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Novartis   AG

Postfach

4002   Basel

Switzerland

June 30, 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 reply to your letter addressed to Jonathan Symonds, our Chief Financial Officer, dated June 2, 2011, which was in response to our letter dated April 22, 2011.  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

Please refer to prior comment one.  We acknowledge your assertions and proposed new disclosures.  Considering that almost 80% of your research and development expenses for each of the last three years were incurred by the Pharmaceuticals Division, please provide to us a further breakdown of research and development expenditures for that Division for 2010 and 2009, consistent with your management of these activities; e.g., a breakdown using information provided to the IMB by therapeutic class, development phase or other basis consistent with your management of these clinical development activities.  If you do not track research and development costs in any manner other than in the aggregate at the division level, please provide to us proposed disclosure describing these circumstances to be included in future periodic reports.  To the extent that you track research and development costs by project groupings, please provide to us cost information and a description of each of these groupings.  Also, consistent with the discussion on page 5 of your response, please provide to us a breakdown of your research and development costs that includes direct research and development project expenditures, personnel-related costs and other costs, such as infrastructure, travel and information technology.

Novartis Response

We acknowledge your request for information regarding our Pharmaceuticals Division’s research and development expenditures broken down according to any “project groupings” tracked by Company management.  Of course, information regarding our expenditures is available to our management to a significant degree of granularity, and can be, and from time to time is, aggregated in a number of ways.

However, as stated in our letter dated April 22, 2011, we manage our research and development expenditures across our entire portfolio in accordance with our internal priorities.  We do not manage our expenditures by therapeutic area, or on some other “project grouping” basis.  Rather, we manage expenditures globally, and make decisions about whether or not to proceed with development projects on a project-by-project basis.  These decisions are based on the project’s potential to meet a significant unmet medical need or to improve patient outcomes, the strength of the science underlying the project, and the potential of the project (subject to the risks inherent in pharmaceutical development) to generate significant positive financial results for the Company.

It is these factors which are significant to management in making decisions about our portfolio, and we report significant amounts of information about these aspects of our projects to investors.  This information can be found in our Form 20-F, as well as in our quarterly financial results releases, our ad hoc disclosures, in presentations to analysts which are disclosed on www.novartis.com, and in other public disclosures, such as www.clinicaltrials.gov.

For these reasons, we will enhance our disclosure of our research and development expenditures commencing with the filing of our Form 20-F for 2011 by adding the following statement to the Research and Development section of the Pharmaceuticals Division portion of Item 4.B (set forth on page 49 of the 2010 Form 20-F):

We manage our research and development expenditures across our entire portfolio in accordance with our internal priorities. We make decisions about whether or not to proceed with development projects on a project-by-project basis.  These decisions are based on the project’s potential to meet a significant unmet medical need or to improve patient outcomes, the strength of the science underlying the project, and the potential of the project (subject to the risks inherent in pharmaceutical development) to generate significant positive financial results for the Company.  Once a management decision has been made to proceed with the development of a particular molecule, the level of research and development investment required 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.

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SEC Comment No. 2

Please refer to prior comment one.  Please address the following for the projects listed in the Selected Development Projects table on pages 38 to 42:

·                  SEC Request: Provide us proposed disclosure to be included in future periodic reports of a summary of changes in 2010 to this table, including projects added, projects terminated and projects transitioned to the commercialization phase.  For projects terminated in 2010, disclose the reason therefore (e.g. it was determined during the period that the clinical results did not meet the necessary standards for regulatory approval).

·                  Novartis Response: Commencing with the filing of our Form 20-F for 2011 we will modify our “Projects Terminated” disclosure (set forth at page 47 of our 2010 Form 20-F) by displaying it immediately following the Compounds in Development table, and by revising it as follows:

Projects Added To And Subtracted From

The Development Table Since 2010

Project/Product

Potential
   indication/Disease
   area

Change

Reason

[This   box will display the project code name or product name]

[This   box will display the potential indication in the event that the change   impacts only a single indication]

[This   box will display the change that has occurred, e.g., project added, project   terminated, project commercialized]

[This   box will display the reason for the change]

·                  SEC Request:  Provide us proposed disclosure to be included in future periodic reports that indicates the year that each project entered the “current phase.”

·                  Novartis Response:   Commencing with the filing of our Form 20-F for 2011 we will add a column to the Compounds in Development table immediately to the left of the “Planned filing dates/Current phase” column.  The new column will be entitled “Year Project Entered

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Current Development Phase” where we will list the requested information for each project.

·                  SEC Request: As previously requested provide us information regarding the remaining term of patents for each project.  If you do not know or cannot estimate the remaining patent life for a particular patent(s) associated with a project(s), please tell us the specific facts and circumstances governing this limitation.

·                  Novartis Response: As set forth in our letter dated April 22, 2011, there are a number of reasons why the ultimate patent life on our compounds in development cannot be known, and indeed are little more than a matter of speculation, until such time as those compounds in development are approved by the various health authorities around the world for sale in the relevant market — if such an approval ever occurs.

·                  Patent applications are typically filed throughout the development process, with some filed early in the process, and often some filed late in the process, as additional uses for the product are discovered.

·                  In certain key countries, data exclusivity periods may be available, and may impact the period during which we would have the exclusive right to sell the product.  These exclusivity periods run from the date the products are approved, and so their expiration dates cannot be known until the product approval dates are known.

·                  Regarding patents that are applied for and granted comparatively early in the development process, the length of the patent term still cannot be known until the product is approved for sale (if this occurs), at which time a patent term extension is often granted for a period of time related to the length of time taken by FDA (or countries’ health authorities) to review the product’s application.  The length of this extension cannot be known in advance, but is only determined after the product is approved.

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For all these reasons, information regarding the patent terms of our development projects cannot be known with certainty prior to product approval, and would be inherently speculative.  As a result, providing any estimates as to patent life would suggest more certainty on our part than would be warranted, and would in our view therefore be misleading to investors.

Accordingly, in order to assist investors in understanding the patent status of our development projects, commencing with the filing of our Form 20-F for 2011 we will modify the “Intellectual Property” portion of the Pharmaceuticals Division section of Item 4.B (which begins on page 55 of our 2010 Form 20-F) by adding the following to it, after the listings of the patent status of our marketed products:

Compounds in Development

We file patent applications on our compounds in development during the course of the development process.  The length of the term of any patents on our development compounds cannot be known with certainty until after a compound is approved for marketing by a health authority.  This is so because patent applications for many of the compounds will be pending during the course of the development process, but not yet granted.  In addition, while certain patents may be applied for early 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 uses. Further, in certain countries, data exclusivity periods may be available, and may impact the period during which we would have the exclusive right to sell a product. These exclusivity periods run from the date the products are approved, and so their expiration dates cannot be known until the product approval dates are known.  Finally, in the US and other countries, pharmaceutical products are eligible for a patent term extension for patent periods lost during regulatory review.  The law recognizes that review by the FDA and other health authorities can take an extended period, and permits an extension of the patent term for a period related to the time taken for the health authority’s review.  However, the length of

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this extension cannot be known in advance, but is only determined after the product is approved.

Item 5. Operating and Financial Review and Prospects

Impairment of long-lived intangible and tangible assets, page 129

SEC Comment No. 3

Please refer to prior comment two. You use either the excess earnings or relief of royalty method to determine fair value for acquired assets and liabilities. For each asset you valued using the relief-of-royalty method, please tell us:

·                  The carrying value you assigned to it;

·                  Its nature, intended use and, if not complete, its stage of development and the nature of the efforts and steps necessary to complete it; and

·                  Why you believe the relief of royalty method versus another method is the most appropriate.

Novartis response

As part of our Alcon Purchase Price Allocation we used the relief-of-royalty method to determine fair values of the Alcon brand name and certain technologies currently used in Alcon’s surgical business. The identified technologies used in the surgical business are: Cataract, Vitreoretinal and Refractive.

The carrying values assigned to these assets were as follows:

$ million

Existing technologies

Cataract technology

4,130

Vitreoretinal technology

420

Refractive technology

120

Total

4,670

Alcon trade name

2,980

Total assets valued using the relief of royalty   method

7,650

These assets meet the criteria for initial recognition of intangible assets as per IAS 38 IN7 and were all completed, in existence and in use at the acquisition date, and subsequently remain in use. The relief-of-royalty method was used to value these assets as Alcon benefits from owning the assets rather than paying royalties for the use of the assets.

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The valuation method for these intangible assets is also in line with good valuation practice. The royalty rates were estimated to be the amount that a licensor and licensee would negotiate if both had reasonably and voluntarily attempted to reach an agreement.

The estimations were based on investigations in similar or comparable assets and related royalty rates, and took into account guidance and calculations provided by an external professional valuation company, who also validated the relief-of-royalty method for valuation of these assets.

Notes to the Novartis Group Consolidated Financial Statements

Note 2: Significant Transactions, business combinations and divestments

Acquisitions in 2010: Corporate—Alcon, Inc., page F-21:

Novartis response to SEC Comments 4 - 8

We note that SEC Comments 4-8 set forth questions concerning the methods that the Company used to value the first two of the three tranches in the Company’s ultimate 100% acquisition of Alcon, Inc.  Given the interrelated nature of these comments, we set forth here the methods by which we valued our acquisition in Alcon, and then respond to any specific questions below.  The discussion of our valuation methodology relies on the chronology of events set out in Addendum A hereto, and the information related to the share price of Alcon, Inc., which is attached as Addendum B hereto.

Valuation Method.  We performed a valuation of Alcon with the support of an independent valuation expert, as part of our purchase price allocation as at August 25, 2010, the date we completed the acquisition of 77% of Alcon, Inc.  As of that date, we performed our valuation in three parts.

·                  We determined the value of the entire 100% of the Alcon business and our 77% interest.

·                  We determined the value of the approximately 52% second tranche of shares acquired from Nestlé on that same date.

·                  We determined the value of our first approximately 25% tranche of Alcon shares, which had been acquired from Nestlé pursuant to the same agreement on July 7, 2008.

With respect to the first tranche — the initial non-controlling 25% interest acquired from Nestlé — we deemed the correct basis for the fair value of those shares as of August 25, 2010 to exclude any control premium.  This conclusion was based on a comparison of the prices paid for the first and second tranches, which clearly showed that the entire control premium for Alcon was included in the payment for the second tranche.

Valuation of 77% Stake.  The Company’s valuation analysis showed that the fair value of the Company’s 77% interest in Alcon, Inc. at August 25, 2010 was $168.00 per share.  This $168.00 per share figure resulted in a total fair value for the 77% stake at August

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25, 2010 of $38.7 billion.  This per-share value is also equal to the approximate average net price we paid to Nestlé for the total 77% interest, and ultimately also the amount we paid the non-controlling shareholders for the 23% public float.

Valuation of 25% Stake.  The Company’s valuation