Supplier Collaboration & Innovation ...... is not an either-or proposition *

Emmanuel Cambresy – Global SP&I ManagerJune 18, 2015

* Source: Kate Vitasek, Forbes – January 2015

Novartis is a global healthcare company based in Basel, Switzerland, with roots dating back more than 150 years. We provide healthcare solutions that address the evolving needs of patients and societies worldwide.

Novartis products are available in more than 180 countries worldwide. Our products reached more than 1 billion people globally in 2014. About 133 000 people of 150 nationalities work at Novartis around the world.

NovartisWho we are

Our approach for sustainable growth

| NBS | SP&I | Supplier Collaboration & Innovation | June 2015 | Business Use Only | Not for distribution2

NovartisA world-leading healthcare company

2014 USD billion

Net sales: 58.0

Net income: 10.3

R&D investment: 9.9

Key figures

Leading market position

One of 25 largest companies by market capitalization

Among most respected companies globally

Sales by region 2014

Canada/Latin America

US

EuropeAsia/Africa/Australasia

37%

32%

21%

10%

| NBS | SP&I | Supplier Collaboration & Innovation | June 2015 | Business Use Only | Not for distribution3

NovartisA historic shift in our strategy

Novartis Business Services (NBS)Integrated Solutions that Matter

#2 generic medicinecompany worldwide

# 3 pharmaceuticalscompany worldwide

Novartis Pharmaceuticals

#1 eye carecompany worldwide

Alcon Sandoz

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Supplier Performance & InnovationVision & Mission

| NBS | SP&I | Supplier Collaboration & Innovation | June 2015 | Business Use Only | Not for distribution5

Vision Within Novartis Business Services, SP&I aims to be recognized as a thought-leading

organization in the areas of supplier excellence, continuous improvement and business transformation through outstanding supplier relationships and unique insights on how Novartis can deliver innovative solutions to help customers.

Mission Support local, regional and global sourcing organizations, strategic supplier teams and key

stakeholders to successfully complete joint transformation that will deliver Total Business Value through increased customer satisfaction, additional productivity, new capabilities, industry recognition, capital efficiencies and measurable enhancements to business processes.

The SP&I Value ChainAn end-to-end value creation system

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Supplier Segmentation1

Culture & Mindset

Governance & Sponsorship

Tier 1Identification

Strategic Account Management2

SharedVision

PerformanceManagement

TransformationManagement

SP&I Value Chain

* measured at the service delivery point (i.e. country, site, plant, distribution center, division...

Vision & Strategy3

SupplierCorporate Strategy

Voice OfThe Customers

Growth ◄Productivity ◄

Innovation ◄

Shareholders ◄Stakeholders ◄

End-Customers ◄

NovartisBusiness Strategy

Local SupplierPerformance Inputs

Operational◄Relational◄

Transformational◄

Supplier Performance *4

CountryOrganizations

Joint Project Execution7

PerformanceImprovements

► Do what we do better

► Exceed targets

ProcessImprovements

BreakthroughProjects ► Change what we do

Value Management **8

Productivity

Value Sourcing

Process Demand

IncreasedBenefits

DecreasedRisks

DecreasedCosts

IncreasedOpportunities

ValueSharing

InvestmentManagement

Innovation Management6

Portfolio Management

StrategicDirection

► Priority

► Intent

Ideas &Opportunities

Innovation Factory◄Supplier Innodays◄

iVillage◄

IdeationEvents

SocialInnovation

Crowdsourcing◄Crowdfunding◄Communities◄

TotalQuality

LEAN◄Value engineering◄

Six Sigma◄

Creativity & Ideation5

** Source: “Getting to We”, by Jeanette Nyden, Kate Vitasek and David Frydlinger.e

SP&I StrategicInputs

Strategic AccountManagement

SP&I StrategicOutputs

Global Account ManagementFive key features

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What is needed for successful Account Management?

Culture &Mindset1 ... in order to create a favorable and collaborative partnership climate through

clearly defined Values & Principles, supported by the right Behaviors.

SharedVision2 ... in order to build perspectives and allow both parties to focus and align on jointly

agreed Strategic Objectives that will drive partnership focus areas.

Governance& Sponsorship3 ... in order to engage key stakeholders, receive executive sponsorship, obtain

commitment from all associates involved and maintain continuity of resources..

PerformanceManagement4 ... in order to monitor operational excellence against agreed targets, assess the

overall performance of the partnership, proactively bridge gaps and solve issues.

TransformationManagement5 ... in order to document the process used to transform ideas into business value,

clarify the way value is recognized by both parties and how value gets shared.

Who owns Account Management? Account Management is co-owned by all functions involved at every stage of the partnership lifecycle,

which act as permanent or ad-hoc members of the T1 Account Governance Board, including:

SUPPLIERNOVARTIS

CatMan

SP&I

Operations

QA

Legal

Finance

Sales & KAM

Solutions

Operations

QA

Legal

Finance

Program developed in conjunction with University of Tennessee. © Vested Outsourcing, Inc. Used with License.

Global Account Management“Getting to We ®”

| NBS | SP&I | Supplier Collaboration & Innovation | June 2015 | Business Use Only | Not for distribution8

Culture &Mindset

Governance& Sponsorship

PerformanceManagement

TransformationManagement

SharedVision

1

2

3

4

5

The GAMP embeds the “Getting to We®” process into the Global Account Management process with the goal to lay a strong foundation for Novartis Tier 1 strategic supplier relationships.

Program developed in conjunction with University of Tennessee. © Vested Outsourcing, Inc. Used with License.

Global Account ManagementWhy does every feature count?

| NBS | SP&I | Supplier Collaboration & Innovation | June 2015 | Business Use Only | Not for distribution9

ConfusionLack of

alignment

MyopiaLack of

perspectives

AbsenteeismLack of

ownership

ComplacenceLack of

oversight

FrustrationLack of

innovation

SharedVision

Governance & Sponsorship

PerformanceManagement

TransformationManagement =

Culture& Mindset

Governance & Sponsorship

PerformanceManagement

TransformationManagement =

Culture& Mindset

SharedVision

PerformanceManagement

TransformationManagement =

Culture& Mindset

SharedVision

Governance & Sponsorship

TransformationManagement =

Culture& Mindset

SharedVision

Governance & Sponsorship

PerformanceManagement =

Culture& Mindset

SharedVision

Governance & Sponsorship

PerformanceManagement

Drive ChangePartner

& Succeed =Transformation

Management