a company that invests into new antibiotics. And you all know, Mr. Rechsteiner also mentioned this about the delivery bottlenecks for standard medications and generics. And we have a very similar problem here, which is that the large pharmaceutical country -- companies want to have 40% profit margin on a business where it's just about 10% or 15% are not attractive and are actually a burden to them. This means that a lot of the profits are not available for strengthening these areas that we need so urgently. So if the pharmaceutical industry wants to serve mankind with all of the things than mankind needs, that's a problem to withdraw from that. And the third major topics in terms of the medication crisis is that the prices are skyrocketing. There is a survey for Germany that has shown that the average price of new medication has risen from EUR 5,000 in 2018 to an average of EUR 40,000 within just 3 years, and that has effects also for rich countries such as Switzerland. More and more people are unable to afford or to get -- to have access to the medication that they need for survival. Kymriah, for example, in Switzerland, somebody died because the health insurance refused to pay for it until that person died. It was a smaller health insurance who were worrying about their financial basis. So we are facing severe problems. And we are -- we firmly believe that we have to face this with non-for-profit pharmaceutical supply. And that is why we're going to make that offer, with the objective of creating the backbone of a global strong, open and non-for-profit organization that supplies important pharmaceuticals. So this is not just a whim, and that is why I've brought along a book that contains all of the suggestions that we have made. And I would like to give that -- present that book to you, Mr. Reinhardt. I was told that for security reasons, I'm not allowed to give it to you directly, but I'm going to leave it here for you and hope you enjoy reading it. Thank you very much for your attention.

[Interpreted] Thank you, Mr. Ringger. If I understood you correctly, your colleague is going to talk about the same topic. Shall we have that straight away? And then I'll respond to both of you. Okay. In that case, [ Mr. Goeppert ].

[Interpreted] Ladies and gentlemen, management, members of the Board, I am pleased to explain to you what the organization Pharma für Alle wants to do with Sandoz. First of all, on the price, we offer the symbolic price of CHF 1 for Sandoz because we believe that it is urgently necessary for Novartis to return some of its wealth to the public. Over the last 23 years, Novartis has generated a net profit of USD 192 billion. And you can see it today, too. Shares are being bought back all the time in order to maintain the share price. And this shows that Novartis has plenty of money. But the population is no longer that enthralled with the pharmaceutical industry. In surveys, the industry often is in last place. In 2017 in Switzerland and in 2019 in the U.S., this was once again confirmed. It is high time to return something to the public. For example, in the form of Sandoz as the backbone of a secure and non-for-profit medical supply. What will Pharma für Alle do with Sandoz? Well, Pharma für Alle wants to make Sandoz public -- put it into public ownership. And it also wants to research and develop new antibiotics and other medication in cooperation with organizations, both in Switzerland and in other countries and with all pharmaceutical companies who are open, transparent and patient-oriented. The new Sandoz is to have a policy of maximum exchange of knowledge and findings with public data and also go strive for open patterns. It also wants to introduce extended codetermination rights. We would like to put it to you, ladies and gentlemen, to accept this offer. We would like to put it to you and urge all of you to support this, help us to face the drug's crisis and to help make -- help Novartis make a surprising step towards improving its image. More information on the Pharma für Alle and our offer is available from our website, www.pharmafueralle.ch. Thank you very much for your support and your attention.

[Interpreted] [ Mr. Goeppert ], thank you very much for your explanations. Sorry, maybe something first that we should take seriously, and that's antibiotics. And you're absolutely right. There has been a shortage of various antibiotics for various reasons, one of them being that the last few years of COVID have led to the antibiotic use going down. There have been few bacterial diseases, and the antibiotic production around the world was reduced. Stocks were used up. And it was expected to be more -- it is expected to be more needed again this year but not as much as that actually was. So the global demand for antibiotics for diseases, maybe some of you have had experience with it, too. And this year is bad. And that has led to the bottleneck in terms of antibiotics such as amoxicillin, for example, that we won't see next year. You mentioned that Sandoz is the largest manufacturer of antibiotics in the western world. That's correct, not of the whole world but of the Western world, and the only large manufacturer of antibiotics. And that is why the activities of Sandoz are very important, and they will have to continue to invest, whether they're part of Novartis or whether they're independent. And you mentioned antibiotics research. Of course, that's a different topic that the industry has been discussing for many years. We recently got together with other drug manufacturers to form an alliance to dedicate funds to antibiotics research. Maybe Mr. Narasimhan can explain what we do there.

I want to echo Mr. Reinhardt's comments about how serious the antibiotic shortage is and how committed Sandoz is. And of course, we as Novartis, are to ensuring that we maintain a steady supply of antibiotics. The challenge of discovering new antibiotics is a significant one. And this is something the industry overall is trying to find ways to accelerate the research for novel antibiotics. Through a consortia of over 10 pharmaceutical companies, we have joined together to raise over $500 million fund to invest from a venture capital standpoint on promising startups that are working on the next wave of potential antibiotics. Over time, we hope that we can discover the next generation of antibiotics to tackle antibiotic resistance and, ultimately, produce those at scale, either within a Sandoz or within one of the other partner companies. I think that's just one example of many where the industry is trying to take on this challenge. But it is one that will take time because the science has to advance in order to find the next wave of these antibiotics. Thank you.

[Interpreted] Thank you, Mr. Narasimhan. And that means that Novartis will continue to invest in antibiotics research. It will be outside of Sandoz, and this is a commitment for the next few years. Sandoz has its own activities in this area, not quite as extensive as ours, but Sandoz will also continue to develop in antibiotics development. So the question remains about your offer. As I said earlier, as long as the shareholders meeting has not taken a decision, everything is open. We are open to. So please do make us a written proposal. We will certainly review it and make a decision to the benefit of our shareholders, and then we'll get back to you. We'll see how it goes. Thank you very much. And that takes me to the next speaker, Mr. [ Reinhard Meier ].

[Interpreted] [ Dr. Reinhard ], ladies and gentlemen. Let's move on to a different topic. I was impressed with your insistence on the change of research activities. Of course, the investments in research and development are the most high-risk part of pharmaceutical operations. I was impressed with the figures. Novartis invests twice as much as the entire university research in Switzerland does. And that's the basis for my question. The Swiss university system is chaotic. It's badly managed. But it reasonably fulfills its task, which is to perform high-level research, good training and bring out start-ups. Novartis had to pay out a lot of money for this change in research, and the new drugs were mostly bought by acquisitions of companies. And my question to you is this: how are you going to go on in the future? So how do you expect research to become stronger since you pay twice as much as universities do? And how you can consolidate this and coordinate this and make this risk smaller in the interest of the population, in the interest of developing new medications and in the interest of the shareholders? Thank you very much.

[Interpreted] Thank you very much, [ Mr. Meier ] for this question. You mentioned yourself that we talked about research and development. It's a clear signal that we are not 100% satisfied with our own performance in this area. Then again, pharmaceutical business is always -- works on the principle that only part of the research results actually become licensed. And we have seen some opportunities that we could not miss so that we acquire companies. But that does not mean that we don't see the need to be productive in our own research and development. So our 2 largest products, Entresto and Cosentyx, both of those products are our largest sellers, and they come from our own research pipeline. You said that most of the new molecular entities in the industry have been brought to the market by us. We have the largest amount of new substances in the industry. That's a mixture of internal and external ones. That's correct. But in terms of output, we are certainly doing well. But we want to get even better. We mentioned that decision-making paths are going to be changed, that we have a new team. And all in all, we expect that the productivity of our own research is going to increase in the next few years so that we can get a balance -- or tip the balance a little bit towards our own products. This is important, of course, and Novartis is a research and development-focused company. We have to have first-class research and development, and we're going to do everything we can to get there. And that takes us to the next speaker, Mr. [ Charles Falk ].

Good morning, and thank you for the opportunity to ask the question. My name is [ Arnold Falk ]. And I live in Stans, in Nidwalden, [indiscernible]. My question is simple. But the answer most certainly cannot be, and I respect that. The question is, why is -- well, first of all, I want to say I want to refer all of you to 2 recent and widely read books. China Rx by Mary Gibson that was published in 2018 and Bottle of Lies written by Katherine Eban in 2019. Both of these books are widely read and respected because the authors are professional journalists in this area. The question is, why is such a high percentage of our medications from Novartis and others fabricated in India and China? Why aren't most made in Europe? Not all, but why aren't most? That's my question.

Thank you very much, [ Mr. Falk ]. You are indeed right. I mean it's an easy question. The answer is not so easy. The fact is that most of the generic substances are today manufactured in Asia and in India. When you look at innovative products, that's not the case. So when I look at the portfolio of Novartis with Novartis on the one hand and Sandoz on the other hand, then it's correct that Sandoz has many manufacturing companies and suppliers that are in Asia. So Novartis does not. Novartis produces most of its products in Europe or in the U.S. And you may not be surprised to hear it has something to do with pricing. The trend that existed -- or started, let's say, 20 years ago to rely more and more on Chinese and Indian facilities had to do with the price level, especially for generics in most Western countries coming down and down and down to an extent where companies felt that they need to find cheaper sources of ingredients for generic products. And once you started the production in China or in India, it's not so trivial to go back again because you need new registrations, et cetera. And you would have to build new plants. Somebody has to pay for that. A plant costs easily a few hundred million dollars. So I mean, for generic products, where some of them really had barely covered the cost of goods in some markets in the meantime in the Western world, for them to expect the significant amount of production capacity will move back to Europe is probably not realistic. As long as prices for generics are at the current level, I believe, I'm afraid that the situation of significant sources still being in Asia will continue. For innovative products, it's a totally different story. For innovative products, production sites, like for our radioligand therapies or Kymriah was mentioned before, production sites are here in Europe or in the U.S. because you need highly skilled labor, you need really high quality of employees and associates, et cetera, high-quality facilities. And many of them or most of them are actually built in Europe and in the U.S. So we have a balance between generics and nongenerics. And I'm afraid that may continue for a while. [Interpreted] This takes us to the last speaker on the list who requested the floor, [indiscernible].

[Interpreted] Ladies and gentlemen, shareholders, members of the Board. I address all of you, the independent proxy, the tellers and you, Chairman, good morning from my side, and I wish you good health. It's 3 years since we've seen each other. And a lot of us have suffered in that time. And I do hope, however, that we haven't changed even though some may have departed, and we must think of them. Allow me to begin my words by saying the following. The Chairperson -- or the Chairman said something about the neutrality of our country, and I must say something about that, too. That is the reason for our prosperity in the recent -- or in the past few decades. It is what allows us today at global level to walk around the world to go into whatever country we want without having to look over our shoulders. It's incredibly important. I'm sure you've noticed that yourself when you've been traveling. So Chairman, this neutrality is vital. And it's also the reason why Novartis is able to move around all over the world. And if you don't respect this neutrality, you have to be careful. You will find your markets being closed -- the doors being closed in your face. That was just an aside I wanted to touch on. Let me come to my main points. As I say, it's been 3 years since we last saw each other. And in that time, what's happened? What's been going on? Lots of things have happened. And Chairman, you didn't, for example, mention one particular event that took place in the United States. I want to take you back 3 years. Many of you will remember, I'm sure, that we talked about an enormous corruption scandal, which Novartis was involved in. And back then -- 2 years in a row, actually, the response we got from the Board was that in Greece, for example, and in other countries as well. What was going on? Just involve local politicians. And we accepted what you said. Nevertheless, since June 2020, Strauss, the U.S. prosecutor decided otherwise. She handed down a fine to Novartis, declaring Novartis guilty then. $730 million you had to pay up. And not just that, but the legal fees and goodness knows what else as well as all that damaging publicity, it cost you an awful lot of money, $800 million, perhaps even $1 billion. So it's a major issue. And Mr. Reinhardt just comes along and casually tells us as well that 8,000 people are going to lose their jobs, casually tells us. With all that money you had to pay out in fines, you could have paid those poor 8,000 people for years on end. I'm sure none of you sitting here like to earn money because of the suffering of others. None of you want to worry about a few cents on your dividend if you know that 8,000 people find themselves unemployed. So I think we ought to take account of that when we're making our decisions. Now I know this is difficult, but Mr. Reinhardt, you mentioned war and conflict as well. Yes, indeed, there are conflicts going on around the world, disagreements and conflict in our own country as well in society in the world of business. And here's my question to you, Chairman. And it's not just to you, Chairman. It's to the independent proxies as well. In the Board of Directors at Novartis, is there anybody who sits on other boards of directors? I don't know, but I dare say you do. I mean there's lots of companies you could be involved with. What would be those people's positions if there were a conflict of interest between those other companies and this company, Novartis? I'd like you to think about this. I mean there's lots more I could say, but it's been mentioned by other people. We don't want virtual AGMs. I do hope you'll take account of that feeling. And I hope you'll take account of what I've said as well when you come to the votes. There's 2 -- only 2 buttons on that voting device. So make sure you press the right one.

[Interpreted] Well, thank you, Mr. [indiscernible]. And thank you very much for your words. My summary of what you've said brings me to one of the specific questions you asked. Perhaps we won't go into the details of what you said about Swiss neutrality and so on. But you asked what's the situation with our -- with members of our Board who sit on the boards of other companies and on the potential conflicts of interest. And of course, this is something that we are very careful about. We want to avoid such potential conflicts of interest. We agree with our directors that they are allowed to sit on other boards, but they need to be able to show that those companies have no demonstrable conflict of interest with Novartis. They need to be in a different area of business. I mean I sit on the Board of Swiss Re. That's a different field of business. And I don't think it could be seen as a conflict of interest or likely to lead to such a conflict. But I do share a lot of what you've said actually. The economic reality, however, does sometimes force us to take measures, which, as we've already explained, we don't take lightheartedly. We've talked about the transformation project that we launched a while back. I do think that most of the employees whose jobs are being cut, will indeed be able to find positions with other companies and won't end up unemployed as you suggest. Otherwise, I don't think I have any further comments to make on what you have said. We do have one further request for the floor under this agenda item. The next person on the list is [ Herald Groeb ].

[Interpreted] Chairman, ladies and gentlemen, I'm going to speak in Swiss German since we're here at the AGM. But I want to be careful about it. I think it's important that you understand what I have to say. Thank you very much that you still sent me that lovely Novartis calendar every year. I really enjoy turning over the pages every month, and seeing all those bits of good work that you do is lovely as well to be welcomed, so warmly here to this building with the coffee and croissants. Maybe you could set up a few more coffee machines next time because you know we stood in that queue for a really long time and had to wait ages for that precious cup of coffee. I mean there's lots of people here. They look around. A lot of us have gray hair or white here. It would be great if we could sit down while drinking that coffee instead of having to stand around. People have a bit of trouble when they just have to squat on the window sill because there's nowhere else to sit down. And I've got a couple of other things I want to talk about as well. The spin-off of Sandoz is something that I think is all right. And whether that involves transfers of shares or whether you end up selling it for CHF 1 or if you're giving it away for nothing. What's important is that all those Sandoz products remain on the specialty list. I mean we want these products to remain on the list. I don't like it when I go to the pharmacy. I often have a prescription from the doctor, and I asked them to look for the generic version of the medicine. And yet it's not always available. It's not on the right list. I sometimes have to then pay for it myself because my health insurance won't cover it. You took a decision at Novartis a while ago not to produce vaccines. But there's a huge demand for vaccines. And I do think you ought to think carefully about your decision. Might that not be a strong area that you could get involved in? I think are the comments I wanted to make today. Thank you very much for listening.

[Interpreted] Thank you very much, [ Mr. Groeb ]. Yes. So we'll see what we can do about the coffee machines, so sorry about that. We're a bit out of practice, I guess, after the last couple of years. We will make sure there's more coffee on offer next year. You raised the matter of vaccines. Yes, we did decide to exit the vaccines business some years ago. We still believe that was the correct decision. But of course, that doesn't mean that we might not decide to get involved in vaccines or vaccine-similar applications in the future, for example, for oncology applications. And we would be able to make a good contribution to that field. Specialist vaccines, they're not exactly vaccines, but let's call them vaccines. I think we would be able to get involved there in the oncology side of things. But we'll have to see. We'll have to see how the situation develops there. Now what about Sandoz and the specialties list, I'm afraid I can't answer that question precisely. We will have a look to find out why it is that some of these products are not on that list for reimbursement by health insurance companies. So thank you very much, [ Mr. Groeb ] for your points and questions. So I don't see anybody else wanting to take the floor on this agenda item. No, apparently, there's nobody else, which means that we could ask Frau Pamer, please, to explain to us how we should use our voting devices.

[Interpreted] Yes, thank you, shareholders. Let me explain the televoter do you. Here, it is on the screen. It has a touch screen. And prior to each vote, you'll see the item that you're being called upon to vote on. And there are 3 buttons at the bottom: green for yes, red for no and yellow to abstain. Once you have selected the correct button, then you will see a tick in that particular button on the screen, showing how you voted. Now if you've pressed the wrong button, you can correct your vote either by pressing the button you actually want or you can go back and put your vote in again. You can only correct your vote until the voting time is up. Now the televoters allow us to carry out several votes in a single round. You might not see all the voting items or candidates on one screen. And if we need to use several screens, you'll see buttons at the bottom left and right that you can use to toggle between the different pages. If you have any further questions about how to use the televoter during the meeting, then please go to 1 of the 2 help desks that are at the side of the room.

[Interpreted] Thank you very much, Ms. Pamer. So we can proceed to the vote then on those agenda items. And the Board proposes approval of the operating and financial review of Novartis AG as well as the financial statement of Novartis AG and the group consolidated financial statements for the 2022 financial year, and therefore, recommends that you vote in favor that you vote yes. Please cast your vote now. [Voting]

[Interpreted] We have the results available. Mr. Aegerter, please?

[Interpreted] Ladies and gentlemen, you have approved the proposal of the Board to the tune of 99.2%.

[Interpreted] Thank you. Thank you very much. So I confirm that you have approved the Board's proposal.

And we can move on to agenda item 2, which concerns discharge from liability of members of the Board of Directors and the Executive Committee. The Board of Directors proposes to discharge each of its members and each of the members of the Executive Committee for the 2022 financial year. I would like to open the discussion on this agenda item, but we do not have any requests for the floor. And therefore, we can proceed directly to the vote. Now any current and former members of the Board of Directors and the executive team who've had anything to do with the conduct of business in this time are not allowed to vote. The Board of Directors proposes that you approve this proposal and, therefore, recommends that you vote yes. Please cast your vote now. [Voting]

[Interpreted] So we have the results. Mr. Aegerter, please?

[Interpreted] Yes, ladies and gentlemen, you have approved this proposal and by 97.5% of the votes represented here.

[Interpreted] Thank you very much. So you have approved the Board's proposal. Thank you for that, and we can move on to agenda item 3. Appropriation of available earnings of Novartis AG as per balance sheet and declaration of dividend for 2022. Our business of last year was in detail to provide in our annual report and also explained under item 1 of the agenda. The appropriation of available earnings proposed by the Board of Directors is contained in the notice to the Annual General Meeting as well as on Page 11 of the annual report. The Board of Directors proposes a dividend increase by CHF 0.10 to CHF 3.20 per share entitled to dividends. If this proposal is approved, the dividend will be paid as from March 13, 2023. I now open the floor for a discussion on this agenda item. I don't think that anybody requested the floor on this agenda item. No? This takes us to the vote. The Board of Directors proposes that you approve this proposal, therefore, also recommends you to vote yes. Please cast your votes now. [Voting]

[Interpreted] We now have the result of the vote. Mr. Aegerter, please?

[Interpreted] Ladies and gentlemen, you approved the proposal of the Board of Directors with 99.5% of the votes represented here today.

[Interpreted] Thank you. And I declare that you approved the proposal of the Board of Directors. This takes us to item 4, which provides for the cancellation of the shares repurchased. Item 4 provides for the cancellation of the shares repurchased as authorized by the Ordinary Annual General Meeting held on the 2nd of March 2021 and on the 4th of March 2022 as well as the corresponding reduction of share capital. I said that creditors were notified by publication, the Swiss Official Gazette of Commerce of the 1st of February 2023, but they can request guarantees by lodging their claims. Furthermore, KPMG AG confirmed in the audit certificate available today that claims of creditors of the company are fully covered also after the proposed reduction of share capital. The Board of Directors proposes to resolve -- to reduce the share capital by CHF 3,121,715 from CHF 1,201,860,626 to CHF 1,138,738,876 through cancellation of 126,243,500 treasury shares repurchased in 2022, whereby the reduction amount shall be set off against the balance brought forward. I would like to open the floor for discussion. There are no requests for the floor on this agenda item. This takes us to the vote. The Board of Directors proposes that you approve this proposal and therefore recommends that you vote yes. Please cast your votes now. [Voting]

[Interpreted] The result is now available. Mr. Aegerter?

[Interpreted] Ladies and gentlemen, you approved the proposal of the Board of Directors with 99.4% of the shares represented today.

[Interpreted] Thanks a lot. I declare that you also approve this proposal of the Board of Directors. This takes us to item 5 on the agenda, further repurchases. The cancellation of the treasury shares repurchased in 2022 has been approved just now. Novartis AG uses capital available for specific purposes such as financing internal growth, distribution of an attractive dividend for acquisitions or for the repurchase of shares. Share repurchases allow the Board of Directors to return funds to the shareholders. As explained under agenda item 4, the 2021 and the year 2022 Annual General Meetings, authorized the Board of Directors to repurchase shares as deemed appropriate from time to time up to a maximum amount of CHF 20 billion. Up to January 31, 2023, shares with a total value of CHF 12.6 billion have been repurchased under this authorization, which means that CHF 7.4 billion remain. Following current practice, the Board of Directors proposes that as a first step, the shareholders authorized the Board of Directors repurchase in addition to the remaining authorization of CHF 7.4 billion as it deems appropriate from time to time up to a maximum amount of CHF 10 billion further shares between the 2023 Annual General Meeting and the 2026 Annual General Meeting. The authorization is to allow for the full execution of the already announced share repurchase up to a maximum of USD 15 billion as well as further share repurchases. Any shares repurchased under this authorization are to be canceled. And as a second step, the shareholders can resolve the required share capital reduction at the next AGMs. The floors are now open for discussion. So there are no requests for the floor on this agenda item. So that takes us to the vote. The Board of Directors proposes that you approve this proposal and therefore recommends that vote yes. Please cast your votes now. [Voting]

[Interpreted] The result of the vote is now available. Mr. Aegerter, please?

[Interpreted] Ladies and gentlemen, you approved the proposal of the Board of Directors with 98.2% of the votes.

[Interpreted] I note that you've approved the proposal of the Board of Directors. We now have item 6 of the agenda, amendment of the Articles of Incorporation. On the 1st of January 2023, the reform of this corporate law entered into force. Transitional provisions required the companies to adjust the Articles of Incorporation within 2 years. The new wording of the Articles of Incorporation to be amended, as well as the reasons for the proposed amendments, are found in a brochure, explanations of the Board of Directors on the amendment of the Articles of Incorporation provided on our website. The notice to the Annual General Meeting made reference to the brochure. The Board of Directors proposes to approve the amended Articles of Incorporation in three separate votes. First, the introduction of Article 12A regarding the participation in AGM by electronic means; second, the adjustment to mandatory new provisions; and third, other amendments, which takes us to item 6.1. Under this agenda item, the Board of Directors proposes introduction of Article 12A of the Articles of Incorporation regarding participation in Annual General Meetings by electronic means, whereby the above-mentioned brochure also states that the associated authorization of the Board of Directors will be limited to 5 years. Based on recently evolving views on virtual Annual General Meetings as we also heard today in several markets, which show that there are certain reservations about virtual general meetings, or formats still unknown in Switzerland. Taking these into account, and subject to the approval of item 6.1, Novartis commits to submitting the corresponding authorization again to a shareholder vote at the 2025 Annual General Meeting. This is notwithstanding the proposed limitation to 5 years. You will find this also in the declaration published on the Novartis website on the 10th of February 2023. I open the floor for discussion. There are no requests for the floor on this agenda item either, which takes us directly to the vote. The Board of Directors proposes that you approve this proposal and therefore recommends that you vote yes. Please cast your votes now. [Voting]

[Interpreted] The result is now available, Mr. Aegerter?

[Interpreted] Ladies and gentlemen, you approved the proposal of the Board of Directors with 85.0% of the votes.

[Interpreted] Thanks, Mr. Aegerter and I've note that you've approved the proposal of the Board of Directors, which takes us to item 6.2 of the agenda. Under this agenda item, the Board of Director proposes the amendments of Articles 10, 14, 30, 33 and 34 of the Articles of Incorporation. I now open the floor for discussion, but I see that there are no requests for the floor, which takes us directly to the vote. The Board of Directors proposes that you approve this proposal, and therefore, also recommends that you vote yes. Please cast your votes now. [Voting]

[Interpreted] The results are now available. Mr. Aegerter, please.

[Interpreted] Ladies and gentlemen, you approved the proposal of the Board of Directors with exactly 98% of the votes.

[Interpreted] Thank you. I state that you approved the proposal of the Board of Directors. We now have item 6.3. Under this agenda item, the Board of Directors proposes the amendments of Articles 4 to 7, 9, 11 to 13, 16 to 18, 20 to 24, 27, 38 and 39 of the Articles of Incorporation. I open the floor for discussion. [ Knowing ] no discussion, which takes us to the vote. The Board of Directors proposes that you approve this proposal, therefore, recommends that you vote yes. Please cast your votes now. [Voting]

[Interpreted] The result is now available, Mr. Aegerter?

[Interpreted] Ladies and gentlemen, you approved the proposal of the Board of Directors with 93.9% of the votes.

[Interpreted] I declare that you approved the proposal of the Board of Directors, and that takes us to Agenda item 7, votes on compensation for the members of the Board of Directors and the Executive Committee. The Board of Directors proposes approval of a maximum aggregate amount of compensation for the members of the Board of Directors for the period between this Annual General Meeting and the next Annual General Meeting and to approve a maximum aggregate amount of compensation for the members of the Executive Committee for the financial year 2024. Furthermore, there will be an advisory vote on the Compensation Report 2022. KPMG AG has audited the compensation report of Novartis AG and has nothing to add to the audit report. Explanations on the compensation system are contained in the brochure compensation votes at the 2023 Annual General Meeting published on our website. The notice of the Annual General Meeting contain to reference to the brochure. I open the floor for discussion. We have one speaker on the list, Mr. [indiscernible].

[Interpreted] Thank you, Chairman. So I've come back and I will ask again the question that I asked earlier that you didn't answer. These CHF 800 million that you had to pay out for the various offenses that Novartis appears to have committed in several countries. Let me just mention a few countries, Greece, South Korea, Vietnam and other countries as well, as well as the fine I mentioned. Novartis has been placed on probation, meaning that the U.S. justice system can call on Novartis to file any documents that they require over 5 years. Now the money has been paid out, taken from Novartis' accounts, of course. I mean as you've heard, we have billions in the bank. So it's not so much about the actual sum of money. It's an ethical question, can we accept the fact that people are engaging in corruption in order for us to receive a few extra cents on our shares in dividends? Can you accept that? Personally, I do not accept that. I mean, even if I'm told there's no financial change. That's not the world I want to live in. It's not acceptable. And what's been happening, it appears that Novartis has been bribing government officials for years and years. My [ stress ] was very clear from the prosecution. It was officials. It wasn't cleaning ladies or porters. It was officials. If we get to this stage, where are we going to draw the line? Where is this going to stop? We had somebody else earlier talking about the excessive pay that the Board receives. It's extremely excessive actually, if you think about this CHF 1 billion that we've had to pay out in fines. I mean, what else are we going to have to pay back? They ought to pay this money back. You could achieve that with your vote. So I am opposed to any increase in these levels of compensation. In fact, I believe they should pick out because I believe maybe we've ended up with a few extra cents in our dividend. But that is not the point. I mean we might as well be selling weapons than being shareholders of Novartis if we're so concerned about those few extra cents and that sort of ethical level. So thank you very much.

[Interpreted] Well, Mr. [indiscernible], thank you. And I'm sorry if you have the opinion that I avoided your question earlier. I haven't seen the connection in the same way that you just put it forward. Now I do agree with you, of course, that corruption is completely unacceptable. You're perhaps drawing conclusions from some of the figures that you've named. I don't want to go into too much detail, but it is true that we had to pay fine for achieving certain benefits with certain doctors around the world over a number of years. And it took rather a long time before all this came out and before it made its way through the slow wheels of justice and here we are today. Now over the last few years, we certainly have worked very hard to prevent such incidents. To avoid anything like this happening in the future, we've changed our systems in many places. We've also changed some of our staff, our employees. We implemented a code of ethics. It's an exemplary one in the industry actually a few years ago. And in the field of compliance, we have beefed things up a lot, and I do believe that we can say that we're not the same company as we were a few years ago. And therefore, I accept your criticism of what happened a number of years ago, but I would like to argue and promise that this is something that we will not allow to happen again in the future. Now you've also talked -- you talked about an increase in compensation. Actually, there was no increase in any compensation being paid to Board members. And you'll see that the compensation being paid to the executive team indeed also involves a cut. So that is what I wanted to say in response to your comments for the time being. We have someone else wanting to take the floor as well on this point, Mr. [indiscernible]. Yes, Mr. [indiscernible], you have the floor again.

[Interpreted] Thank you, Chairman, ladies and gentlemen. I'm [indiscernible] just very briefly. Before we approve there's huge sum of money for these gentlemen, may I ask how many fines has Novartis had to pay since the turn of the century? Mr. Reinhardt said he had calculated this or perhaps you could have a look at your notes and tell us how much money you've had to pay out in fines. I mean how much money have you taken away from us effectively as shareholders? What would we have received if you hadn't had to pay all these fines? I mean, we might not be getting more -- just another $0.10 in our dividend. It ought to be more than that. So that's why I want to ask you about this. You're getting a reasonable level of compensation. That's fine, but you need to make sure that the shareholders get something as well. I mean you'll get -- you're giving us this lovely $0.10. It's not fantastic, but it's better than nothing. But what about all that money that you had to pay out in terms of fines. I mean, that -- should actually be our money. So perhaps you can tell us how much you've had to pay out in fines for various offenses over the last few years? I mean, obviously, not just things that you've done, but the people that you've employed have done. Thank you.

[Interpreted] Right. Mr. [indiscernible] . I can understand your logic, of course. Anything that gets spent by the company, of course, is deducted from the profits, and that would include fines. But I must also say that I'm afraid I don't have a figure for you in my notebook as to what we've paid out in fine since the turn of the century. But we can put those figures together for you and send them to you personally, if you'd like to have them. I can't give you any figures, and I wouldn't like to just pull a figure out of my hat, of course. But we will certainly let you know. Do we have any further requests for the floor on this agenda item? Apparently not. Right. Well, that means then that we could proceed to the vote on the compensation for the members of the Board of Directors. The Board of Directors proposes the maximum aggregate amount of compensation of the Board of Directors covering the period from the 2023 AGM up until the 2024 AGM should be approved. That sum is CHF 8.750 million, and we therefore, recommend that you vote yes. Please cast your vote now. [Voting]

[Interpreted] We now have the results. Mr. Aegerter?

[Interpreted] Ladies and gentlemen, you have approved the proposal of the Board with majority of 97.4% of votes represented.

[Interpreted] So I state that you have approved the proposal of the Board.

We are now going to proceed with the compensation for the management. The Board proposes the overall amount of CHF 90 million for the year 2024, be paid out to the members promised or assigned to the members of the Board and recommends that you vote yes. Please cast your votes now. [Voting]

[Interpreted] We now have the results, Mr. Aegerter?

[Interpreted] You have approved the proposal of the Board with 90.7% of votes represented.

[Interpreted] Thank you. I state that you have approved this proposal by the Board of Directors. That takes us to the vote on the compensation report 2022. The Board of Directors proposes that shareholders endorse in an advisory nonbinding vote the compensation report 2022 and recommends that you vote yes. Please cast your vote now. [Voting]

[Interpreted] We now have the results of results. Mr. Aegerter?

[Interpreted] Ladies and gentlemen, you have approved the proposal of the Board with 80.6% of votes represented.

[Interpreted] Thank you, Mr. Aegerter. I note that you have approved the proposal of the Board of Directors. Now we continue with item 8 on the agenda, the reelections of the Board, Chair and the members of the Board of Directors, the election of one new member to the Board of Directors. Andreas von Planta has decided not to stand for reelection. I already mentioned his merits under agenda item 1, but I would like to take the opportunity once again to thank him on behalf of the Board for his long-standing dedication and commitment. The Board of Directors proposes the reelection of the current members of the Board of Directors with the exception of Andreas von Planta as well as the election of John D. Young as a new member of the Board of Directors until the end of the next Annual General Meeting. The Board of Directors also proposes the reelection of myself as Board Chair for a term of office until the end of the next Annual General Meeting. Let us start with my proposed reelection as a member of the Board of Directors and as Board Chair. I would like to hand over to the Vice Chair, Mr. Moroney.

[Interpreted] Thank you, Mr. Reinhardt. On item 8, we do not have any requests for the floor. So we can directly proceed with the vote. The Board proposes the reelection of Joerg Reinhardt as a member and the as Board Chair of the Board of Directors and recommends that you vote yes. Please cast your votes now. [Voting]

[Interpreted] We now have the results of the vote. Mr. Aegerter?

[Interpreted] Ladies and gentlemen, you have reelected Dr. Joerg Reinhardt as the Board Chair and a member of the Board of Directors with a majority of 94.9%. Congratulations, Mr. Reinhardt.

[Interpreted] Thank you. I note that you have reelected Mr. Reinhardt as a member and the Chair of the Board of Directors. I'm now going to hand the Chair of the meeting back to our President -- our Chairman.

[Interpreted] Thank you, Mr. Moroney. Thank you for your trust. This takes us to the remaining reelections of the members of the Board of Directors. We have no request for the floor, item 8.2 to 8.12. So we will proceed with the vote, which we will vote together, but we will have an individual vote for each of the members. The 11 members of the Board of Directors who stand for reelection are grouped into a total of four election units. The voting time will be 45 seconds. The Board of Directors proposes that you reelect all 11 candidates and therefore, recommends that you vote yes in each case. The voting time starts now. [Voting]

[Interpreted] The window for voting is now closed, and we're now going to wait for the results. We now have the results, Mr. Aegerter, please.

[Interpreted] Ladies and gentlemen, you have reelected the following members to the Board of Directors: Nancy Andrews, 99.2%; Mr. Buechner, 89.8%; Mr. Bula, 92.9%; Mrs. Doherty, 96.7%; Mrs. Heller, 96.6%; Mr. Hochstrasser, 97.1%; Mr. Van Houten, 98.5%; Mr. Moroney, 99.3%; Mrs. de Pro Gonzalo, 99.4%; Mr. Sawyers, 97.9%; Mr. Winters 96.8%. Congratulations to all of the reelected members on this vote.

Thank you. I note that you have approved the proposals of the Board of Directors, and I would like to congratulate the elected members. This takes us to the election of Mr. John Young to the Board of Directors. John Young retired from Pfizer in June 2022, where he had held several senior positions for over more than 30 years, and most recently served as a member of Pfizer's executive leadership team. This was since 2012. He successfully led and developed multi-$10 billion global businesses and he has a wealth of industry experience in the areas of leadership, strategy, business development and commercialization of innovative medicines, which he will contribute to the Board of Directors. John Young is currently on the Board of Johnson Controls International Avenues Inc. and a privately held biotech, Imbria Pharmaceuticals. He is independent from Novartis according to the independence criteria set out by the Board of Directors. I would like to open the floor for discussion. Excuse me for a moment.

You've come to Basel, come to Novartis. What is your motivation? I'd like to hear -- to listen to you. Thank you.

John, we'll provide you with mic, a few sentences. Does anybody have a mic? Do you want to go over? Let's see what happens. There you go.

Thank you for your question. I trained as a scientist. I have joined Pfizer 36 years ago from an immunology lab. And the entirety of my career has been spent working for a company that has like Novartis aim to translate science that can make a difference to patients. I retired from Pfizer just over -- or almost a year ago. I stepped down from the Executive Committee about 1.5 years ago. And one of the things that I wanted to do in the next stage of my life was to continue to take the knowledge and experience that I've gained and to help a company whose pursuit was to translate science that can make a difference to patients all around the world. To the extent that the experiences that I have can be of help to Vas and the management team and the Board of Directors, then I offer my services and my experience in what I believe is one of the most noble pursuits that human kind undertakes. So thank you for your question.

[Interpreted] Maybe just one more remark. John worked in the United States for many years but he now lives in the U.K. Are there any other questions, remarks? If that's not the case, we will proceed with the vote. The Board of Directors proposes the election of Mr. Young to the Board of Directors and recommends that you vote yes. Please cast your votes now. [Voting]

[Interpreted] We have the result. Mr. Aegerter?

[Interpreted] Ladies and gentlemen, you have voted to the Board of Directors, Mr. John Young, 99%. Congratulations to 99% of yes votes.

[Interpreted] So I note that you have elected Mr. Young as a member of the Board of Directors. I congratulate him on this election and wish him the best of success.

This now takes us to item 9 on the agenda, the reelection to the Compensation Committee. The Board of Directors proposes the reelection of the current members of the Compensation Committee until the end of the next Annual General Meeting in each case. Moroney is elected as Chair to the compensation. The Board of Directors intends to designate him as Chair. I would now like to open the floor for discussion. There are no request for the floor, it seems. No requests? In that case, we will proceed with the vote, which we will once again do as one. So the four members of the Compensation Committee are shown on two pages and the window for the vote will be open for 15 seconds. The proposed -- the Board proposes the reelection of all 4 candidates and recommends that you vote yes. Voting time starts now. [Voting]

[Interpreted] Voting is now closed, and we are waiting for the results. We now the results. Mr. Aegerter, please.

[Interpreted] Ladies and gentlemen, you have reelected the following members through the Compensation Committee, Mr. Bula 92.1%; Mrs. Helen, 95.1%; Mr. Moroney, 96.6%; and Mr. Winters with 94.8%. Congratulations.

[Interpreted] Thank you. I note that you -- I note that you have approved the proposal of the Board of Directors, and I would like to congratulate the elected members. That takes us to item 10, the reelection of the auditors. According to the Articles of Incorporation, the auditors have to be elected annually. KPMG AG is available for reelection. I open the floor for discussion on this item. We do not have any request for the floor, so we can proceed with the vote. The Board of Directors proposes the reelection of KPMG AG as a statutory auditor for 1 year and therefore recommends a you vote yes. Please cast your votes now. [Voting]

[Interpreted] We now have the results. Mr. Aegerter, please.

[Interpreted] Ladies and gentlemen, you have reelected KPMG as auditor with 99.5% of votes represented.

[Interpreted] Thank you. I note that you have reelected KPMG. This takes us to the last item on the agenda, 11, the reelection of the Independent Proxy. The Board of Directors proposes the reelection of Mr. Peter Andreas Zahn, attorney at law in Basel, as Independent Proxy until the end of the next Annual General Meeting. Don't think there are any requests for the floor. So we can go directly to the vote. The Board of Directors proposes that you approve this proposal and therefore, recommends that you vote yes. [Voting]

[Interpreted] We now have the result. Mr. Aegerter?

[Interpreted] Ladies and gentlemen, you have reelected the independent proxy, Peter Andreas Zahn, with 98.8% of votes. Congratulations.

[Interpreted] Thank you. I note that you have reelected Peter Andreas Zahn. We have now dealt with all of the items on the agenda, which brings us to the end of this year's Annual General Meeting. I would like to thank you for the trust expressed in the elections and votes on behalf of the Board of Directors and the Executive Committee. The next Annual General Meeting is scheduled for the 5th of March 2024. I hereby declare today's meeting closed. Thank you very much. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]