I'd like to welcome our webcast audience. We're webcasting this for the first time and so we'll be happy to take questions as we get into Q&A, both from the audience here and also from the webcast, so feel free to send in your questions. Now before we get started, I would like Samir to read the Safe Harbor Statement.

Sure. Good afternoon, everybody. The information presented today contains forward-looking statements that involve known and unknown risks, uncertainties and other factors. These may cause actual results to be materially different from any future results, performance or achievements expressed or implied by such statements. Please refer to the Company's form 20-F on file with the U.S. Securities and Exchange Commission for a description of some of these factors.

Thanks, Samir. Okay, we've got a pretty interesting agenda today. Harry and I are going to talk through 2016 results and the plans for 2017. Then we've got Paul Hudson coming up you to talk about the pharmaceuticals business. Mike Ball will give an update on Alcon. And then you're in for a real treat as Vas and Jay take us deep into the pipeline of Novartis. Okay, let's start by talking about 2016. At the beginning of the year, we set five objectives for the Company and we have tracked through these five objectives every quarter. At the end of the year, I'm happy to say that we've broadly delivered on many of these, but there are some areas where we fell short and so we'll talk about that in a minute. Let's start with the financial results. You saw from our press release today that we did deliver sales that were equal to last year in constant currency, so flat versus year-ago. And I think this is important to note that we were able to offset $2.4 billion of patent expiration, primarily Glivec, but some others also. This is a real testament to the growth products and their potential to fully offset $2.4 billion and deliver flat sales. Our core operating income was down 2% based on that patent expiration and also some of the investments that we made in the growth products. Importantly, though, free cash flow was quite strong, $9.5 billion, up 2% in U.S. dollar terms. The second objective was to strengthen innovation and the launch of Cosentyx continues to go very well. You saw the fourth quarter sales. The brand has crossed $1.1 billion and it has become a blockbuster in its first full year since introduction. Entresto, while we fell short of the…

Thank you, Joe. Good morning. Just want to start with a quick comparison between the guidance we gave and the results. And clearly, we came in under our guidance of broadly in line with the 0% in constant currency sales and the minus 2% core operating income in the range of broadly in line to a low single digit decline. When you look at the numbers on the left side of the quarter, four numbers. We delivered, in quarter four, flat sales and core operating income was even up as the productivity efforts offset the significant increase in investments we made, not only, but also into Cosentyx and Entresto. On the full year on the right side, you saw the number zero and minus two. Net income is up one point as the Ode an die Zitrone venture continues to contribute and was, this prior year, a significant increase. Free cash flow was very strong at $9.5 billion. I'll give you a few more details later on. Overall, I would I say, given $2.4 billion of generic impact on the top line, solid financial results. The quarter four margin by division and total Company you'll see on the lower right side that the margin improves by 0.2%. It's a very strong performance from the Innovative Medicine division is offsetting the Alcon core operating income margin decline. Innovative Medicines, certainly Glivec, increased as an effect in quarter four minus 1% on sales, but very good productivity and resource allocation efforts, increasing core operating income by 4%, we're citing a 29% core margin. Alcon stabilizing sales, flat sales, but 36% decline of core operating to 11% margin. Given the investment into the growth plan and Mike will later on give you more details on that. Sandoz delivering a solid quarter with 3%…

Thank you, Harry. Good afternoon, everybody. So I'm leading the pharma business. I thought I'd give you a sense of perspective where we're six months into the role and try and give you some type of indication of how we hope to perform as we go into 2017. So firstly, maybe it's good to touch base on the priorities. Firstly, we went from a single digit negative decline in pharma in the first quarter to a single digit growth in overall performance across the business in quarter four. We're pleased with that. We're pleased with you how we finished the year, but more importantly we really the focused the division on the key priorities. And what were they? Initially, to make sure we're resourced appropriately and appropriately means to win with Entresto and Cosentyx, to get back to some of the heritage, some of our strong DNA on commercial execution and of course, we've got 10 data readouts over the next couple years, I think four this year and some of the hard lessons learned in making sure that we were ready for those launches to deliver well and exceed expectation. From a culture perspective, of course we work on all the normal things, diversity and inclusion. But the key take-away is the external focus, the in market performance and setting the culture up for a winning outcome to 2017 and to beyond that. Cosentyx's first full year is a blockbuster. In fact, I think it's the best launch I think we've ever had at Novartis. It's been an incredible full year for Cosentyx. The team has done an outstanding job. The final quarter was close to $400 million. Exceptional. We'll guide a little bit, but because of thoughtful decisions on the rebates for 2017, Q1 will be modest in…

Thanks, Paul. Good afternoon, everyone. I'm here to speak briefly but passionately about Alcon. So I want to tell you what we've done, where we're and where we're going. So I've been here almost one year now and when I came in the door last February, we quickly assessed what the major issues were with the Company and then we set to put out a game plan as what we're going to do about it. That game plan had three key elements associated with it. Number one was to invest behind the vision care business because what we really saw was that vision care being a consumer business would be more responsive than surgical. Number two, we wanted to fix the supply and service issues because in my mind, without those being fixed, we could not turn around the surgical business. And number three, referring to our innovation front, we really wanted to restock our pipeline through aggressive outreach and business development. So what are the results so far? Well, in my mind, I think we've made progress on both franchises. When you look at vision care, in fact, the investments seem to have carried the brand franchise forward so we got to plus 5% in Q4, 2% overall for the year. So I'm very pleased that we got one of the businesses turned around. Now, with respect to the surgical business, fixing the supply and service issues turned out to be more challenging than we had originally imagined. And those issues persisted throughout quarter three and I think really pushed back the turnaround of the IOL business and also allowed our competitors to continue with their penetration of our market share. And I want to talk about that in a moment. Consumables, as you can see, grew nicely, mid-single…

Before we get into the R&D session, I wanted to break and do a Q&A session. So why don't we raise the lights and we'll start here. Yes?

Thank you. It's Michael Oustin from UBS. Question on your comments around alternative, potential alternative plans for Alcon. You talk about capital market solutions as a potential alternative. That seems to suggest you firmly believe that the division gets back to a better place and then you might think about what you do. But from our perspective, that probably means you're thinking about trading earnings versus balance sheet strength as well. What does that mean for Novartis going forward over the next few years if Alcon does turn around? Do you still think about a counter market solution and end trade earnings for balance sheet?

Okay, go ahead.

And sorry and a second question just on Entresto. Thank you for the details. Would you be able to tell us what percentage of your patients are currently coming from Medicare versus non-Medicare?

Okay. On the Alcon question, what we announced today is that we will be conducting a review and that review will be, include everything from retaining the business to -- we said a capital markets exit, so IPO or spin. But it could be anything in between. So, it's too early to speculate on what we will actually do. The reason why I personally believe capital markets exit could be attractive for our shareholders is that there's a scarcity of assets in that $25 billion to $35 billion market cap business today in healthcare and so if our shareholders could participate in that, that could be something that's very good for our shareholders. So it's premature to talk about what that would mean for the Company because we really haven't made a decision. This is really just the review process. And on Entresto?

So the number currently has been quite small, in the teens. What we've done is to, as I mentioned earlier, to try to access that two-thirds of the total population by entering into Part D. So you'll have seen we've gone to almost 90% preferred access. So we expect to see a significant acceleration in the Part D population into Medicare.

Other questions? Yes?

I've got two big picture questions, please. The first one, Mike, thank you for that very passionate talk about how you see the Alcon future. It kind of fits somewhat at odds with the comments you made, Joe, about whether you want to be a part of this future or not. So what are we missing? Is Novartis not the right owner of this asset and if so, why not? That's question number one. Okay?

Go ahead with question two.

Question two, you were kind of talking about a new operational model kind of for Novartis. It's been about two-and-a-half years since you kind of had the big strategy refocus. You identified three areas that you want to be long term future of Novartis, now maybe two. But, why has it taken you two-and-a-half years to come up with the new operating model?

Okay. So on the first one, Alcon owner, the answer is that both of those are right. This is -- if you think about what we acquired with Alcon, we acquired an ophthalmology business and a medical devices business. We've taken the pharmaceutical side of that business and it's now integrated and the medical devices business is a very good business. It's got leading market shares in growing categories, exactly what Mike said. We take full responsibility for the fact that that innovation did not come through as expected on the medical devices side. So that has taught us something. It's a very different kind of a business than the rest of our business. It doesn't mean that we can't participate in medical devices. But what it does confirm is that the pharmaceutical innovation cycle, everything that takes place in pharmaceuticals in terms of rejuvenating the pipeline and success in that are different key success factors than in that medical device business where you're in the surgeon's office, you're iterating very quickly, very short cycle times, incremental innovation and so this is the time to step back and say we should do a review and say whether that medical devices piece which is highly attractive in the market, are we the best owners for it? So I don't think that they're inconsistent. In terms of the second question on the new operating model, it's not as if we just said, we woke up one day and said we're going to go to a new operating model. This has been an evolution. So when we foes the Company with the GSK transaction and the Eli Lilly transaction, there were a series of events that made our portfolio very focused. We did not want to move into immediately centralization of manufacturing and global drug development at the same time as integrating those businesses and separating the vaccines business, the OTC business and the animal health business. It was just too much for the organization to absorb. So we staged it in an approach that would get us to where we're today, two-and-a-half years later, from that decision to now be fully ready to implement that new operating model. Yes? And then we'll go here. Richard?

Richard Vasa from JPMorgan. Just on the drivers of 2017 performance, I think you highlighted the savings from the development organization. Perhaps you could give us some idea of the level of contribution from the savings from that and potentially through the period 2018 to 2020 as well. And just on the 2018 to 2020 sales bridge, could I venture for you to give an idea of the path there? You've obviously said growth each year, but potentially, how you see the magnitude of that growth through 2018 to 2020 each year. Thanks.

On the first, some of the way that we're going to offset the Glivec patent expiration is not just from savings in global drug development, but also we get the beginning of the manufacturing cost savings that start to kick in. So we have not disclosed what our expectations are but I think you can expect to begin to see the savings that we have said will come from this new operating model beginning in 2017 and that's primarily through our Novartis business services organization, the manufacturing centralization and to a lesser extent, the global drug development. In terms of 2018 to 2020 sales growth, I really don't -- there are too many uncertainties. I don't want to get into making a projection. I wanted to show a graph that was illustrative of the kind of growth that we will expect and we've become as granular as saying we expect growth every year. But that's about as far as we'll go. Yes?

Three questions, first, for Paul. Could you come back on Cosentyx, just as a follow-up question, because you gave some color and you said that for 2017, you expect at the beginning of the year some pressure from Medicare. So the growth rate we understand should be a little bit softer as what you delivered in Q4. Could you elaborate a bit on that point? Because I suspect that the proportion of the population coming from Medicare is much lower versus what we have for example with Entresto. Then for Mike, I have two questions for you. Could you elaborate a bit on the product approvals on surgical side of Restore and PanOptix? Are they big growth driver for this division this year and beyond? And remember last year you said that you expect in 2017 by mid-year to have a good idea of if the recovery of Alcon is well on track or not. Could you tell us if it's still the case that by mid-year you will know if the recovery is on track? The last question is for Bruno. A quick one on the Afinitor. It seems that the Q4 was better than expected. Is there a recovery? Could you elaborate on where this is coming from? Thank you very much.

Paul?

So, Florence, I hope I heard you correctly. You mentioned Medicare and you mentioned Cosentyx. Is that right? So maybe just to be doubly clear. I said I was very pleased with the Q4 performance which was in the main, the growth was out of demand, is principally from commercial patients. And the comment I made about modest growth in Q1 is that we've been thoughtful about our access position for 2017. Of course, we know that there are more than one medicines in the class now. And so we have to be very deliberate. We're the market leader by some way, but we had to be thoughtful. So, we've improved our access into Q1, paid some rebate to get there thoughtfully which is why we'll see modest growth and an acceleration thereafter as volume catches up in 2017. It's principally commercial, yes.

Mike?

Okay. And then with respect to the new product pipeline, so, if I understood the question correctly around PanOptix and so PanOptix rolled out in Europe in 2016 and we're having it roll out over the rest of the world essentially, other than the United States, in 2017. The Toric version of PanOptix is being approved in the European marketplace. This will give us then a broader line in order to meet the competition in what I would call a more fair way or, for them, unfair way as we get into the marketplace. So I'm feeling good about it. The feedback on the trifocal lens is extremely strong, extremely good. And where we've launched it, we've seen very good pick-up. So very pleased with how that product is moving forward. With respect to then halfway through 2017, you took notes from when I talked before obviously. So one of the things I said was we'd be broadly in line with last year for the first half of this year. And obviously, we go through this year we'll see how things are picking up. One of the most difficult things in turning around a surgical business is you do the right things for long term growth, such as putting in training centers. So we've opened up wet labs to start training physicians again like we used to. When does that actually translate into sales? If the you think about getting your service and supply levels back, you still have to recapture the customers that may have gone elsewhere. So again, this basically takes time. But it is the right thing to do and with the right execution, it will, in my opinion, lead to growth. We're just challenged to figure out exactly where then. So again, update mid-year, as promise.

And Bruno, on Afinitor?

Regarding Afinitor, our two main indications, breast and RCC, were affected by competition, palpable and immuno oncology. We launched some new indications net of lung and GI origin that has compartly compensated for that. But I think the main point that happened in quarter four where we had, in the U.S., Afinitor grew 1%, is that we're getting into, in breast, into the zone now where patients that were put on palpable are starting to move to a later line of treatment. So that is having a positive impact on our sales. So I would talk of stabilization or slowing of the decline rather than full recovery yet. We'll see what happens next quarter.

Okay. Let's take a question from the web and then we'll come back.

Okay. We have a question from Graham Parry about the buyback. Is this in addition to the up to $5 billion bolt-on M&A target that we have previously indicated would allow us to retain the AA rating? Should we assume that the buyback precludes that level of bolt-on deals if you are to remain AA? And the last point is could you do a $5 billion buyback, a $5 billion bolt-on and still reduce debt? Second question more for Alcon. What factors go into the decision to keep or sell Alcon? Doesn't it make sense to execute a turnaround before selling? Or is sale the option you choose if you can't turn it around?

Okay. Let's start with Harry on the buyback.

The share buyback is, as I mentioned earlier, in addition to the employee participation program. So it's a net share buyback that will reduce the share count. It's also, we will continue to execute our bolt-on acquisition strategy. Now, credit ratings we leave to credit rating agencies, but we have, even with this additional leverage, a very strong balance sheet. And, of course, let's say $5 billion additional bolt-on, $5 billion share buyback, we will issue new debt for the share buyback. Our cash flow has been in the range of $9.5 billion. We expect it roughly to stay stable. Of course, cash flow is a bit more volatile than the P&L. And we pay out roughly $6.5 billion of dividend. So we will be able to continue to do the bolt-on and we have a strong balance sheet. We would need a bit more of debt in order to do up to $5 billion of a bolt-on in addition to the share buyback.

And the only thing I would add to that is that we did, in the fourth quarter of 2016, acquire two small bolt-ons as well as two option deals that could become acquisitions and these were upstream quite a ways. So they're supplementing the pipeline. They're not as big as $2 billion to $5 billion. You're going to continue to see us do those even with the buyback and if something bigger comes along, we'll take a hard look at it. We're looking at everything. Prices are at a level where we're not sure we can generate a lot of value for Novartis shareholders if they're bigger deals. And that's why we've chosen to do the buyback as well as to show confidence in the future. In terms of the Alcon, what factors would be required, the reason why I wanted to get this announcement out is that a lot of work has to take place. And I don't want to do it in a secretive way. We've got people at Alcon. I want make sure we're out in the open about this. For example, we have to determine what it will take to separate that business. So we have to go function by function to understand what it would like if we did a capital markets exit. We have to do carve out financials. We have to look at other things that would need to be done to make that a separate company. So it's going to take us some time which is why I said we would give you an update towards the end of 2017. Meanwhile, with Mike executing that plan, we fully expect there to be a nice story on Alcon as we get to that point when all of this work takes place. So it's premature to say what we will do. But I will tell you that we'll give you an update by the end of 2017.

Vincent Manye from Morgan Stanley. So follow-up question on Alcon and more broadly, your corporate strategy in terms of M&A. Based on your comments, you're concerned that you prefer bolt-ons rather than larger acquisitions, but if you can get some proceeds from Alcon, what would you do with that? Would you consider then buying something to replace Alcon, something big or something different, maybe giving back the cash to the shareholders or just split that in multiple acquisitions? And the second question is the R&D spend. So in your slides you say that you want to spend 20% of Innovative Medicines sales. Does it mean that you consider now that Innovative Medicines are the right perimeter and you will not reduce the number of therapeutic areas? Just confirmation of that.

In terms of the first question around Alcon and what we would potentially do with the proceeds, I think it's way too early to speculate. Part of it would depend on what we actually do and how we execute that. The guiding principle is going to be what's in the best interest of our shareholders. That will be the first criteria in terms of what we do with the Alcon business and also with the proceeds if the there are proceeds beyond that. So I would -- go ahead.

Regarding the shareholders and their interests, do you think that it's better for them to have another leg in the Company to some extent, some differentiation? Or be more focused and adopt a different model?

One of the things that I've learned since the GSK acquisition is that focus is good. Right? When we had the OTC business, the animal health business, the vaccines business, when we were able to execute that transaction and double down in oncology and really focus where we were strong, that was a benefit to the Company. And so I don't think necessarily that the Company needs to replace. Were we to exit that medical devices business, I don't think the Company needs necessarily another leg. What it could use is more depth and breadth within what we call our core which is -- I wouldn't call it our core. I would say where we have had the most success as a Company which is in that pharmaceutical and generic/biosimilar framework. So again, nothing's decided. But that's a bit of what we're thinking. Okay. Oh and your second question was on R&D spend as a percent of sales. And maybe, Paul, also in terms of the therapeutic areas, does that mean that we've got about the right mix of disease areas?

If you look at historically where we've been from R&D in Innovative Medicines as a percent of sales, it's around 23%. But with many of the changes we've made over the last 18 month, we're already 100 basis points down from that. And our goal is to continue that trend to get to the 20% in the medium term and particularly when you look at the sales growth along with better cost management, we think we can get there. I would say overall our goal is to build therapeutic area depth in the areas that we're in. We're always evaluating are we in the right disease areas? I'll talk a little bit more about it later on. But in our core disease areas, our core six disease areas, inclusive of oncology, we believe these are places where we can be leaders. Paul?

So, Joseph, in terms of TAs, I think what we've done with discipline and you've just seen it with the recent BD towards the end of last year, we tried to double down in the areas we have critical mass where we can add new assets over short-, medium- and long term, where they can be some synergies to the promotion and we can become even more expert. We've done with the Ionis deal in cardiovascular. We've done it in atopic dermatitis in immunology and dermatology. We've gone out. We've got our own assets, QAW, of course, in respiratory and the same with RTH. So we've tried to make sure that we're not breaking new ground as an unknown, but we're concentrating on where we have real effectiveness and market leadership. And Vas will talk later, but we've then tried to explore areas we think we're going to be fundamental to the future in healthcare. Nash is a great example and started to make our first plays in Nash. Good where we're and open minded and opportunistic about future areas of growth.

Mary Evan-Lewis, Prime Avenue. My first question is for Joe. Just want to make sure on Alcon, I'm reading the wording of your announcement correctly. So are you effectively ruling out selling to a strategic buyer or to private equity and if so, is that on the basis of discussions you've had or your analysis of structural issues with the business or your analysis of the antitrust situation? Second question is for Mike. Just again the famous Alcon margin question. It sounds like the margin is not going to be picking up any time soon. I'm just wondering if you can confirm that the 2016 full-year margin is the trough for 2017 and beyond and we're not going to see a margin below that. And quickly for Paul. You said that Entresto, you're only just finding out how big this medicine can be, so should I read that as you not reconfirming the previous management's guidance of $5 billion in peak sales in the ref indication? And then just finally a question on the Innovative Medicines margins and the oncology margins within that. So when Novartis took over the Galaxil oncology business, that business had a very low margin of about 25% and I think Novartis was very confident of getting it up to the sort of margin levels that we know this type of business is capable of. So I'm just trying to get a feel very roughly, I know you don't split out the margins for oncology, but very roughly how much of that structural margin improvement has taken place, how much scope is there still left to go, just so we can get a rough feel for also for what's been happening to the margins of the rest of the Innovative Medicines business. Thank you very much.

On the first question regarding Alcon, we have not ruled out sale to a strategic buyer. We haven't announced a sale today. The only thing that we've announced really is that we're doing a review and when we bracketed that by saying either retain the business all the way up to a capital markets exit, it really would include all options. So there was nothing beyond that in terms of how we disclosed. Mike, on the margin for Alcon?

With respect to the Alcon margins, look, the bottom line here is we've got to turn the top line. So we're continuing to make investments to make that happen. Because I think once the top line turns, then all kinds of good things flow through the P&L. Without that top line turning, that's not possible. As I think Harry referenced, we're going to have a wrap-around effect from 2016 on expenses, so we're going to continue to spend against this business. So I'd be looking at 2017 more as the trough year.

Paul, on Entresto.

As you imagine, I did plenty of diligence before accepting the role and subsequently on Entresto and what the opportunity could be as recently as talking to some top KOLs this last week or two. Clinically, there's no doubt that $5 billion and the previous ambition as stated is incredibly relevant. I think what we've talked about externally before and I've said this with Joe and the team, is that we should push on and exceed $500 million this year globally based on strong foundations in terms of setting ourselves up in Medicare and beyond and then Europe too. If we do that, I can see a line. When, I couldn't tell you, but I feel confident that we're resourcing it appropriately to get there and I feel l good about it.

And, Harry, on Innovative Medicines margins.

You mentioned GSK, ex-GSK, oncology assets had a 25% margin before we acquired them. And they have moved up significantly in their margin contribution. They are clearly around the average oncology which is very high margin and depending there will be some -- there's some ongoing combination trials. After that, they will be even above average. However, when you look at the profile of 2017, I mentioned initially this effect of Glivec being pretty high prior-year and prelaunch and other investments. The first half will be a bit depressed margins, core operating income declines, second half core op inc increase for the total Company driven by these dynamics in the oncology unit and quarter one will be even a bit more pronounced. We could have a core operating income declining high single digit to low double digit in quarter one versus prior-year. But GSK, ex-GSK, oncology is contributing very well to the overall oncol margin and the Company margin, ahead of our expectations.

Next question, yes.

It's Michael Leecoat from Main First. You've mentioned a lot about these value contracts, Joe and been very public about that. When will we see some hard data to give us an idea of how effective they are? If they're effective, how fast and how far can you roll them out across your business? And how will that impact the shape of your marketing costs, given on the one hand, you've got the value based contracts for Entresto and on the other hand, significant sales force investment?

That's a good question. Right now, as I said, the value based contracts are with a number of payers in the U.S. and also in Europe. They're confidential and so we're not going to, we're probably not going to be public with whether they're working or not working. What you will see is if they are working, you're going to see more of them. If they're not working, you're going to see kind of a retooling of what it will take. It's very interesting. Right now, everybody wants to do them and they're difficult to do because of data. The ability to get the data to actually see if hospitalization was reduced in that cohort or not. The integrated payers in the U.S. can do it. In Europe, there are many payer, single payer systems that have the data to be able to do it. But we're doing this more as a way to stay in the front of this because we know it's coming. There's too much waste in the system that will be eliminated once true outcomes-based contracting takes place. Not just in pharmaceuticals, but I'm talking about one of the reasons why we're doing this is that it's not just about the pharmaceutical. We're looking at a everything else, all other inputs that either result in that outcome or not and we're getting rid of the stuff that doesn't. And that is a lot of waste that we're getting out of the system. So I can tell you that it's going to be a journey. It's in its beginning phases. And so it's really too early to say how that would change the shape of the M&S spend right now. Yes, back in the back.

Thanks for taking the question. It's Narif Strahan from New Street. Firstly on Entresto, you've still got around 77% of Medicare plans with PAs and the vast majority of them are complex. Given that the guidelines couldn't have been much better, what is the kind of hold-up here and how much do you expect that to fall in the near future? And secondly, in your TRx guidance for 2017, have you assumed a material change in those PAs either on the commercial or the Medicare side? And then lastly on Cosentyx, we've seen a new entrant in Taltz and then eight price cuts. We may be seeing another one shortly in February for Cosentyx, in secukinumab. Should we expecting, given the changing dynamics in the U.S., is there a risk that there is a further rebate given through the year on Cosentyx?

Okay. So the 2017 number of exceeding $500 million globally includes the level of access as defined. Access will continue to improve in the complex to simplified to absence in both populations over the year but it will come gradually. The guidelines as we've all learned, I think in many therapeutic areas, not just in heart failure, they give wind at your back and a lot of confidence, but it takes time for the people to change prescriber behavior, particularly in conditions that have only been treated one or two ways for a very long period of time. So we made progress every day but it's not like a dam bursting. The take-away from the Entresto piece is the three variables that we've been fixing in the back end of 2016 for 2017 was to deliver more than $500 million. We will see and take stock then whether that's the right access. As for Cosentyx, I'm not sure I heard you right. Did you say a price cut? Is that what you said?

Rebates.

So we're the market can leader by some significant way in this class and of course ex-U.S., it's okay, but in the U.S., you have single and double stepedes depending on the condition, depending on the indication. We, by definition, have to rebate a bit less because we're the market leader. I think we've been very thoughtful and I think between us and the payers we've really looked hard at the patient populations and we recognize that rebate is just part of it. Then pull-through and turn into share performance and real patients, is on us to make sure that that happens. Whilst it will be modest growth at the beginning of 2017 in quarter one, I'm very much expecting an acceleration because of that access opportunity over the remainder of the year, any strong performance irrespective of number of competitors in 2017.

Question here and then we'll go to the right.

[Indiscernible]. Just a short question again on Entresto, just to have a bit more regional information about U.S. and ex-U.S., how it's been going and whether you can also say something going forward are there expectation is sliced by these by U.S., ex-U.S.

Sorry, Joe. So, I think we've touched on it before. We're roughly two-thirds, a third U.S. versus Europe at the moment. We don't -- that will resettle, we think, because don't forget that although ex-U.S. looks a little under-powered in terms of performance, we're about to launch in Italy. We're restricted for cardiology only and that will come off at some point this year in France. We had very favorable health technology support in the UK, but it's still early days. In Spain, we only launched in October. In terms of the major European markets that have a strong aptitude to treating in heart failure, you're expecting them to start to accelerate in the second half of the year and beyond. Then I think we'll see a rebalance and then perhaps the U.S. shift again based on how quickly we penetrate the Medicare population. So, I think the ex-U.S. looks a little bit lighter right now, but we'll start to gather momentum and then we'll see how they balance out throughout the remainder of 2017.

Next question on the right. Yes.

Manoj Garg from Healthco. Since we have Richard sitting patiently, I'll ask a few. The guidance provided for Sandoz, does it -- what does it contemplate for Glatopa 40. One. Two, what does it contemplate for U.S. pricing? And then three, we've recently so far this year seen some updated guidance out of the FDA on interchangeability for biosimilars. Just wanted to see from a practical sense, what impact you see to your business from that.

Thank you for the questions. Appreciate the engagement. So, on 40 milligrams, it's a good question. Maybe if I sort of explain the variables involved in that which I think make that quite difficult I think for people to model, including ourselves, is there are a number of factors. First, we have to have the approval from the FDA. As that happens, as you know, with Ananda, there is no specific time period that that has to happen in. That's one variable. There's obviously the litigation around the patent which also has a certain variability around that to when that happens. And then finally, as is very often the case in my sector is the number of competition or competitors coming in. So how many competitors will come in at the same time or later in the year and how will that play out for the revenue expectations on Glatopa 40 milligrams. So obviously, we're planning on launching that. Those are the variables which make it very hard to predict how that's going to impact the revenue for Sandoz. With regard to pricing --

Is it in this number or is it in the number of risk adjusted?

It's in the number. It's in the number. So then if you go to the pricing in general in the U.S. which was your question, we ended last year with a 6% price decrease, net price decrease which was slightly better than the year before. I wouldn't read too much into that. It's a market where we've always said it's around 6% to 8%. I would stand by that for 2017. So no major change from a pricing and the reduction in some of the price in the U.S. A lot of that, obviously, depends on competition, when competition comes in and how they come in. That's that question. On the interchangeability that we've just seen from the FDA come out, obviously that's just come out, so we're just absorbing that, but we think firstly the FDA set a very high bar with regard to having these products approved in the first place and biosimilarity and from an efficacy and safety. I think they followed that through to a certain degree on interchangeability. I think for us we see that as something which a Company like Novartis can manage very well. What it actually means in the market, I think, is a question a lot of people are asking now and I think that often will depend on whether it's in the hospital setting, the product or whether it's in the retail setting and then it also depend on how some of the states start to view substitution in individual states, because we know 26 states have made some decisions around that already. That's how we sort of view it. It's only a few days old, so we're still absorbing what that means.

Question in the back.

One question on the outlook for 2017. Can you guide us through your assumption on the pharma side, when do you expect the fourth and fifth generic of Glivec come into the market. One question for Richard regarding your biosimilars. I was expecting or you were as well in your presentation, the submission in 2016 of the Humira biosimilars in the U.S. Now looks like it's postponed for one year. One question finally for Paul. What will change once Humira biosimilars will enter the market? Do you expect the price to drop and for some patients to start first on Humira and eventually only after that on Cosentyx? Thank you.

Assumptions on the outlook for 2017 for Glivec, really, Glivec has already had generic entry in Europe, so they're already here. So really not much beyond that. Harry, do you have anything else to add?

I think [indiscernible] can maybe add more details. Several generics are already in Europe on the market and also in the U.S. we expect continued entries.

Richard? Go ahead.

In Europe, we believe the dynamics are very different from what they are were in the U.S. and it varies from country to country. On average we have eight to 10 generics that are registered per country and it's still early days that we lost the patent on the 21st of December. But there are 20 generics in Germany and in France we haven't seen a generic yet. It's still very early days. We'll see what happens over the next few weeks.

Richard.

In the U.S. we anticipate there will be more generics this year, clearly and some further decline in the U.S.

Maybe you could give --

With the Humira biosimilar originally had intended to file in Q4. Based on discussions with the FDA and ongoing capacity upgrades we're making at our production site and the timing of regulatory inspections that would be required, we have pushed that into the first half of this year. We expect to file it in the first half.

Paul.

In the U.S., particularly in AS and PSA and even somewhat in psoriasis, there's a single or double-step edit through a different mechanism irrespective of whether it's a biosimilar or not. So, we live in a world where other standards of care are expected to be -- to have failed. The difference between the Humira net price and the biosimilar price, I have no idea about. But I think that will settle down and I think because of the efficacy differential that we have in the major indications that we're in, that they will reach Cosentyx in the right period of time.

We have time for one more question and then remember, there's going to be a Q&A session after the development session and after the research session. Go ahead.

A question regarding your capital allocation policy. Just like you have done Alcon and you expect to do with Alcon review this year. I'm just thinking, what has been your thoughts on capital allocation. If you go back the last five years. If you look into your share buybacks how much they have created for your shareholders and compare that to paying out a dividend cumulative over the last five years and also looking into the actually rate of return that you made on bolt-ons over the last five years and how you see that actually, let's say that spill over into the next five years or three years.

Harry.

So I think I've demonstrated we have these four priorities. They are also in that priority. So first the organic investment and we have made significant ones despite the Glivec generics, for example and overall, we try to find always a very optimized balance. So we have done share buyback in 2014 and 2015. We announced now, given that the share price we believe is at a very low level that allows us to be a very good investment and good deal for our shareholders and as we go along our business situation, we optimize based on each of the elements. In terms of the bolt-on, if you go a few years back, we started in 2012 with Fujairah, $1.5 billion. Then we did a bit bigger than bolt-on with the GSK, buying oncology for $16 billion. Now we have done 18 smaller bolt-on deals to strengthen the pipeline over the roughly $2.5 billion, if you add all of those together. So, we really optimized the capital allocation according to the business situation and the market external environment.

What I'd like to do is have Vas do his section on development. We'll then take a break and then we'll come back and do Q&A on R&D. Vas.

Great. Thank you, Joe and thank you all for giving us an opportunity to give you a bit of an update on what we're up to in R&D at Novartis. Over the next two sessions Jay and I will give you a perspective on our late-stage development portfolio, as well as our mid-stage portfolio, as well as many of the exciting things going on at NIBR, as well as with our immuno-oncology portfolio. What I can say is what we're about to show you is what really animates the over 120,000 employees we have at Novartis. It's what makes us come to work every day to find breakthrough medicines that can change the lives of patients and change the trajectory of healthcare systems. Today in development, we have three key priorities. Creating an efficient and agile development organization that is future-proof for the next decade, delivering our late stage pipeline of 13 potential blockbusters and advancing our high value mid-stage opportunities, internal and external. I'm looking forward to giving you much more transparency as to some of the assets we're excited about in our mid-stage pipeline. Let's start with the development organization and some of the work we're doing. When you look at Novartis's track record in R&D, we have a deep pipeline. That's always been the case. Today we have over 200 projects in the clinic and 90 NMEs. We're very proud about the depth and breadth of our pipeline. We also have been recognized for our innovation power. We have 13 breakthrough therapy designations, seven FDA fast tracks last year in a range of different indications. We've also been successful, with 29 approvals over the last five years which puts us in the top three in the industry when you think about approvals in major markets. We also…

Great. So welcome back. We will now open up the Q&A for the development section of the presentation so if we could have the lights up and we will move to questions.

Couple of questions, first one on Paragon though we are hearing from some of your competitors who are just literally starting out with a heart failure development now that now the regulators want to study combining reduced and preserved ejection fraction. So you know if you want to do it now you have to combine paradigm and Paragon. So the question really is do you know what the reasons are the regulator is asking for that and have you had any conversations both with the regulators and the clinicians how in the unlikely event that Paragon is negative and I think you laid out the reason why it should be positive but if it's negative what the ramifications would be actually for the current label and the marketability in the current indication and my second question is on [indiscernible] and how efficacy correlates with the severity. I'm a little bit confused there because at the extremes [ph] there was a question towards the end of the presentation whether patients with long standing SPMS had a different response compared to patients who had just literally started progressing and I think couples. response was he thought not but the data were being analyzed. So I wanted to follow up with you on that today anyway, but I wonder whether on page 38 with your forest plot you've given a partial answer where you’re showing us the SPMS sort of relapsing positive versus negative patient population and I just wonder what is really asked SPMS with overlapping relapses is that actually sort of like patients who are starting to progress and quite close to the RRMS and I mean is there a risk here that really you mainly have efficacy driven by the patients who are not that far into the progressive phase yet and ultimately you know the distinction between RRMS and sort of early progression is a bit fluid. Thank you.

First on paragon, it's actually the first time hearing of any real discussions of combining preserve rejection and fraction -- ejection fraction -- our clear guidance from FDA has been on interest so that you know patients with injection fraction less than 40 or call for the reduced ejection fraction indication and greater than 40 for the preserved ejection indication. So I don’t believe there will be any read through from the results of paragon on the Entresto for reduced ejection fraction and our overall end points for Paragon remain cardiovascular mortality as well as rehospitalization so we also have an endpoint there on serial rehospitalization. I think we're the first company to work out how to actually measure that in a way that it's not just the first hospitalization but rehospitalization so we will be collecting both of those end points. So I can't provide any further insight beyond that but both of these pivotal protocols have gone through all the necessary regulatory reviews. Regarding [indiscernible] couple of points I would want to make, when you look at that fourth slide first the patients that we enrolled in the study had a mean EDSS score of 5.5 which means that they're pretty severe. So that gives you a sense that we did not enroll patients that were kind of in the early SPMS phase but really in the in the later stage of the disease. Now one of the questions that came up at ACTRIMS was that there was a greater effect size when you look at the [indiscernible] and the patients who have had symptoms for 10 years as opposed to 30 years but it's important to note that the number of patients that we had at 30 years was relatively small, so the study was empowered but…

Three questions on [indiscernible] and one on Alzheimer. First on serelaxine could you come back a bit on the current situation. I understand that you’ve achieved a number of events targeting but the database is not just closed and on this could you share with us the potential for this product knowing that you compare with the existing drugs that are used in acute heart failure are pretty cheap and given the current pricing environment so that’s serelaxine. Second on the [indiscernible] as we are approaching the decision from the FDA could you come back on how you will position this product on the CK46 landscape given the fact that there is product already put you and established on the market and that's a question Alzheimer's on your base inhibitor could you share with us what's the size of the eligible operation the people with the efficient with limitation [ph] and the standard homozygous population is quite a tiny population. I know it's quite early days so just some force and some ideas on the size of the potential for this product. Thank you.

So first on serelaxine and I will hand it to Paul on the commercial considerations, on serelaxine right now we have completed the -- we have seen the necessary events in the study. It's an event driven study based on the number of deaths adjudicated cardiovascular deaths that occurred at six months in the study. So right now we're in the process of the normal process we go through of course cleaning the database, finishing all of the necessary paperwork on the of adjudication and then we'd move to a database lock in and analysis. So right now we're forecasting that we would have a result in Q2 but if we did have anything sooner we would of course let you know. In terms of the commercial potential of serelaxine, maybe Paul will comment.

So I think you will remember from the past slides it was 1.2 million acute heart failure episodes a year roughly 50:50 Europe and the U.S. So just in case you may not have done, this message is infused over two days so one-off opportunity with what we hope is ground breaking efficacy later outcomes in the same year. We did 108 in two days, there was clearly a significant unmet need given the severity of this population. We’re working through the pricing analytics right now to decide where it should sit, and there is two very different environments we operate in there is the U.S. environment which of course has bundle payments to hospitals for heart failure patients and the ex-U.S. environment and in Europe and what that means in terms of protocols, listings, P&T committees. So I think it's safe to say that if we were to reach the goals as we've seen in the earlier days and to be well received by payers the number of patients means we've been several billion dollars category with this medicine. Also important to point out what we really have to work on in the intervening time but predominantly in the U.S. is how we access that protocol in the emergency room into the sort of cardiac care units because it's a new muscle for us getting listed, getting used, getting protocol in the hospital itself and overcoming what is known as the DOJ which is the bundled payments that I talked about. So we're upscaling in capability, we’re doing the pricing research but if the efficacy data reveals what we think it should then we are sat on the several billion dollars blockbuster open.

And then on [indiscernible] as I mentioned we had the clinical data to differentiate in particular subgroups as well as the additional data in the first line indication or maybe Bruno you want to comment on the differentiation.

Sure. My first order it's a very large market as we know we have made advancement of major study breast cancer. We're talking about 180,000 patients new patients per year between the U.S. and the Europe. You had the [indiscernible] setting and you more than double that number so it's a very large number and by all accounts the prediction for that market is that it could be 10 billion plus. We've seen the efficacy data, we’ve seen the side effect profile where the side effects are quickly identifiable, manageable and reversible. So we believe that we have a very competitive product and we're very excited about getting ready to launch that product. At one point I'd like to add is the history that we have in that field, this is a field that we know extremely well we've been present in that field for many, many years with [indiscernible] and we have one of the broadest programs not only with Monaleesa 2 but Monaleesa 3, Monaleesa 7 and also the adjuvant trials that we are going to start later on this year so we believe we are very well equipped to be extremely competitive in that market.

And then last on Alzheimer's, I don’t have the data on hand right now. So we'll get back to you but what I can say is the homozygotes population is a much higher risk population but obviously much smaller. I mean there is a multi-fold greater risk of developing Alzheimer's for the homozygotes. Of course they are moving into heterozygotes which will move later this year the population expands quite substantially the key element that will determine how fast we really come over the result is actually getting genetic screening done and getting patients ultimately enroll. So we have launched a number of programs to actually expand the genetic testing so that then we can start the funnel of getting patients to actually want to enroll that's a big part of the collaboration's we have with Banner in the National Institutes of Health. So maybe Richard then we will go right side of the room.

Richard Vosser from JPMorgan, just one extra question on [indiscernible] just wondering how you’re treating the co-primary endpoints inclusion of the worsening heart failure around the statistical hierarchy and perhaps you could explain the latest thinking for the hospitalizations going, I think in the previous Phase 3 the wrong way was the thinking there. Then on cosentyx, the FDA Adcom I think in 2015 still had some reservations about the FDA's belief in non-radiographic x-bar. So just thoughts what's different your trial looks to be similarly designed to [indiscernible] trials of the past. So what's changed there and then just finally on QAW039 I think atopic dermatitis results where a little bit where it doesn't seem to be going forward there so just is there any way across from that into the customary [ph] settings as well. Thanks.

Yes absolutely. So on serelaxin when we decided to add worsening heart failure on top of the cardiovascular mortality end point we actually made a sample size adjustments to not reduce the power on the mortality endpoint. So as part of the reason why the readout of the study got pushed out of quarter but there's no loss of power on the mortality end point and so there is no hierarchical testing these are actually both tested independently and then and powered appropriately. In terms of the cosentyx non-radiographic axial, I think the FDA has evolved in their thinking as more and more physicians and we had expert opinion as well as part of these discussions to understand better this is a real condition that warrants and approves therapy and labeling I think one of the important elements I'm not sure exactly what Humira had in their original studies in the U.S., but it is of course having evidence on MRI that you actually see some of the evidence early evidence of the disease and that's one of the most important inclusion criteria as part of the study design. For QAW039 I mean I think what, an atopic dermatitis we're on hold we're focusing our resources on the Ziarco compound. I think what we saw there in atopic dermatitis was a I think a mixed result we had a very compelling result at the interim analysis, the analysis at the final analysis did not show a significant result. We're not sure if that's because patients were allowed to be rescued on the placebo group or not, taken together right now, I mean we think that Ziarco present or the Ziarco product it's a better option for us in atopic dermatitis, we don’t believe there is any REIT across and I think you probably have saw two other studies that have now read out on the CRTH2 any [indiscernible] one in Japan and one in Europe and both had similar results and so I think that the mechanism and its relationship to reducing [indiscernible] is real.

We mentioned earlier but I think it's important to clarify again some of the notes I saw after the Ziarco acquisition made a direct comparisons to dupilumab and there were some questions about why we go in that space and just to reinforce what was said earlier, I mean it would be great if our efficacy gets closed that will be fantastic but remember first oral pre-biologic in that space is a very, very important space from the patient. We have seen it with otezla in psoriasis and we may take up a position like that with QAWR itself and it's driven severe asthma. So we are well placed on the back of cosentyx to come through on a topic with Ziarco.

I have two question, the first one on cart in Europe. You are now planning to filing in late 2017, I was wondering how well is the construction of your money factoring going in Germany and if you would be ready for commercialization later in 2018 and then on also in PPMS, I was wondering why have you not started to the best of my knowledge in PPMS.

It's a good time, on part we do we are working with a partner in Germany and so we are prepared to actually have that facility ready for the European filing. I think we will have a mixed approach between Morris Plains and the facility in Germany but that will be part of our launch plan in Germany and things are progressing on track. With respect to Ofa in PPMS, I think our plan at the moment is given the timelines that we’re in is to see the final labeling for ocrelizumab to inform how we would actually take — [indiscernible] in PPMS. Obviously PPMS study is large and a substantial investment for a relatively long study. So once we understand over ocrelizumabs label I think that will inform our study design of how we then move forward.

Two questions please, first on biosimilar rituximab program. You have kind of said you will file or you filed in Europe you are expecting approval by the end of this year. Can you just update us where you’re with that program from a U.S perspective and kind of why it's essential kind of combines on that. And second one taking a lot of your IO programs ahead. we haven't seen a lot of data either on your PD1, PDL1. We’re just taking all of the data that you’ve and how it's in totality, is there anything about those assets that stands out compared to before that we all know about or are they broadly similar, just compare and contrast why those assets might actually be interesting?

Yes absolutely. So for biosimilar and rituximab the EU filing is currently under review and as you said our plan is to have an approval this year. In the U.S., the U.S. asked for additional a progression free survival data from the Phase 3 studies. We have to wait for that data to mature in order to provide it for the filing but there's no other issues that's behind the difference in timelines of different data requests from the two regulatory authorities. They're on track to file that in 2017 as well. With respect to our PD1, I think we haven't shown data yet because it's still to be published but I think Jay could comment in more detail but broadly we would say our PD1 is performing in line with what we see from the other competitors and that's the basis for our moving forward. Our PDL-1 is an earlier stage of development and I think Jay could comment on that on the next session.

It's Michael Dion from UBS. Just going back to LEE-001 you made a comment about how many oncologists have access to an AKG [ph] in your remarks earlier. So I understand from a patient perspective just how you frame to slide that wouldn’t be a problem but from a physician's perspective how do you think about the patient having to move from one department to another and then coming back?

So maybe Bruno can comment but I think given the variety of drugs that are currently available that require some level of EKG testing, this is a normal course of business and important to note as well that there is ultimately a tech who comes in and is running the actual EKG reading and then deciding whether or not to bring in a cardiologist and then of course a cardiologist as a formal review. Bruno anything else you want to?

No that’s exactly what you're saying and in fact we have had a similar experience with [indiscernible] where we had exactly the same situation and where we had hematologist who went to perform EKG as well, so there was -- as we described and it didn’t prevent us from making a success out of the product. So we don't see that as being a really an issue going forward. I think the important point in what [indiscernible] presented was that it would be performed at the same time as the other visit and it won't be any extra visit.

It's Naresh Chouhan from New Street. Couple of questions on [indiscernible] please? We have discussions with neurologists who suggested that the upper limb function would be a very useful secondary end point given we didn't see any major improvement in 25 walk test. So do you clear the nine hole test and if so how did that look? And then secondly earlier approval of [indiscernible] would be quite material for growth in '18 and '19. So could you give a little bit of color on what the FDA is asking for to be comfortable with just one study and your level of confidence that you may have on whether or not you may have filed this year.

So on that we did collect a range of other data and we are providing that to the agency but none of that was a formal secondary endpoint, the only formal secondary end point we had on mobility was the six minute walk test. So I think that's important consideration, we of course will provide the additional data but typically particularly with FDA having exploratory analysis as part of a basis for registration it's typically not been the case and at least in neuroscience division. I think in general the discussions as I've said with -- have been I think everyone agrees that it's a positive study with a statistically significant key value in the -0.01 range. I think there is probably two levels to the discussion. One does this meet the standard of a single study submission and so that key value is on the edge of that depending on which guidance and which kind of precedent you look at. So I think that's one thing the regulators are rightfully understandably grappling with and then the second as I've mentioned previously is the sub population of non-progressing, non-relapsing patients and the kind of continuously progressing. I think that's more of a concern for FDA because of the certain labels that exist in the market of a relapsing MS so they would like to be able to see something clear and progressing patients. In Europe it's a little more open and so I think there are of course we'll have to wait for formal EMEA guidance to really guide us as to what else it would be looking for and would they be find the single study acceptable but I think in our interactions with EMEA regulators at the country level it's been a mixed feedback some are very positive and some are a little more cautious and want to see additional analysis.

The first one is no RTH, do you think that the drug will replace lucentis [ph] or you could co-position it's -- across along with lucentis and what are your options in case of failure because that’s our particular areas smaller compared to the other ones. So would you prune lucentis or would you reinvest in other mechanisms of action and another question on Nash. You already have I think four or five mechanisms of agent. So do you think that in order to address Nash you need both for you of mechanisms of agent, what's your view regarding the diagnostics and stratification of the population of patients because competitors have been changed specifically on these so what is your view on that?

So first on RTH I will hand it to Paul as well. The way the study is design the primary endpoint look at tier testing, first we look at can we -- are we non-inferior to aflibercept with quarterly dosing versus bi-monthly dosing and if we fail on that parameter then we can test for non-inferiority at bi-monthly dosing versus bi-monthly dosing. So we have kind of a fallback design within the study. I think the attraction of this of course is we also we get access to the U.S. market where we currently do not have access commercially, so RTH opens that up for us. I would say overall for portfolio, we're continuing to look at bolt-on opportunities. W presbyopia drug as I mentioned we also have an option for a dry eye drug from a company called Lubris which we’re quite excited about and we're continuing to look as well from the internal pipeline what we could bring forward. In terms of the positioning with lucentis, Paul?

Well lucentis, we have been under a little bit of price pressure ex-U.S. volume is stabilizing and we’re in a reasonable shape and in fact we picked back up a little bit in Japan which is where we had struggled a little bit and we've increased resources. I think if we do have a quarterly dosing with RTH I think that could be well received by the community and that’s what we’re hopeful. Could you then stratify and find different patient populations, it's possible but it also gives us ex-U.S. and pricing flexibility, also if you both in the market and we would get to decide. As for the mechanisms then that’s been complicated we have tried it with Vista, with the PDGF and they are not that many mechanisms traditionally follow up on so I think we're well placed right now. We have our little ways to go before we'd be in the market with RTH if we get there. I think that we have significant infrastructure already in play. So it would be nice to be both of them but the real flexibility would probably be around pricing.

So just on Nash I think I would say couple of things one on mechanisms I mean we’re quite pleased to have the different mechanisms in-house and you want a mechanisms here that’s anti-inflammatory you want a mechanism here that has metabolic properties like we do with LIK and there is a competitor in Phase 3. I think you also want to kind of linchpin assets like the FXR agonist that you can add these different compounds on top of so I think we're pretty happy with the combination of assets that we have there we're continuing to look at bolt-on opportunities because we don't exactly which combination is going to be the one that ultimately lead to significant improvements. I think the overall Nash base will evolve very rapidly now as multiple companies come forward with different proposals I think there's a few dimensions for that one is the length of time of the studies because I think initially there was a view you need to have two year studies and announce more and more data, will FDA evolve their expectations on how long you need to follow to really convince them of an anti-fiberoptic effect or other improvements in Nash course. I think the other is going to be and how we diagnose, right now there's still on a biopsy which is involved in our programs right now that we're running we do have biopsy. There's a lot of work we're doing and others are doing to look at biomarkers to say can you find other ways to convince the FDA that this is Nash and importantly can you stage it because that's the challenge I mean we of course. We have a portfolio that's both in the F1, F2, or F2, F3 kind of kind of early Nash as well as with [indiscernible] and some of our other compounds after F4s and cirrhotic. So the hard part is to make sure you can stage them with biomarkers and hence the need for biopsies. I expect in the next three years to be a lot of evolution in the whole trial design space around Nash.

So first one [indiscernible] can you comment on your IP position with your PD1 agent in light of the recent patent settlement between Merck and BMS. What is the reasons for PD1 finished the BMS [ph], and what would you have to do?

So I think the way we look at this situation it's too early for us to say and we need to be further long before we really engage in those discussions. I think the important point is there is a path forward that's now been charted by the market BMS agreements. So when the right moment comes we will assert our position and work our way through this situation but we don't see this any longer as a hindrance to our advancing our portfolio.

Another from Graham Berry, Bank of America Merrill Lynch [ph], related to ABL001, in a world where payers are mandating failures in first line before using it. This far superior data, what is the likelihood you can get ABL001 reimbursed in first time.

I will comment and maybe Bruno can also add. I mean I think in the world where we finally have first line data for ABL001 which is some years out, you would have multiple generic TKIs I would say available from the first line and that will open up fiscal space. If we can show that ABL001 on top of the TKI leads to that deep molecular response that patients and physicians want, that then allows them to stop therapy and only have to come on if they relapse earlier than they would have otherwise. I think there is a compelling opportunity there just given the overall timing.

I think there will be the continuation of what we're seeing today. In fact we see that testing [ph] is still growing nicely and we see that there is a space for passing out even in first line. Some medical doctors believe that acting fast and acting on the clinical response is important even in first line. So I think that it would be room for a product like a ABL001 and particularly because it lends itself to combination with TKI as well. So clearly we would have to demonstrate a superiority to the existing assets and we believe that there is certainly a space for such a product.

And maybe I will just add, thus far ABL001 on top of the TKI that’s a very nice safety profile and that's the combination we have been looking to bring forward in the first line.

On BAS 312 it's a long question but essentially in northeast that we don't have a Phase 3, second Phase 3 stops. Is possible interpretation is that this means we have a positive signal coming from the agencies and he's asking if we can comment on what would be the argument in favor of being able to file in this single trial?

All right. So first on why we did a single Phase 3 at the time we have started both Juliana [ph] PPMS and BAS 312 and SPMS because we knew progressive MS was a very challenging indication and so that’s part of our thinking as it was to see which of these molecules would likely work but we did go for an SPA to ensure that the agency fully was on board. I think the case for approving BAS would be that we do have a Phase 2 study in RRMS which read out positive so we have RRMS data and therefore in principle we have a two study package of Phase 2 and RRMS and a completed settting in SPMS which could support depending on the labeling you look at in SPMS or with plus minus relapses that would be kind of our the positive case of the native case would be if you didn't want to include that Phase 2 and you wanted to take a more conservative view on a single study then of course you would have a different approach and that's exactly the discussion we plan to have with both FDA and EMEA in the coming weeks. Anything else in the room? Yes, please. We have time for two more.

Maybe an overarching question on the whole pipeline because you’ve 90 [indiscernible] big numbers overall, maybe you can help us to give us your thinking about the commercial value that you have maybe by let's say how many of these components on a standalone basis if it was a kind of biotech company would exceed one billion in terms of in-licensing potential or market value and on the emerging assets if you can just keep two of them which would be the ones you would pick. Thanks.

Yes I think on the as I said I mean we really are focusing on this 13 plus late stage blockbusters that we believe we have, I think in the mid stage pipeline it would be too soon to forecast which of these we think would be blockbusters and I think that's where your question is going more in the mid stage and early stage correct?

[Indiscernible] you are willing to pay a 1 billion plus for in terms of dollar -- not the revenues on the market.

Let me frame it differently, what we do when we prioritize the pipeline is we're looking for molecules that have a significant commercial potential. I mean so one thing we want to do is reshape the pipeline is to look for assets that we think have the potential to be at least 750 million I will throughout a number of peak sales but all the way up from there and then of course we have the lifecycle management of the existing assets but we know we need to shape the pipeline for existing assets and what that means is that Phase 2 interface were becoming much more aggressive about deciding what we will out license and what we will keep. So in general if you see something on mid-stage pipeline that’s watch list that I showed you we believe that there is a potential for these to be significant assets that's why you see things like ABL001, atopic dermatitis, presbyopia, stroke prevention, resistant hypertension, neuropathic pain. If we have a hit on one of these in a Phase 2b study we would expect this to be a drug that yes we would pay a $1 billion to bring in. So that's what I want to highlight in that list I don't give you the full list of every possible thing but I really want to focus the attention. I will take one last one and we will stop.

Richard Wagner with Bernstein for Tim Anderson, the question is bout LEE011 and specifically it was about the historic analog to Tasigna Tasigna and the EKG monitoring. If you’re referring to the Glivec intolerant or resistant indication wasn’t the competitive context a choice between Tasigna and a different drug -- that had a more serious toxicity pleural effusion such that the oncologist choice to undergo the EKG monitoring requirement was in fact a choice not to take the risk of pleural effusion. So if I were to take that lesson instead and apply it here to LEE011 wouldn't the expected reaction be not to bother with the additional monitoring instead stay with the established product. Thank you.

So what I was referring to was that we were in a competitive situation where you had two assets, Sprycel and Tasigna, we came with Tasigna behind Sprycel and in addition we had actually a black box and we had to conduct and perform the EKGs and didn't prevent us from developing the product and making it a success. So I was looking at the practical aspect of running EKGs if you will for payment hematologist and making that parallel with what's going to happen in a breast cancer context with oncologist.

, :

I'm Jay Bradner, I'm a hematologist and I read my own EKGs. Thank you for joining and good afternoon. It's a pleasure to share with you insights from Research and Early Development. It turns out we live at a very unique time and we practice research and medicine here at Novartis in a very unique environment. At this time, we witness a convergence of the biological and physical sciences, a convergence also of guiding insights into the hard wiring mechanisms of disease as well as an expansion in the enabling technologies that facilitate the next generation of therapeutics together those like us at Novartis appropriately resourced to leverage disease biology insights for definitive therapeutics addressing profound unmet medical need are well positioned to make tremendous contributions to medicine and to make medicines that really matter for a company even as large as ours here at Novartis. This is therefore a very unique moment. Drug Discovery and early clinical development are integrated within the Novartis institutes of bio-medical research. I came to lead NIBR to make NIBR the most impactful and importantly most productive Biomedical Research Institute in the world to make definitive medicines for life threatening diseases we're not here to make Band-Aids and this will become important as we talk about cancer moving forward. For sure historically NIBR has been a leading site and a productive site for research and early development even for the last 13 years. You can see here on this slide, a good number of the licensed products used worldwide, they have significant impact for patients as well as for the bottom-line of this company. In that regard NIBR is highly inductive [ph]. We're fortunate though to work at a company that does not need to choose between internally innovative products and also to leverage…

Thank you. Florence [ph]. Two quick questions, first an easy one, could you share with us when we should see the first immune oncology products. I think will results remember from a discussion last year with you guys. That should be biggest thing of the half of this year so do we have to understand that the addition of B&E results [indiscernible]? And second question on specific on BYL719, BI3 Kinase Alpha product, my understanding that make sense to combine this product with your CDK [ph] project. Maybe I'm wrong any clinical trials combining a complex with something that you have in mind as well? Thank you.

I'll start and then hand over to Lilly around the timing. I want to be clear that I consider CAR T-cell therapy immune therapy. It is cell-based immune-therapy there can be nothing more immune than administering or prescribing T-cells to a patient and so in that regard there be very meaningful progress in early part of this year but I do understand your question to mean a result surrounding this next generation of agents. Lilly, can you share the expected timeline?

We're going to rebuilt our really robust pipeline last year the studies are enrolling quite well so we will this year we should begin to see the emergent data from these studies I can't give you an exact timing but they're really progressing very nicely.

I think I will take the BYL. On the BYL so we are continuing to actually we do have a study on going study to look at BYL plus LEE plus [indiscernible]. I think the key thing now is for us to look at the toxicity profile overall of the triple combination to make sure it is positive to take forward as soon as we make that decision we will let you know.

Michael Ekoff [ph]. It's a very simple question that probably with a yes or no answer. In all your chart where you have IO combinations of the PD-1 is it your PD-1 is it the same PD-1. And if yes to those two, how do you know that's the best PD-1?

That's not a yes no question but the answer is C, all of the above. We have studies planned and open with our own medicines as well as with established medicines. And we think that this is an important part of leverage, as well as our developing internal experience with each of these types of drugs.

Thank you.

Marriott [ph], couple of questions please. The first one on CRISPR, I mean teams everybody's working with CRISPR in some shape or form. So I'm just trying to understand you know is there a particular IP around this, do you have to unique right to use this to modify approach and to become drug of all target -- targets or how should we think about that. And second question just very briefly on the CART and solid tumors, can you just give us a rough feel for the timelines for that, and what some of the key obstacle to overcome would be, thank you.

Thank you. I’ll just start on CRISPR and then ask one to weigh in on solid tumors with CART. CRISPR is so easy even a chemist can do it. You're right. Everybody is using crisper but everybody is using it for target identification, such as crisper screens target validation, walking along the open reading frame of the genes of figure out what's a drug, model creation, it's the new faster way to make mouse knockout models and mouse knock in models. But as it turns out few groups are organized in a way to make a definitive therapeutic out of crisper. And we believe we're collaborating with two of the best at Intel and in Caribou. So our strategy with crisper does lean on the creation of novel intellectual property, and accessing new intellectual property as it is described, this is a field that is moving very, very fast. And we believe we have a very competitive position regarding IP both through FTO interactions and tell you a as well as our internal intellectual property elaborated over the last several years. Glenn, would you care to comment on solid tumor CART.

Yes, thank you for that, important question about CART cells. I think it's critical to underscore that CART cells, really are a form of definitive therapy. And that the data achieved in children with refractory lymphoblastic leukemia, is remarkable transformative and raises the possibility that single treatments can actually give rise to very, very durable clinical benefits. So we are quite excited about continuing to explore the power of CART cells, in the solid tumor space with all our colleagues at University of Pennsylvania, we are currently interrogating two targets, the variant three ice a form [ph] of the epidermal growth factor receptor that's expressed that about 20% or so of Glasgow multiform [ph] a leasehold of brain cancer. As well as [indiscernible] a cell surface protein that's expressed on many important, I don't know carcinoma which is pancreas, colon, ovarian and long. Now it does appear that the challenges in CART cells and solid tumors will involve many of the same problems that we are addressing through the portfolio of immunotherapy assets that they illustrated because solid tumors created immunosuppressive microenvironment. But we're quite optimistic that with this tool kit that we have, that will be able to identify what are the limiting parameters for holding CART cells back from better therapeutic efficacy in this solid tumor space and will rely a lot on the translation all research laboratory, that set up to help us understand that a very detailed level how we are impacting the tumor microenvironment.

Thanks, this is Richard Vosser for JP Morgan some track some trial signs that potentially suggests PDO-1 lack of interaction with these 7-1 could provide sort of greater long term survival benefits, it's just really your thinking on that and the emerging science and development signs, a and your first develops on D1, just how do you think about the merging signs there, thanks.

That's a great question and the PD-1 pathway is not monolithic. It doesn't simply involve the interaction of the PD-1 receptor with a single light and PDL-1. But rather there is at least the second light in PDL-2 and that. PDL-2 is able to engage in another receptor and PDL-1 disable to engage another receptor in B7-1 that you talk about. There is very active study both pre-clinical and clinical systems to try to understand which of all of those interactions really are critical. I think it's still a bit premature to talk to identify PDL-2 versus PD-1 as being fundamentally different, but this is extremely important issue as the complexity of if you know ecology residents get increased. So for example, where the regulatory T-cells may be impacted by a specific therapy, they express very high levels of CTLA-4 as you know, that interacts with high affinity with the B7-1 molecule that you described, but if CTLA-4 is not in the picture because T-cells have been paired, then B7-1 and PDL-1 interaction comes to a much higher importance. So we're very excited about exploring that biology or the context of the arsenal that we have.

Two questions please. The first one just gives us a sense for kind of between [indiscernible] kinds of least the replacement. -- are we talking a billion or 3 billion, just kind of give us some flavor.

So we don't discuss the sub division of the R&D. spend quite in that way though we could think on that number for you. I can say that it is significant and vast can say it is increasing.

And the second question perhaps a stupid question to ask, but a somebody who's kind of who you describe the neighbor environment, somebody who's kind of vast described development organization would be very interested in understanding how the decision making actually happens for the organization. I suspect you got 18 programs, you got probably at least 70 combination for the insurance you're thinking about 10 tumor types, we're thinking about two or three lines of treatment. So somebody comes to you and says I want to study this agent with this agent in this line of treatment. How do you as a manager running that business unit, decide what is the right study to run. What is not the right study to run. At least from the output perspective you don’t have access to a lot of the diagnostics stuff it's not a field you've been in for the last 10 years. So just help us understand what's driving your confidence in making the right decision making that.

It starts with having the best people in science that are sitting around you, that we're very blessed, with that circumstance and there are there's no question, but also it needs quite a bit of structure. These creative minds and quite a bit of structure, and Vasant and I have a series of checkpoints governance bodies one for the formal entry into the Novartis pipeline, it's called TNT targets and new technology. We have a portfolio not just of targets that we're prosecuting for therapeutic innovation, but also as you say periodic-matic [ph] therapeutic technologies and we can work on everything. And so these decisions are taken quite seriously formal entrance to the pipeline. As technology matures as drugs a bubble up from that research environment, they are presented for the second checkpoint at organ -- at a meeting called the translation into early development, that's where medicines are identified nominated and received the extra funding necessary to repaire7 technology for human clinical and innovation. That is also the step where we adjudicate the response of phase one and two study. Vasant attends these meetings and so it's a seamless handoff when the medicines then graduate into development. They will ultimately meet with the INB board that Vasant chairs, and that's where a decision is taken whether or not to commit the major spend necessary to perform registration studies. But perhaps Jeff could talk leading oncology about how discrete scientific projects emerge, from our largest disease area oncology.

You know, so one of the things we try to do in oncology, is we're really trying to identify the next wave of transformative therapies. Glenn spoke about the IO therapies and that -- Jay spoke about that as well. Some of the technologies that Jay outlined open up possibilities that we never knew existed before in terms of what we could target with molecules and what we could actually develop as drugs. We now -- as Jay mentioned, it used to be in a pharmaceutical company you would rely on the academic centers to help you identify what you would want to drug and how you want to drug it, what types of combinations you want to develop. Novartis made the investment to develop an outstanding research institute and that type of work now is done at the highest level internally and we have -- we understand the genetic dependence of almost every cancer model we have according to every gene that exists in the genome. This type of data is extraordinarily powerful and we use this information now to develop the next wave of therapies that as Jay and Vas and everyone says, we're not really here just to budge the needle forward a little bit, we're going to try to make therapies that really have an outstanding impact on patients with the new immunotherapies. With their targeted therapy profile we're really thinking about what are the next wave of therapies that will change patient's lives and when we find those we bring them to TNT and we hope Jay says we can go forward and if he does, we go forward quickly.

This is Michael Ekoff [ph]. I mean just on your pie-charts of the diseased areas, I just wondered Jay how you get to manage this? It looks more like the institute of oncology in immune-oncology. How do you avoid the infectious disease people, feeling sort of pushed-out, left-out and eventually probably leaving? How do you get in there and proportionate shout in the scheme of resource allocation?

Yes, thank you for this question. It's the first time I've ever thought about it because that's not their experience, I think they feel very supported and loved. But the way that we've done this is to strategically position groups that might be in some sense fringe groups to create real centers around them. Last year I took the difficult decision to move the Novartis Institute of Tropical Diseases from Singapore where it was very productive to Emeryville, California. To bring our tropical disease infectious drug hunters into the same laboratory spaces as Donegan [ph] on their anti-viral an anti-bacterial drug hunters. They are supported also by one of the top protein science fragment-based NMR screening in crystallography groups with the Novartis if not the world, they now have a community. At that site that to them they wished others were around them, they feel very well supported. Another way that we do this is we have scheduled throughout the year TED meetings that will -- and TNT meetings that will focus on specific areas where they can bring forward their full portfolio. And then the last for the leadership team, we initiated last year something we call SOLANS [ph] based on the European salons in Paris where artists of the day would bring their artwork to dazzle the other artists and their cohort. We did the same with our science, it is a first step of our annual strategic planning process and so we shine a big bright light on these other disease areas. And you then wouldn't be surprised by having these leaders, all mix together through these coordinated events that we see technologies transition innovated in oncology and then applied immunology and vice versa. It is a highly collaborative and surprisingly not siloed [ph] research environment despite the geographies and territories that we span. We have time for one more question.

Thank you very much. [Indiscernible]. I want to ask a question outside cancer because at CMC [ph], outside cancer is more than 50% of the total molecules in your portfolio. I'm going to understand how you decide which areas because I see some areas which are quite challenging; if I take cardiovascular for prevention or [indiscernible] quite a graveyard, and some older areas if I look at neurology disorders or know if I kicked paid [ph], the bar is quite high and developing new antibiotics is quite challenging. Can you share with us why you believe at NIBR even though they consider the resources and you know how to find new drugs on this area?

You could imagine that we've put a lot of thought in this at the leadership level within NIBR, in collaboration with our colleagues in innovative medicines and development, and at the board level we think hard about the places where we make investment and we invest in research in places that we think have extraordinary potential. Neuroscience has been a challenging area to make drugs, yet we think that there is great potential by reconsidering the models of these diseases. Multiple sclerosis was a very difficult area to develop drugs yet we may Gelania [ph]. Cancer was a very difficult area to consider target therapies, yet we make Glivac. I think this is exactly the environment where you nuanced insight into disease biology can open up new markets. Joe?

Okay, I want to thank everybody for coming today. I want to just close the session by saying that our intent today was to give you in-depth look at the depth and the breath of our pipeline, and I hope we were able to accomplish that. But I think another byproduct of that was that we were able to give you a look at the depth and the breadth of our management talent which is very important because we are undergoing a generational change at the company and its part of the rejuvenation of Novartis. So thank you very much again for coming and we look forward to keeping you up to speed every quarter with our results through the fiscal year.