Letter from Daniel Vasella

Dear Shareowner,

It gives me great pleasure to be able to present record results again. Today, Novartis is one of the fastest growing global pharmaceutical companies. Thus, we have overtaken competitors and are now in fifth position in the Global Pharmaceuticals sector. At the same time, we have gained market segment share in all of our other businesses. Let me summarize the key results in 2003:

• Increase in group sales of 19% to USD 24.9 billion (+ 11% in local currencies)
• Expansion of operating income to USD 5.9 billion (+16%), of net income to USD 5.0 billion (+6%) and of earnings per share by 8% to USD 2.03
• Growth of free cash flow by 23% to USD 3.6 billion
• Pharmaceutical sales climbed 18% with the especially successful enlargement of our product line in Oncology (+36%) and Cardiovascular medicine (+36%), combined with a further rejuvenation of our product portfolio
• Dynamic growth of our Consumer Health business (+24%) and particularly of our Generics business, Sandoz (+60%)
• Expansion of our development pipeline to 79 projects, of which 34 are in late stage development or registration
• Extension of our access to medicine programs for uninsured and indigent patients suffering from leprosy, malaria, tuberculosis, chronic myeloid leukemia and other diseases.

We attribute our success to our clear focus on sustainable growth, our corresponding, consistently innovationoriented strategy, and the capabilities and commitment of our associates. Accordingly, we see our investments in Research and Development as being of primary importance. Last year we increased our investment in Research and Development by 32%. In Pharmaceuticals alone, we invested more than USD 3 billion in 2003 to discover and develop innovative medicines, and to improve treatments for patients. The first phase in the buildup of our new research center in Cambridge, Massachusetts was successfully completed. Nearly 400 scientists are already working in the new laboratories. In 2004, we will continue the expansion. This demands continued over-proportional investments that will yield mid- to long-term returns.