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Novartis AG
   Postfach
   4002 Basel
   Switzerland

April 22, 2011

Mr. Jim B. Rosenberg

Senior Assistant Chief Accountant

US Securities and Exchange Commission

100 F Street, N.E.

Washington, DC  20549

Re:                              Novartis AG

Form 20-F for Fiscal Year Ended December 31, 2010

Filed January 27, 2011

File No. 001-15024

Dear Mr. Rosenberg:

This is in response to your letter addressed to Jonathan Symonds, our Chief Financial Officer, dated April 8, 2011 setting forth comments regarding our filing, and seeking certain information.  For ease of reference, we set forth your comments below, followed by our responses.

Item 4.B Business Overview

Pharmaceuticals
 Compounds in Development, page 38

SEC Comment No. 1

In order to help us evaluate your disclosure about your research and development activities, please provide us the following information:

Novartis Response:

Given the significance of our research and development activities to our Company, we extensively communicate the status of our efforts to the public both by means of ad hoc disclosures, and by means of filings with the SEC.  Throughout the course of the year, as developments arise, we issue ad hoc press releases to the media reporting on events associated with our pipeline.  Similarly, our quarterly and annual results releases contain updates and summaries of the status of our pipeline projects.  These ad hoc and results releases are then furnished to the SEC attached to Forms 6-K.  In addition, we present the status of our pipeline at investor events, and these presentations are posted on our website, novartis.com.

Finally, our Form 20-F annually provides investors with a comprehensive disclosure of our research and development activities.  These disclosures are found in our Compounds in Development section, together with our Research and Development section and our Regulation section.  Together, these sections describe our Pharmaceuticals development pipeline and our research and development efforts, including the projects in development, the process we follow in our efforts to develop products, the regulatory framework we must work under to get our products approved, and our investment in research and development.  See “Item 4.B Business Overview—Pharmaceuticals—Compounds in Development,” pages 38-47, “—Research and Development,” pages 49-51 and “—Regulation,” pages 51-53.

In response to your specific requests, we provide additional information underneath each bullet point below:

·                  SEC Request: A description of your research and development process for each of your segments, including to what extent regulatory approval is required to market products.  In your response, please describe the key management activities within your “development paradigm,” particularly the “confirmatory” phase, including a description of your process for monitoring development progress for individual projects (e.g. board reviews), your criteria for prioritizing and funding projects, your key decision points for determining project continuance or termination and financial measures used to evaluate performance of your “development paradigm.”

·                  Novartis Response: A description of the research and development processes and the regulatory requirements for the approval of products for each of our divisions disclosed in our Form 20-F can be found in Item 4.B at the following locations:

·                  Pharmaceuticals Division: “Item 4.B Business Overview—Pharmaceuticals—Research and Development,” pages 49-51 and “—Regulation,” pages 51-53;

·                  Vaccines and Diagnostics Division: “Item 4.B Business Overview—Vaccines and Diagnostics—Research and Development,” page 65 and “—Regulation,” page 66;

·                  Sandoz Division: “Item 4.B Business Overview—Sandoz—Development and Registration,” page 73 and “—Regulation,” page 73;

·                  Consumer Health Division: “Item 4.B Business Overview—Consumer Health—Research and Development,” page 78 and “—Regulation,” page 78.

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In response to your further request, the following is a description of our internal processes for monitoring and managing the progress of individual development projects in our Pharmaceuticals Division, which we would propose in future periodic reports on Form 20-F to add to the description of the “—Development Program” (found on page 50 of our Form 20-F for 2010) as a new second paragraph to that section:

At each of these phases of clinical development, our activities are managed by our Innovation Management Board (IMB).  The IMB is responsible for oversight over all major aspects of our development portfolio.  In particular, the IMB is responsible for the endorsement of proposals to commence the first clinical trials of a development compound, and of major project phase transitions and milestones following a positive Proof of Concept outcome, including transitions to full development and the decision to submit a drug to health authorities.  The IMB is also responsible for project discontinuations, for the endorsement of overall development strategy and the endorsement of development project priorities. The IMB is chaired by the Head of our Pharmaceuticals Division and has representatives from Novartis senior management, as well as experts from a variety of fields among its core members and extended membership.

·                  SEC Request:  For each segment that requires regulatory approval, quantify the number of projects that were in preclinical development and Phase I, Phase II and Phase III of clinical development and for those which a submission requesting regulatory approval was filed as of December 31, 2010.

·                  Novartis Response:   As of December 31, 2010, our Pharmaceuticals Division had 52 projects in Phase I clinical development, 47 projects in Phase II, 33 in Phase III and 15 in registration, for a total of 147 development projects, which total number was reported in our Form 20-F at page 26.  Also as of December 31, 2010, our Vaccines and Diagnostics Division had 5 vaccines projects in Phase I clinical development, 5 projects in Phase II, 3 in Phase III and 5 in registration,

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for a total of 18 development projects.  Regarding our Sandoz Division, the development of their products do not follow the Phase I-III process followed in the development of new branded pharmaceutical products.  See “Item 4.B Business Overview—Sandoz—Development and Registration,” and “—Regulation” at pages 73-74.  Regarding our Consumer Health Division, only certain of the products developed by that division are developed following the Phase I-III process followed in the development of new branded pharmaceutical products, and it is not our practice to disclose the pipeline of that division, which, given the size of that division relative to the Group, and the comparatively small amount invested by the Consumer Health Division in research and development (see page 78) we do not believe that such information would be material to investors.

With regard to your request for the number of projects in our preclinical pipeline, we do not believe that such information would be meaningful to investors, and to the contrary could be misleading.  The time from discovery of a new chemical entity to commercial launch can take up to 15 years, or even longer.  In addition, for each preclinical project, there is a substantial risk that it will fail even to reach Phase I clinical development, with an even greater risk that it will fail to succeed through all levels of clinical development and be approved for commercial sale.  As a result, information regarding the number of projects in the preclinical pipeline would not provide investors with meaningful information with respect to the potential future prospects of the Company.

·                  SEC Request: For each segment requiring regulatory approval, the breakout of research and development expenses incurred during 2010, if practicable by development phase (i.e. preclinical, Phases I, II and III) and by therapeutic class.

·                  Novartis Response: The research and development expenses for each of our divisions disclosed in our Form 20-F can be found in Item 4.B at the following locations:

·                  Pharmaceuticals Division: “Item 4.B Business Overview—Pharmaceuticals—Research and Development,” page 49;

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·                  Vaccines and Diagnostics Division: “Item 4.B Business Overview—Vaccines and Diagnostics—Research and Development,” page 65;

·                  Sandoz Division: “Item 4.B Business Overview—Sandoz—Development and Registration,” page 73;

·                  Consumer Health Division: “Item 4.B Business Overview—Consumer Health—Research and Development,” page 78.

·                  In response to your request for more detailed research and development expense information, our research and development costs comprise direct project expenditures, personnel-related costs and various other costs, including infrastructure, travel and information technology costs related to research and development functions. A significant proportion of our research and development expenditures are fixed in nature and, in some cases, can be difficult to allocate to specific projects with a high degree of accuracy.

We manage our research and development expenditures across our entire portfolio in accordance with our internal priorities. The level of research and development investment required for a particular molecule will be driven by many factors including the medical indications for which it is being developed; the number of indications being pursued; whether the molecule is of a chemical or biological nature; the stage of development; and the level of evidence necessary to demonstrate clinical efficacy and safety. As a result of the complexity of such factors, additional disclosures on research and development expenditures by therapeutic area and/or development stage may not be accurate, and would not be meaningful information to investors either regarding any particular therapeutic area, or as to the Company’s commitment to research and development overall.

In addition, given the disclosures already provided, we do not believe that the breakout of research and development expenditure by development phase or by therapeutic class would add significantly to an investor’s understanding for the following reasons:

·                  We have a broad and diversified portfolio encompassing 147 clinical stage projects (as at December 31, 2010 in our Pharmaceuticals Division alone).  Thus our investment in any

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given set of projects within a defined development stage or therapeutic area is not likely to be individually material;

·                  We believe that the key disclosures relate to the scientific aspects of the projects themselves, rather than to our expenditures. Significant information is made available to investors in various ways in this respect and we believe additional cost information would be of limited benefit;

·                  As mentioned above, our research and development costs include a significant element of unallocated costs. Excluding such costs would limit the usefulness of the information to investors. Equally, attempting to allocate all such costs would also impact the accuracy of such information, again limiting the usefulness of the information to investors;

·                  Such additional disclosures are not consistent with current market practice. As such, we would be concerned that unilateral disclosures may put Novartis at a significant competitive disadvantage.

·                  SEC Request: For your key projects in the Confirmatory development stage listed in the Selected Development Projects table, indicate the month and year that it entered that phase.

·                  Novartis Response:  We do not believe that such information would be material to investors.  As stated, pharmaceutical projects can take many years from discovery to approval, and the length of time in development is not necessarily meaningful, and can be misleading, with investors potentially assuming that the length of the development period is meaningful.  We do provide investors on pages 38-42 with information regarding the current phase of development each project is in, and the year in which we plan to file the project with health authorities for approval.  In addition, for our key projects in development, we provide a narrative describing the development status of the project.  In our view, it is this information which an investor could view as material with respect to our pipeline.  We do not believe that the backward looking information of how long a project has been

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in Confirmatory development would assist investors in making an investment decision.

·                  SEC Request: For your key projects in the Confirmatory development stage listed in the Selected Development Projects table, identify the significant patents associated with the project and their expiration date.

·                  Novartis Response:  The disclosure of information regarding the patents on our compounds in development would be both misleading to investors, and would disrupt the FDA’s process for disclosing such patents, potentially putting us at a competitive disadvantage.  The information would be misleading to investors because it would be, by definition, incomplete, and not a true picture of the patent status as would be applicable to the compound when and if it is ultimately approved.  This is so first because patent applications for many of the compounds will be pending, but not yet granted.  Second, in the US and other countries, pharmaceutical products are eligible for a patent term extension for patent periods lost during regulatory review.  Essentially, the law recognizes that FDA review can take an extended period, and permits an extension of the patent term for a period related to the time taken for the FDA’s review.  However, the length of this extension cannot be known in advance, but is only determined after the product is approved.  Similarly, pharmaceutical products are eligible for an additional period of marketing exclusivity if the manufacturer conducts clinical studies in a pediatric population upon FDA request.  But whether this extension is granted cannot be known at the pre-approval phase.  Finally, while certain patents may be applied for early on in the development process, such as for the compound itself, it is not uncommon for additional patent applications to be applied for throughout the development process, such as for formulations, or additional indications.  So for these reasons, any early disclosure of the patent portfolio associated with a development compound would be misleading to an investor, and would not provide the investor with meaningful information as to the strength or lack of strength as to the patent protection which the product might ultimately have if and when it is approved.

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Perhaps for this same reason, the FDA only requires pharmaceutical manufacturers to disclose their patents at the time new pharmaceutical products are approved, at which time, the patents are required to be disclosed in the “Orange Book.”  See http://www.accessdata.fda.gov/scripts/cder/ob/default.cfm.  Generic pharmaceutical manufacturers then use the patent information disclosed in the Orange Book to begin their process of developing generic competitors to our branded drug products.  Should we be required to disclose our patent portfolio (or whatever portion existed as of the time of disclosure) prior to the date a product was approved, we would be placed at a significant competitive disadvantage with respect to any generic pharmaceutical companies which might be beginning their preparations for a generic challenge of our products.  Such information would enable the g