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<DOCUMENT>
<TYPE>TEXT-EXTRACT
<SEQUENCE>2
<FILENAME>filename2.txt
<TEXT>
 April 8, 2025

Harry Kirsch
Chief Financial Officer
Novartis AG
Postfach CH-4002 Basel
Switzerland

 Re: Novartis AG
 For 20-F for Fiscal Year Ended December 31, 2024
 Filed January 31, 2025
 File No. 001-15024
Dear Harry Kirsch:

 We have completed our review of your filing. We remind you that the
company and
its management are responsible for the accuracy and adequacy of their
disclosures,
notwithstanding any review, comments, action or absence of action by the staff.

 Sincerely,

 Division of Corporation
Finance
 Office of Life Sciences
</TEXT>
</DOCUMENT>

CORRESP
 1
 filename1.htm

 Novartis
 AG P.O. Box

 CH-4002 Basel

 Switzerland

 United States
Securities and Exchange Commission

 Division of Corporation Finance

 Office of Life Sciences

 100 F Street, N.E.

 Washington, D.C. 20549

 Attn:      Doris
Stacey Gama

 Chris Edwards

 Lynn Dicker

 Daniel Gordon

 Basel, 31 March 2025

 Re:          Novartis
AG

 Form 20-F for
the Fiscal year Ended December 31, 2024

 Filed January 31,
2025

 File No. 001-15024

 Ladies and Gentlemen:

 This letter sets forth
the responses of Novartis AG (the " Company ") to the comment letter of the Staff (the " Staff ") of
the Securities and Exchange Commission, dated March 18, 2025, relating to the Company's Annual Report on Form 20-F for
the fiscal year ended December 31, 2024, filed on January 31, 2025 (the " 2024 20-F ").

 For your convenience,
we have reproduced the Staff's comments preceding our responses below.

 Form 20-F for the Fiscal year Ended
December 31, 2024

 Item 3.D Risk Factors

 Intellectual Property, page 10

 1. You
 state on page 35 that Entresto patent protection is set to expire in 2025 and 2026 in
 the US and EU, respectively and that, based on your disclosure on page 41, Entresto
 makes up USD 7.8 billion in net sales. In future filings, please expand your risk factor
 disclosure to discuss specific risks that may result based on Entresto's imminent patent
 expiration.

 Response :

 The Company respectfully
acknowledges the Staff's comment and confirms that in future filings we will expand our risk factor disclosure to discuss specific
risks that may result based on Entresto's imminent patent expiration.

 Novartis consolidated financial statements
for the fiscal year ended December 31, 2024 Note 3. Operating segment, page F-17

 2. We
 note you operate as a single global operating segment company due to the spin-off of the
 Sandoz business on October 3, 2023. We also note on page 21 that you have two commercial
 units, US and International. Please explain to us how you concluded that you operate as a
 single operating segment. Refer to IFRS 8.11 – 12.

 Response :

 The Company respectfully
acknowledges the Staff's comment and has set forth below an explanation on how we concluded that we operate as a single global
operating segment, with reference to IFRS 8 – Operating segments.

 Background

 As disclosed in the
2024 20-F in Item 4.B Business overview – Overview on page 21 and in the consolidated financial statements Note 3 –
Operating Segments on page F-17, prior to the October 3, 2023 spin-off of the Sandoz business (the " Sandoz Spin-Off "),
which was approved by the Company's shareholders on September 15, 2023, we had two operating segments, our innovative medicines
business (Innovative Medicines Division) and our generic pharmaceuticals and biosimilars business (the Sandoz Division) that were our
two reportable segments, and we separately reported corporate activities.

 With the completion
of the Sandoz Spin-Off, Novartis solely operates as a global single segment innovative medicines company, engaged in the research, development,
manufacturing, distribution, marketing and sale of a broad range of innovative medicines. Contemporaneously with the Sandoz Spin-Off
, we reorganized our continuing operations into five organizational units and global functions along our innovative medicines business
value chain continuum as follows: (i) Biomedical Research, (ii) Development, (iii) Operations, (iv) the US commercial
unit and (v) the International commercial unit, and global functions that support our business including IT, procurement, real estate,
corporate affairs, ethics, risk and compliance, finance, legal, internal audit, people and organization, and strategy and growth. The
organizational units and global functions are inextricably linked. The Company operates as a pure-play innovative medicines company on
a global basis and its operations are vertically integrated. This organizational structure reflects the matrix management structure under
which we operate our business, which enables clear accountabilities to manage the operational activities of the Company (e.g. research
and development, manufacturing operations, US and International sales and marketing and global support functions). All resource allocation
decisions are taken globally on a company-wide basis by the Executive Committee Novartis (ECN), which is the Chief Operating Decision
Maker (CODM) of the Company.

 IFRS 8 Analysis

 The above mentioned
third quarter 2023 transformational events triggered the requirement to update our assessment of our operating segment reporting according
to the principles of IFRS 8 – Operating segments. This assessment concluded that we operate as a single operating segment innovative
medicines company. In this assessment, we considered the core principle of IFRS 8.1 and the reportable segment principles of IFRS 8.11,
which references to paragraphs 5-10 for the principles on identification of the operating segments. This assessment was reconfirmed in
2024.

 Page | 2

 The CODM within Novartis
is the ECN, as it is the governance body (function) that is responsible to allocate resources to and assess the performance of the single
operating segment of the Company (IFRS 8.7). The Novartis corporate governance regulations (Organizational Regulations of Novartis AG)
stipulate that the ECN is responsible for the management of the business, and it has in particular the following duties, among others:
(i) regularly assess the achievement of the (financial and non-financial / ESG) targets for the Company; (ii) submit proposals
to the Board of Novartis or to one of the Board Committees for approval for items requiring such approval; (iii) implement the decisions
taken by the Board or the Board Committee; (iv) implement modifications to the organization of the Company to ensure efficient operation
of the Company and achievement of optimized consolidated results; and (v) ensure that management capacity, financial and other resources
are provided and used efficiently.

 The ECN is comprised
of a cross functional team of senior leaders of the Company that consists of the: Novartis CEO (ECN Chair); President, Biomedical Research;
President, Development & Chief Medical Officer; President, Operations; President, US; President, International; Chief Financial
Officer; Chief Legal Officer; Chief Strategy & Growth Officer; Chief People & Organizational Officer; and Chief Ethics,
Risk & Compliance Officer. Given the responsibilities of the ECN, it meets the IFRS 8.7 criteria to be designated as the CODM,
as it is the governance body (function) that is responsible for the management of the innovative medicines business on a global basis
and for allocating resources and assessing the business performance on a company-wide basis.

 According to IFRS
8.5, an operating segment is defined as a component of an entity which meets the following three characteristics:

 (a) it engages
in business activities from which it may earn revenues and incur expenses;

 (b) its operating
results are regularly reviewed by the entity's chief operating decision maker (CODM) to make decisions about resources to be allocated
to the segment and assess its performance; and

 (c) for which
discrete financial information is available.

 We concluded that
we operate as a single operating segment based on IFRS 8 principles. Our segment reporting as a single operating segment innovative medicines
company aligns with how the CODM operates the business, allocates resources and assesses its performance. The financial information that
is regularly reviewed by the CODM for purposes of assessing performance and allocating resources is focused on the total company performance.
The key resource allocation decisions of the Company are made on a global basis focused on the research and development pipeline, medical
need, and prioritization on core therapeutic areas, and not by geographic area. The financial information regularly reviewed by the CODM
about resource allocation decisions and assessment of performance is at the total company level (IFRS 8.5 (b)). Therefore, none of our
organizational units, including the US and International commercial units, or global functions meet the IFRS 8 criteria to be an operating
segment.

 Set forth below is
further analysis of our assessment under IFRS 8.5 identification of operating segments criteria.

 IFRS 8 references
to availability of discrete financial information (IFRS 8.5(c)). Company-wide financial information is readily available and provided
to the CODM monthly on the basis of consolidated IFRS and non-IFRS measures. While certain financial data are available at the level
below the total Company, this financial data is not used by our CODM for making resource allocation decisions or to assess performance.

 IFRS 8 requires the
identification of the business activities in which the entity earns revenue and incurs expenses in assessing if a component of an entity
is an operating segment (IFRS 8.5(a)).

 Page | 3

 As discussed above,
we are a vertically integrated innovative medicines company. Our business activities include the research, development, manufacturing,
distribution, marketing and sale of a broad range of innovative medicines. Our innovative medicines business operations are inextricably
linked and are operated and governed on a global company-wide basis. For example, the research, development, manufacturing and supply
chain for the business and the global functions are managed and governed on a global vertically integrated basis, and not by our US and
International commercial units. In addition, our capital expenditures, intellectual property acquisitions (through in-licensing and asset
and business acquisitions), and research and development resources are allocated by the CODM on a company-wide basis based on global
demand, overall medical need, therapeutic area, in alignment with the global company-wide strategy. This can be illustrated by our research
and development portfolio management and investment decisions (one of the most significant resource allocation decisions of an innovative
medicines company) where the CODM takes decisions about new early- and late-stage development projects, strategic plans and portfolio-related
priorities, drug development budgets; major project phase transitions; and other key decisions, such as when to submit regulatory applications
to health authorities or when to discontinue projects. This is done on a global basis to facilitate a company-wide single combined research
and development strategy. Although the US and International commercial units engage in business activities from which they may earn revenues
and incur expenses, we operate our business and allocate resources on a global company-wide integrated basis, and our CODM does not use
the financial information below the level of total company to make decisions about resource allocation or assess business performance
(IFRS 8.5(b)). Further global functions perform corporate and business support activities, where they incur expenses and earn revenue
that is incidental to our business activities (IFRS 8.6).

 IFRS 8 further requires
the assessment of operating results by the CODM to make decisions about resources to be allocated to the operating segment and to assess
its performance (IFRS 8.5(b)).

 As noted above, the
ECN is the governance body responsible for the management of and the decision making for the innovative medicines business on a global
company-wide basis, including allocating resources and assessing the business performance on a company-wide basis, and therefore is the
CODM of the Company.

 In making its resources
allocation decisions and assessing performance of the Company, the CODM (the ECN) reviews financial information on a consolidated basis
for the total Company, substantially in the form of, and on the same basis as the Company's reported IFRS consolidated financial
statements and disclosed non-IFRS measures, which includes supporting financial data that is provided for information purposes to explain
the business performance. Each month, the ECN receives a financial report presenting the Company's IFRS consolidated income statement,
consolidated condensed cash flow statement and current month consolidated balance sheet, and reporting on the net sales and operating
results that cover both IFRS consolidated financial information and non-IFRS measures (core results and free cash flows). The reports
include consolidated financial information on net sales, IFRS operating income, non-IFRS measure core operating income, IFRS
net income, non-IFRS measure core net income, IFRS basic EPS, non-IFRS measure EPS, non-IFRS measure free cash flows, and certain
other IFRS and non-IFRS measure financial KPIs and non-financial KPIs. Changes in company-wide consolidated net sales are explained by
contributions from our organizational units' net sales and key brands. Non-IFRS measures core results are further explained by
contribution from organizational units and global functions. During the annual target setting process, the ECN report also includes key
financial target information on global company-wide basis.

 The ECN allocates
resources on a global company-wide basis according to business requirements and in alignment with our global strategy and targets, and
not by organizational units, including US and International commercial units or global functions. For example, the resource allocations
include decisions concerning capital expenditures, intellectual property acquisitions (through in-licensing and acquisition of assets
and businesses), and research and development resources, all of which are allocated based on global demand, overall medical need, and
therapeutic area, as further discussed above.

 Based on the factors
outlined above, including on how the Company's CODM operates the business, allocates resources and assesses performance on a global
company-wide basis, we concluded that none of our individual organizational units, including the US and International commercial units,
or global functions meet the IFRS 8 criteria as separate business operating segments and that we operate as a global single operating
segment innovative medicines company.

 * *
*

 Page | 4

 We trust that this letter responds to the
issues raised in your comment letter. If you have additional questions, please do not hesitate to contact us.

 Respectfully submitted,

 Novartis
AG

 /s/ Karen Hale

 /s/ Harry Kirsch

 Karen Hale

 Harry Kirsch

 Chief Legal Officer of Novartis

 Chief Financial Officer of Novartis

 Page | 5

<DOCUMENT>
<TYPE>TEXT-EXTRACT
<SEQUENCE>2
<FILENAME>filename2.txt
<TEXT>
 March 18, 2025

Harry Kirsch
Chief Financial Officer
Novartis AG
Postfach CH-4002 Basel
Switzerland

 Re: Novartis AG
 For 20-F for Fiscal Year Ended December 31, 2024
 Filed January 31, 2025
 File No. 001-15024
Dear Harry Kirsch:

 We have reviewed your filing and have the following comments.

 Please respond to this letter within ten business days by providing the
requested
information or advise us as soon as possible when you will respond. If you do
not believe a
comment applies to your facts and circumstances, please tell us why in your
response.

 After reviewing your response to this letter, we may have additional
comments.

For 20-F for Fiscal Year Ended December 31, 2024
3.D Risk Factors
Intellectual Property, page 10

1. You state on page 35 that Entresto patent protection is set to expire in
2025 and 2026
 in the US and EU, respectively and that, based on your disclosure on
page 41,
 Entresto makes up USD 7.8 billion in net sales. In future filings,
please expand your
 risk factor disclosure to discuss specific risks that may result based
on Entresto's
 imminent patent expiration.
Novartis consolidated financial statements for the fiscal year ended December
31, 2024
Note 3. Operating segment, page F-17

2. We note you operate as a single global operating segment company due to
the spin-off
 of the Sandoz business on October 3, 2023. We also note on page 21 that
you have
 two commercial units, US and International. Please explain to us how you
concluded
 that you operate as a single operating segment. Refer to IFRS 8.11
12.
 We remind you that the company and its management are responsible for
the accuracy
 March 18, 2025
Page 2

and adequacy of their disclosures, notwithstanding any review, comments, action
or absence
of action by the staff.

 Please contact Lynn Dicker at 202-551-3616 or Daniel Gordon at
202-551-3486 if
you have questions regarding comments on the financial statements and related
matters. Please contact Doris Stacey Gama at 202-551-3188 or Chris Edwards at
202-551-
6761 with any other questions.

 Sincerely,

 Division of
Corporation Finance
 Office of Life
Sciences
</TEXT>
</DOCUMENT>

United States securities and exchange commission logo
May 22, 2023
Harry Kirsch
Chief Financial Officer
Novartis AG
Lichtstrasse 35
4056 Basel, Switzerland
Re:Novartis AG
Form 20-F for the Fiscal Year Ended December 31, 2022
Filed February 1, 2023
File No. 001-15024
Dear Harry Kirsch:
            We have completed our review of your filings.  We remind you that the company and its
management are responsible for the accuracy and adequacy of their disclosures, notwithstanding
any review, comments, action or absence of action by the staff.
Sincerely,
Division of Corporation Finance
Office of Life Sciences
cc:       Karen L. Hale

CORRESP
1
filename1.htm

 Novartis AG

                                            PO Box

                                            CH 4002 Basel

May 9, 2023

U.S. Securities and Exchange Commission

Division of Corporation Finance

Office of Life Sciences

100 F Street, N.E.

Washington, DC  20549

    Re:
    Novartis AG

    Form 20-F for Fiscal Year Ended December 31, 2022

    Filed February 1, 2023

    File No. 001-15024

Ladies and Gentlemen:

This is in reply to your letter
addressed to Harry Kirsch, our Chief Financial Officer, dated April 25, 2023. For ease of reference, we set forth your comment below,
followed by our response.

Form 20-F for the Fiscal Year Ended December 31, 2022

Item 5. Operating and Financial Review and Prospects

Core operating income key figures, page 59

SEC Staff Request:

1. Please revise future filings to more prominently and clearly identify tables including non-IFRS measures
and to consistently label all non-IFRS measures presented. We note for example, the table on page 59 labeled Core operating income
key figures includes all non-IFRS measures but is only designated as such by a small footnote presented below the table in a smaller font.
In this regard, we also note that selling, general and administration, research and development, other income and other expense included
in the table are all non-IFRS measures and not identified as such. Refer to Non-GAAP Financial Measures C&DIs 100.05 and 102.10(a) and
revise future filings to comply.

Novartis response:

We
respectfully acknowledge the SEC Staff’s comment and in future filings we will more prominently and clearly identify tables
including non-IFRS measures and consistently label all non-IFRS measures presented, including in the table labeled Core operating income
key figures in our Annual Report on Form 20-F. The proposed disclosure below demonstrates how we intend to revise in our future filings
the table labeled Core operating income key figures based on the disclosure included on page 59 of our Annual Report on Form 20-F
for the year ended December 31, 2022.

U.S. Securities and Exchange Commission

May 9, 2023

Page 2

    Core operating income key figures1

    The following table provides an overview of the non-IFRS measures
of Core operating income key figures:

    Change
    Change in

 constant

    Year ended
    Year ended
    in USD
    currencies

    (USD millions unless indicated otherwise)
    Dec 31, 2022
    Dec 31, 2021
    %
    %

    Core gross profit
      40 392
      41 097
      –2
      4

    Core selling, general and administration
      –14 190
      –14 815
      4
      –1

    Core research and development
      –9 088
      –9 041
      –1
      –5

    Core other income
      384
      421
      –9
      –2

    Core other expense
      –833
      –1 074
      22
      17

    Core operating income
      16 665
      16 588
      0
      8

    Core operating income as % of net sales to third parties
      33.0
      32.1

1
For an explanation of non-IFRS measures and reconciliation tables, see “—Non-IFRS measures as defined by Novartis.”

Exhibits

SEC Staff Request:

2. We note that the certifications filed in Exhibits 13.1 and 13.2 refer to the annual report on Form 20-F
for the year ended December 31, 2021. Please amend the filing to refer to the appropriate annual report which is the Form 20-F
for the year ended December 31, 2022. The corrected certifications should be filed with a full amendment to your Form 20-F.
Refer to Question 246.14 of the SEC Staff’s C&DI on Regulation S-K.

Novartis response:

We
respectfully acknowledge the SEC Staff’s comment. We advise that our Chief Executive Officer and Chief Financial Officer signed
certifications to be filed as Exhibits 13.1 and 13.2 which correctly referenced our Annual Report on Form 20-F for the year ended
December 31, 2022; however, in the process of preparing the electronic version of those exhibits for filing with the SEC via the
EDGAR system, the references to December 31, 2021 were inadvertently included in the electronic versions of Exhibits 13.1 and 13.2
as the result of a typographical error. Consistent with the SEC Staff’s guidance in Question 246.14 of the SEC Staff's Regulation
S-K Compliance and Disclosure Interpretations, we will file a full amendment to the Form 20-F which includes corrected Exhibits 13.1
and 13.2.

U.S. Securities and Exchange Commission

May 9, 2023

Page 3

We trust that this letter responds to the issues
raised in your comment letter.  If you have additional questions, please do not hesitate to contact us.

Respectfully submitted,

Novartis AG

    /s/ Karen Hale

    /s/ Harry Kirsch

    Karen Hale

    Harry Kirsch

    Chief Legal Officer of Novartis

    Chief Financial Officer of Novartis

United States securities and exchange commission logo
April 25, 2023
Harry Kirsch
Chief Financial Officer
Novartis AG
Lichtstrasse 35
4056 Basel, Switzerland
Re:Novartis AG
Form 20-F for the Fiscal Year Ended December 31, 2022
Filed February 1, 2023
File No. 001-15024
Dear Harry Kirsch:
            We have reviewed your filing and have the following comments.  In some of our
comments, we may ask you to provide us with information so we may better understand your
disclosure.
            Please respond to these comments within ten business days by providing the requested
information or advise us as soon as possible when you will respond.  If you do not believe our
comments apply to your facts and circumstances, please tell us why in your response.
            After reviewing your response to these comments, we may have additional comments.
Form 20-F for the Fiscal Year Ended December 31, 2022
Item 5. Operating and Financial Review and Prospects
Core operating income key figures, page 59
1.Please revise future filings to more prominently and clearly identify tables including non-
IFRS measures and to consistently label all non-IFRS measures presented. We note for
example, the table on page 59 labeled Core operating income key figures includes all non-
IFRS measures but is only designated as such by a small footnote presented below the
table in a smaller font. In this regard, we also note that selling, general and administration,
research and development, other income and other expense included in the table are all
non-IFRS measures and not identified as such.  Refer to Non-GAAP Financial Measures
C&DIs 100.05 and 102.10(a) and revise future filings to comply.

 FirstName LastNameHarry Kirsch
 Comapany NameNovartis AG
 April 25, 2023 Page 2
 FirstName LastName
Harry Kirsch
Novartis AG
April 25, 2023
Page 2
Exhibits
2.We note that the certifications filed in Exhibits 13.1 and 13.2 refer to the annual report on
Form 20-F for the year ended December 31, 2021. Please amend the filing to refer to the
appropriate annual report which is the Form 20-F for the year ended December
31, 2022. The corrected certifications should be filed with a full amendment to your Form
20-F. Refer to Question 246.14 of the SEC Staff's C&DI on Regulation S-K.
            We remind you that the company and its management are responsible for the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action or absence of
action by the staff.
            You may contact Lynn Dicker at (202) 551-3616 or Kevin Kuhar, Accounting Branch
Chief, at (202) 551-3662 if you have any questions.
Sincerely,
Division of Corporation Finance
Office of Life Sciences
cc:       Karen L. Hale

United States securities and exchange commission logo
January 22, 2021
Harry Kirsch
Chief Financial Officer
Novartis AG
Lichtstrasse 35
4056 Basel, Switzerland
Re:Novartis AG
Form 20-F for the Year Ended December 31, 2019
Filed January 29, 2020
File No. 001-15024
Dear Mr. Kirsch:
            We have completed our review of your filing. We remind you that the company and its
management are responsible for the accuracy and adequacy of their disclosures, notwithstanding
any review, comments, action or absence of action by the staff.
Sincerely,
Division of Corporation Finance
Office of Life Sciences

CORRESP
1
filename1.htm

Novartis AG

PO Box

CH-4002 Basel

January 18, 2021

U.S. Securities and Exchange Commission

Division of Corporation Finance

Office of Life Sciences

100 F Street, N.E.

Washington, DC  20549

Re:                   Novartis AG

Form 20-F for Fiscal Year Ended December 31, 2019

Filed January 29, 2020

File No. 001-15024

Ladies and Gentlemen:

This is in reply to your letter addressed to Harry Kirsch, our Chief Financial Officer, dated December 22, 2020. For ease of reference, we set forth your comment below, followed by our response.

Form 20-F for the Year Ended December 31, 2019

Exhibits

SEC Staff Request:

1.                                      Please amend your filing to include complete Section 906 certifications, referencing compliance with the requirements of both Section 13a and Section 15d of the Securities Exchange Act of 1934.

Novartis response:

We respectfully acknowledge the SEC Staff’s comment and, as discussed between the SEC Staff and our counsel, Morrison & Foerster LLP, on January 11, 2021, we commit to referencing both Section 13(a) and Section 15(d) of the Securities Exchange Act of 1934 in 906 certifications in future Form 20-F filings, commencing with our Form 20-F for the year ended December 31, 2020, expected to be filed later this month.

We trust that this letter responds to the issue raised in your comment letter.  If you have additional questions, please do not hesitate to contact us.

Respectfully submitted,

Novartis AG

/s/ Shannon Thyme Klinger

/s/ Harry Kirsch

Shannon Thyme Klinger

Harry Kirsch

Chief Legal Officer of Novartis

Chief Financial Officer of Novartis

United States securities and exchange commission logo
December 22, 2020
Harry Kirsch
Chief Financial Officer
Novartis AG
Lichtstrasse 35
4056 Basel, Switzerland
Re:Novartis AG
Form 20-F for the Year Ended December 31, 2019
Filed January 29, 2020
File No. 001-15024
Dear Mr. Kirsch:
            We have limited our review of your filing to the financial statements and related
disclosures and have the following comment. In our comment, we may ask you to provide us
with information so we may better understand your disclosure.
            Please respond to the comment within ten business days by providing the requested
information or advise us as soon as possible when you will respond. If you do not believe our
comment applies to your facts and circumstances, please tell us why in your response.
            After reviewing your response to the comment, we may have additional comments.
Form 20-F for the Year Ended December 31, 2019
Exhibits
1.Please amend your filing to include complete Section 906 certifications, referencing
compliance with the requirements of both Section 13a and Section 15d of the Securities
Exchange Act of 1934.

 FirstName LastNameHarry Kirsch
 Comapany NameNovartis AG
 December 22, 2020 Page 2
 FirstName LastName
Harry Kirsch
Novartis AG
December 22, 2020
Page 2
            In closing, we remind you that the company and its management are responsible for the
accuracy and adequacy of their disclosures, notwithstanding any review, comments, action or
absence of action by the staff.
            You may contact Frank Wyman at 202-551-3660 or Angela Connell at 202-551-
3426 with any questions.
Sincerely,
Division of Corporation Finance
Office of Life Sciences
cc:       Shannon Klinger

CORRESP
1
filename1.htm

599 LEXINGTON AVENUE  |  NEW YORK  |  NY  |  10022-6069

WWW.SHEARMAN.COM  |  T +1.212.848.4000  |  F +1.212.848.7179

December 21, 2017

VIA EDGAR AND FEDERAL EXPRESS

Ms. Tiffany Piland Posil

Special Counsel

Division of Corporation Finance

Office of Mergers & Acquisitions
 100 F Street, N.E.
 Washington, D.C. 20549-3628

Re:

Advanced   Accelerator Applications S.A.
   Schedule TO-T
   Filed December 7, 2017, by Novartis Groupe France S.A. and Novartis AG
   File No. 005-89192

Dear Ms. Posil:

On behalf of our client, Novartis AG (the “Company”), and its wholly-owned subsidiary, Novartis Groupe France S.A. (“Purchaser”), we hereby acknowledge receipt of the Securities and Exchange Commission (“SEC”) comment letter dated December 15, 2017 (the “Comment Letter”), from the staff of the SEC (the “Staff”) concerning the above captioned Schedule TO-T (the “Schedule TO-T”).

We submit this letter in response to the Comment Letter on behalf of the Company and Purchaser (this “Letter”). For ease of reference, we have reproduced the text of each of the Staff’s comments in bold-face type below, followed by the responses of the Company and Purchaser. Unless otherwise noted, page number references herein refer to Exhibit (a)(1)(A) to the Schedule TO-T, the Offer to Purchase.

The Company and Purchaser have today filed, via EDGAR, an amendment to Schedule TO-T (“Amendment No. 1”) along with this Letter. To assist the Staff in reviewing Amendment No. 1, we have enclosed three copies of Amendment No. 1.

Responses To Staff Comments

Exhibit 99(A)(1)(A): Offer to Purchase

General

1.              Disclosure indicates that Parent and Purchaser are unable to implement a squeeze-out of minority shareholders following completion of the Offer under French law. Please explain how the rights of minority shareholders will differ after completion of the Offer, including their ability to participate in corporate governance matters.

Response: In response to the Staff’s comment, the Company and Purchaser have revised the disclosures under the caption “Squeeze-out of Minority Holders” on page 35 of the Offer to Purchase.

2.              Please disclose any restrictions under local law on your ability to control or fully integrate AAA if you own less than all of its securities after the Offer. If applicable, discuss any relevant ownership thresholds significant under foreign law.

Response: In response to the Staff’s comment, the Company and Purchaser have revised the disclosures under the caption “Squeeze-out of Minority Holders” on page 35 of the Offer to Purchase.

Certain Information Concerning AAA, page 36

3.              We note the statement that you assume no responsibility for the accuracy of the information concerning AAA. It is inappropriate to disclaim responsibility for your disclosure. Please revise accordingly.

Response: The Staff’s comment has been noted, and the Company and Purchaser have revised the disclosures on page 36 of the Offer to Purchase. Specifically, the second full sentence of the first paragraph under the caption “Certain Information Concerning AAA” has been deleted.

Source and Amount of Funds, page 65

4.              Please provide the disclosure required by Item 1007(d) of Regulation M-A.

Response: In response to the Staff’s comment, the Company and Purchaser have revised the disclosures under the caption “Source and Amount of Funds” on page 65 of the Offer to Purchase.

Conditions of the Offer, page 66

5.              Disclosure indicates that you intend to determine whether conditions are satisfied as of the time “immediately prior to acceptance for payment of any Company Shares.” All conditions, except those relating to regulatory approval, must be satisfied or waived as of the expiration of the offer. Please revise accordingly.

Response: In response to the Staff’s comment, the Company and Purchaser have revised the disclosures under the caption “Conditions of the Offer” on page 66 of the Offer to Purchase.

* * * * *

The Company and Purchaser have directed me to acknowledge, on their behalf, that:

·                  the Company and Purchaser are responsible for the adequacy and accuracy of the disclosure in the filings;

·                  Staff comments or changes to disclosure in response to Staff comments do not foreclose the SEC from taking any action with respect to the filings; and

·                  the Company and Purchaser may not assert Staff comments as a defense in any proceeding initiated by the SEC or any person under the federal securities laws of the United States.

The Company and Purchaser acknowledge that the Staff may have additional comments after reviewing Amendment No. 1 and this letter. In light of the type and amount of additional information contained in Amendment No. 1, the Company and Purchaser do not propose to print or mail a supplement to the Offer to Purchase.

We appreciate your assistance in reviewing this Letter. Please direct questions or comments regarding this filing to me at (212) 848-4536.

ABU DHABI  |  BEIJING  |  BRUSSELS  |  DUBAI  |  FRANKFURT  |  HONG KONG  |  LONDON  |  MENLO PARK  |  MILAN  |  NEW YORK
 PARIS  |  ROME  |  SAN FRANCISCO  |  SÃO PAULO  |  SAUDI ARABIA*  |  SHANGHAI  |  SINGAPORE  |  TOKYO  |  TORONTO  |  WASHINGTON, DC

SHEARMAN & STERLING LLP IS A LIMITED LIABILITY PARTNERSHIP ORGANIZED IN THE UNITED STATES UNDER THE LAWS OF THE STATE OF DELAWARE, WHICH LAWS LIMIT THE PERSONAL LIABILITY OF PARTNERS.

*DR. SULTAN ALMASOUD & PARTNERS IN ASSOCIATION WITH SHEARMAN & STERLING LLP

Yours sincerely,

/s/ George Karafotias

George Karafotias

cc:

Jonathan Emery, Novartis Groupe France S.A. and   Novartis AG

Augusto Lima, Novartis Groupe France S.A. and Novartis   AG

Benjamin Brod, Novartis Groupe France S.A. and Novartis   AG

[Signature Page — Company Response Letter]

Mail Stop 4546

         May 3, 2017

VIA E -mail
Mr. Harry Kirsch
Chief Financial Officer
Novartis AG
Lichtstrasse 35
4056 Basel, Switzerland

Re: Novartis AG
 Form 20-F for Fis cal Year Ended December 31, 2016
Filed  January  25, 2017
File No. 1 -15024

Dear Mr. Kirsch :

We have completed our review of your filings.  We remind you that the company and its
management are responsible for the accuracy and adequacy of their disclosures, notwithstanding
any review, comments, action or absence of action by the staff.

Sincerely,

        /s/ Angela M. Connell

Angela M. Connell
Accounting Branch Chief
Office of Healthcare and
Insurance

CORRESP
1
filename1.htm

Novartis AG

Postfach

4002   Basel

Switzerland

April 20, 2017

Mr. Jim B. Rosenberg

Senior Assistant Chief Accountant

Office of Healthcare and Insurance

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, 2016

Filed January 25, 2017

File No. 1-15024

Dear Mr. Rosenberg:

This is in reply to your letter addressed to Harry Kirsch, our Chief Financial Officer, dated March 23, 2017, with respect to our Form 20-F for the fiscal year ended December 31, 2016 (the “2016 Form 20-F”). For ease of reference, we set forth your comments below, followed by our responses.

General

SEC request:

1.              On your website you list offices that you maintain in Sudan and Syria, countries which are designated by the U.S. Department of State as state sponsors of terrorism, and are subject to U.S. economic sanctions and export controls. Your Form 20-F does not include disclosure about contacts with those countries. Please describe to us the nature and extent of your past, current and anticipated contacts with Sudan and Syria, whether through subsidiaries, distributors, sales representatives or other direct or indirect arrangements. You should describe any goods, technology, or services you have provided into Sudan and Syria, directly or indirectly, and any agreements, arrangements or other contacts you have had with the governments of those countries or entities they control.

Novartis Response:

We note that this request mirrors a similar request made to us by the Staff in its Comment Letter to us dated May 11, 2006.  There, too, the Staff raised questions about our contacts with certain countries that are subject to U.S. economic sanctions and export controls, and about the materiality of our activities with respect to those countries.

Novartis provides healthcare solutions that address the needs of patients and societies worldwide. Our broad portfolio includes innovative pharmaceuticals and oncology medicines, generic and biosimilar medicines and eye care devices. Our mission is to discover new ways to improve and extend people’s lives. This is not a mission that is motivated by or sensitive to politics.   In some instances the patients we seek to impact may be located in countries that may not espouse the same political ideals as are taken for granted in the United States and other Western nations.  We do not support repressive regimes, but we do support access to healthcare for individuals.  We believe that this is a concept that is generally accepted by investors, and, indeed, most trade regulations generally contain exceptions for goods intended to alleviate human suffering.

With this premise, we respond to your questions as follows.  Our response is based on the information we have been able to derive to date.

In the three-year period from January 1, 2014 to December 31, 2016, each of our divisions, Innovative Medicines, Sandoz and Alcon, have directly or indirectly sold products to customers in Sudan and Syria.  We operate in those countries through distributors incorporated in those countries who purchase products from us and re-sell them to customers in those countries.  In addition, in each of these countries, we have directly exported certain products to public procurement entities pursuant to corresponding public tenders awarded to us.  Novartis has no offices in either country (the offices listed on the website are those of third party distributors).  Neither do we have any employees based in either country.

We expect such sales to continue in 2017.  We sell only healthcare products in those countries, including medicines and medical devices of the same types that we sell in other countries.  See 2016 Form 20-F Item 4.  Information on the Company — 4.B Business Overview, for a description of our products.

SEC request:

2.              Please discuss the materiality of any contacts with Sudan and Syria you describe in response to the comment above, and whether the contacts constitute a material investment risk for your security holders. You should address materiality in quantitative terms, including the approximate dollar amounts of any revenues, assets and liabilities associated with Sudan and Syria for the last three fiscal years and the subsequent interim period. Also, address materiality in terms of qualitative factors that a reasonable investor would deem important in making an investment decision, including the potential impact of corporate activities upon a company’s reputation and share value. Various state and municipal governments, universities and other investors have proposed or adopted divestment or similar initiatives regarding investment in companies that do business with U.S.-designated state sponsors of terrorism. You should address the potential impact of the investor sentiment evidenced by such actions directed toward companies that have operations associated with Sudan and Syria.

2

Novartis Response:

Our activities in these countries are not material.

From a quantitative point of view, we believe that our dealings with these countries are not material because our revenues derived from these countries are quite small.  In 2016, our combined revenues from the two countries amounted to approximately 0.04% of our total Net Sales for that year.

The following are our unaudited total sales in the two countries (in millions of dollars) from continuing operations in the years 2014-2016 and first quarter 2017:

Sudan
   $ millions

Syria
   $ millions

Total
   $ millions

Year 2014

10.9

10.4

21.4

Year 2015

16.5

5.5

22.1

Year 2016

14.1

5.5

19.5

1st Qtr. 2017

2.0

5.5

7.5

For comparison purposes, our total Net Sales from continuing operations were $52.2 billion in 2014; $49.4 billion in 2015 and $48.5 billion in 2016 and $11.5 billion in first quarter 2017.  We do not have any significant assets or liabilities in either country.

From a qualitative point of view, we believe that our dealings with these countries are not material because the various divestment statutes and policies referred to in the Staff’s Comment Letter generally provide exceptions for companies, such as ours, that sell “humanitarian” goods, such as our medicines and other healthcare products, or otherwise expressly or impliedly permit decision makers discretion to take such factors into account when making investment decisions.  As a result, we believe that few, if any, of these statutes or policies would require a pension or other fund to divest itself of Novartis shares, or indeed have required them to do so in the period since the Staff’s prior Comment Letter on this subject in 2006.  To the extent that we have received inquiries in this regard from any state or other entity we have responded to them, and explained to them the humanitarian nature of the goods that we sell.

In addition, we believe that the same exception for humanitarian goods generally fits with investor sentiment.  As a provider of lifesaving medicines, it would be unconscionable of us to deny our medicines to patients because we dislike the governments they live under, and we believe that reasonable investors would not expect us to do so.

For these reasons, we believe that reasonable investors would fully expect that our products would be sold to countries such as Sudan and Syria.  We further believe that, for these same reasons, our dealings with these countries are not material to investors in Novartis AG shares.

3

Form 20-F for Fiscal Year Ended December 31, 2016

5.F Tabular Disclosure of Contractual Obligations, page 169

SEC request:

3.              Please confirm that you will include interest payments on your debt in the contractual obligation table or in a discussion below the table in future filings.

Novartis Response:

We confirm that in response to your request for additional disclosure we will include estimated interest payments on our non-current financial debt in the contractual obligation disclosures in our future filings.

Form 6-K filed January 25, 2017

Exhibit 99:  Excerpts from Novartis Annual Report 2016
 Notes to the Consolidated Financial Statements

Goodwill and Intangible assets, page 184 of the Annual report

SEC request:

4.              You announced in January 2017 that you are considering options for your Alcon Division, ranging from retaining all or part of the business to separation via a capital market transaction such as an IPO or spin-off.  In addition, the Alcon Division incurred operating losses for the year ended December 31, 2016 compared to operating income in the year ended December 31, 2015.  Please provide us an analysis of the following:

·             your assessment of any impairment relating to the goodwill allocated to the Alcon division at December 31, 2016;

·             your assessment of any impairment related to the Alcon brand name, including how you considered the operations in the Alcon and Innovative Medicine Divisions to which the Alcon brand name relate in determining if an impairment was required to be recorded pursuant to paragraph 10 of IAS 36; and

·             why reclassification of the Alcon brand name to Corporate activities is appropriate.

Novartis Response:

We perform our assessment of impairment of the goodwill attributable to the Alcon Division annually by comparing its carrying amount with its recoverable amount, in compliance with the provisions of IAS 36. The recoverable amount is based on the fair value less cost of disposal. As no direct observable market inputs are available to measure the fair value less cost of disposal of the Alcon Division, the estimate of the recoverable amount is derived indirectly and is based on net present value techniques utilizing post-tax cash flows and discount rates. The estimates utilized reflect

4

assumptions that market participants would be expected to use in deriving the recoverable amount. In our Annual Report 2016 in “Note 1. Significant accounting policies” at page 185 — “Impairment of goodwill and intangible assets” (refer to “Excerpts from Novartis Annual Report 2016” furnished to the SEC on Form 6-K on January 25, 2017), we disclose the significant assumptions that we utilize in the net present value calculation, which we use to derive the recoverable amount. As the net present value valuation technique is based on the expected future cash flows of the business, the projected IFRS reported results are adjusted for the net effect of non-cash items and include reasonable assumptions on investments necessary to derive the expected future cash flows. It is important to note that our Alcon Division has an annual non-cash amortization of intangible assets of approximately USD 900 million and when the IFRS reported results are adjusted by this amount, the Alcon Division cash generation continues to be positive.

For our impairment assessments, we utilize a control framework with well-established procedures for reviewing on a regular basis whether there is any indication an asset may be impaired, including goodwill, and for determining reasonable assumptions for our cash flow projections and the resulting calculations of fair value that reasonably approximates a market participant’s view. The resulting base case fair values are then further assessed using reasonably possible alternative scenarios.

Our 2016 assessment for the Alcon Division considered the current and prior year results. In addition, the Alcon growth plan we announced was considered, which includes taking actions to accelerate innovation and sales, strengthen customer relationships and improve operations. We acknowledge that the 2016 results fell short of the Company’s ambitions for returning the business to growth in 2016. While we were successful in returning the Vision Care business franchise to growth in the second half of 2016, the Surgical business franchise has taken longer than expected and prevented a positive growth rate for the overall Alcon Division in 2016.

Diligent execution of the Alcon growth plan continues in 2017. We believe our current plans for the Alcon business are achievable, returning it to profitable growth levels on a sustained basis in line with relevant industry benchmarks, as Alcon Division had achieved in 2014 and prior years. We are confident of this plan and have a management team with relevant turnaround experience and our progress to date is meeting expectations. We also consider macroeconomics and trends affecting our business, such as the aging population, and the outlook for our products, which we believe supports our sustainable growth and cash flow assumptions.

We considered the guidance in IAS36, paragraphs 34-36 to assess the reasonableness of a cash flow model, by actively reviewing budgeted amounts to actual results. While this guidance is pointed to value in use calculations, we think this is a good measure to check that our forecasts are sound, also when using the fair value less cost of disposal method.

The carrying amount used in the assessment of Alcon goodwill impairment includes the carrying amount of the assets and liabilities that can be attributed directly or allocated on a reasonable and consistent basis to the Alcon Division. In accordance with IAS 36.102, we include in the carrying amount an allocation of Corporate assets and liabilities that can be directly attributed to the Alcon Division’s business, the most significant asset of which is an allocation of a portion of the Alcon brand name indefinite life intangible asset that is attributable to the products sold by the Alcon Division utilizing the Alcon brand name. Such allocation is done based on the relative proportion of

5

the fair value of the Alcon brand name attributable to the Alcon branded product sales of the Alcon and Innovative Medicines Divisions.

The 2016 impairment assessment did not indicate any impairment. In our assessment of a number of different scenarios and sensitivities to our base case, there were certain key assumptions that we considered, most notably the terminal growth rate, the discount rate and potential negative impacts of future cash flows. No impairment was indicated to exist once incorporating reasonably possible changes to these and other assumptions in our sensitivities calculations.  (Refer to disclosures in “Note 1. Significant accounting policies” at page 185 — “Impairment of goodwill and intangible assets” and Note 11. “Goodwill and intangible assets” at pages 207 and 208, in the “Excerpts from Novartis Annual Report 2016” furnished to the SEC on Form 6-K on January 25, 2017).

With regard to the Alcon brand name, in accordance with paragraph 10 of IAS 36, we perform our impairment assessment annually at the same time each year, by comparing its carrying amount with its recoverable amount. The recoverable amount is based on the fair value less cost of disposal. As no direct observable market inputs are available to measure the fair value less cost of disposal of the Alcon brand name, the estimate of the recoverable amount is derived indirectly and is based on net present value techniques utilizing estimated post-tax cash flows and discount rates. Since the date of acquisition of the Alcon brand name, we have used a comparable royalty based valuation approach. The assumptions used reflect what a market participant would be expected to use when pricing the intangible asset. The grouping of cash generating units that derive the expected future cash flows comprise the expected royalty savings on the net sales of products of our Alcon Division and products within the Ophthalmology business franchise of the Innovative Medicines Division that are currently and expected in the future to be sold utilizing the Alcon brand name. The 2016 impairment assessment did not indicate any impairment. As part of our annual impairment testing, we cons

CORRESP
1
filename1.htm

Novartis   AG

Postfach

4002   Basel

Switzerland

March 27, 2017

Mr. Jim B. Rosenberg

Senior Assistant Chief Accountant

Office of Healthcare and Insurance

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, 2016

Filed January 25, 2017

File No. 1-15024

Dear Mr. Rosenberg:

We are in receipt of your letter addressed to Harry Kirsch, our Chief Financial Officer, dated March 23, 2017.  As agreed in a recent telephone call between Barry Rosenfeld, of our affiliate Novartis Finance Corporation, and Mary Mast, Senior Staff Accountant at SEC, we will respond to your letter on or before April 20, 2017.

Respectfully   submitted,

Novartis   AG

/s/   HARRY KIRSCH

/s/   FELIX R. EHRAT

Harry   Kirsch

Felix   R. Ehrat

Chief   Financial Officer

General   Counsel

Novartis   Group

Novartis   Group

Mail Stop 4546

         March  23, 2017

VIA E -mail
Mr. Harry Kirsch
Chief Financial Officer
Novartis AG
Lichtstrasse 35
4056 Basel, Switzerland

Re: Novartis AG
 Form 20-F for Fis cal Year Ended December 31, 2016
Filed  January  25, 2017
File No. 1 -15024

Dear Mr. Kirsch :

We have limited our review of your filing to the financial statements and related
disclosures and have the following comments.  In our comment s, we ask you to provide us with
information so we may better understand your disclosure.

Please respond to the comment s within ten busine ss days by providing the requested
information or advis e us as soon as possible when you will respond.  If you do not believe a
comment appl ies to your facts and circumstances, please tell us why in your response.

After reviewing your response to the comment s, we may have additional comments.

General

1. On your website you list offices that you maintain in Sudan and Syria, countries which
are designated by the U.S. Department of State as state sponsors of terrorism, and are
subject to U.S. economic sanctions and export controls.   Your Form 20 -F does not
include disclosure about contacts with those countries.   Please describe to us the nature
and extent of your past, current and anticipated contacts with Sudan and Syria, whether
through subsidiaries, distributors, sales representatives or other direct or indirect
arrangements.   You should describe any goods, technology, or services you have
provided into Sudan and Syria, directly or indirectly, and any agreements, arrangements
or other contacts you have had with the governments of those countries or entities they
control.

2. Please discuss the materiality of any contacts with Sudan and Syria you d escribe in
response to the comment above, and whether the contacts constitute a material

Mr. Harry Kirsch
Novartis AG
March  23, 2017
Page 2

 investment risk for your security holders. You should address materiality in quantitative
terms, including the approximate dollar amounts of any revenues, assets and l iabilities
associated with Sudan and Syria for the last three fiscal years and the subsequent interim
period.   Also, address materiality in terms of qualitative factors that a reasonable investor
would deem important in making an investment decision, inclu ding the potential impact
of corporate activities upon a company’s reputation and share value.   Various state and
municipal governments, universities and other investors have proposed or adopted
divestment or similar initiatives regarding investment in com panies that do business with
U.S.-designated state sponsors of terrorism.   You should address the potential impact of
the investor sentiment evidenced by such actions directed toward companies that have
operations associated with Sudan and Syria.

Form 20 -F for Fiscal Year  Ended December 31, 2016
5.F Tabular Disclosure of Contractual Obligations, page 169

3. Please confirm that you will include interest payments on your debt in the contractual
obligation table or in a discussion below the table in future filings.

Form 6 -K filed January 25, 2017
Exhibit 99:  Excerpts from Novartis Annual Report 2016
Notes to the Consolidated Financial Statements
Goodwill and Intangible assets, page 184 of the Annual report

4. You announced in January 2017 that you are considering options for your Alcon
Division, ranging from retaining all or part of the business to separation via a capital
market transaction such as an IPO or spin -off.  In addition, the Alcon Division incurred
operating losses for the year ended Decembe r 31, 2016 compared to operating income in
the year ended December 31, 2015.  Please provide us an analysis of the following:
 your assessment of any impairment relating to the goodwill allocated to the Alcon
division at December 31, 2016 ;
 your assessment o f any impairment related to the Alcon brand name, including how
you considered the operations in the Alcon and Innovative Medicine Divisions to
which the Alcon brand name relate in determining if an impairment was required to
be recorded pursuant to paragr aph 10 of IAS 36 ; and
 why reclassification of the Alcon brand name to Corporate activities is appropriate .

We remind you that the company and its management are responsible for the accuracy
and adequacy of their disclosures, notwithstanding any review, co mments, action or absence of
action by the staff.

Mr. Harry Kirsch
Novartis AG
March  23, 2017
Page 3

 You may contact  Mary Mast, Senior Staff Accountant , at (202) 551 -3613 or Lisa
Vanjoske, Assistant Chief Accountant, at (202) 551 -3614 with any questions .  In this regard, do
not hesitate to contact me at (202) 551 -3679.

Sincerely,

 /s/ Jim B. Rosenberg

Jim B. Rosenberg
Senior Assistant Chief Accountant
         Office of Healthcare and Insurance

July 22,  2015

Via E-mail
Mr. Felix R. Ehrat
Group General Counsel
Novartis AG
Lichtstrasse 35
4056 Basel, Switzerland

Re: Novartis AG
  Form 20-F for Fiscal Year Ended December 31, 201 4
  Filed January 27, 2015
  File No. 001-15024

Dear  Mr. Ehrat :

We have completed our review of your filing. We remind you that our comments
or changes to disclosure in response to our comments do not foreclose the Commission
from taking any action with respect to the company or the filing and the company may
not assert staff comments as a defense in any proceeding initiated by the Commission or
any person under the federal securities laws of the United States. We urge all persons
who are resp onsible for the accuracy and adequacy of the disclosure in the filing to be
certain that the filing includes the information the Securities Exchange Act of 1934 and
all applicable rules require.

Sincerely,

 /s/ Joel Parker

Joel Parker
Accounting Branch Chief

CORRESP
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filename1.htm

Novartis AG

Postfach

4002   Basel

Switzerland

July 20, 2015

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, 2014 (2014 Form 20-F)

Filed January 27, 2015

File No. 001-15024

Dear Mr. Rosenberg:

This is in reply to the comment raised by Mark Brunhofer and Frank Wyman in a telephone call to our outside counsel, David Lynn of Morrison & Foerster LLP, that occurred on July 13, 2015.  For ease of reference, we have summarized the Staff’s comment below, followed by our response.

Note 3 to the Novartis Group Consolidated Financial Statements, Segmentation of Key Figures 2014, 2013 and 2012

SEC request:

1.              The last three columns of the tabular presentation of consolidated income statements labeled “Total discontinuing operations,” “Group eliminations” and “Total group” included in Note 3 to the Novartis Group Consolidated Financial Statements should be removed in future filings, in light of the prohibition specified in Item 10(e)(ii)(C) of Regulation S-K on including non-GAAP/non-IFRS measures on the face of a company’s financial statements or in the accompanying notes.

Novartis Response:

In response to the Staff’s comment, Novartis AG (the Company) respectfully submits that, without any prejudice to the Company’s filings, commencing with the filing of the Company’s Form 20-F for the fiscal year ended December 31, 2015 (2015 Form 20-F), the Company will modify the referenced disclosure in Note 3 to the Novartis Group Consolidated Financial Statements to remove from the tabular presentation of consolidated income statements the three columns labeled “Total discontinuing operations,” “Group eliminations” and “Total group.”

Based on Mr. Lynn’s telephone call with Messrs. Brunhofer and Wyman, it is further understood that the Staff does not have any further comment on: (i) the revised discussion of the Company’s results of operations that was proposed in Appendix A to our letter dated June 29, 2015; and (ii) the manner in which the Company proposes to present that revised disclosure in the 2015

Form 20-F.  Accordingly, the Company advises the Staff that the previously discussed revisions to Item 5, as well as the revisions to the above-referenced tabular disclosure in Note 3, will be reflected in the 2015 Form 20-F, rather than being presented in an amendment to the 2014 Form 20-F.

*       *       *

The Company acknowledges that:

·                  the Company is responsible for the adequacy and accuracy of the disclosure in the filing;

·                  Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the filing; and

·                  the Company may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

We trust that this letter responds to the issues raised in your telephone call to Mr. Lynn.  If you have additional questions, please do not hesitate to contact us.

Respectfully   submitted,

Novartis   AG

/s/   HARRY KIRSCH

/s/   FELIX R. EHRAT

Harry   Kirsch

Felix   R. Ehrat

Chief   Financial Officer

General   Counsel

Novartis   Group

Novartis   Group

2

CORRESP
1
filename1.htm

Novartis   AG

Postfach

4002   Basel

Switzerland

June 29, 2015

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, 2014 (2014 Form 20-F)

Filed January 27, 2015

File No. 001-15024

Dear Mr. Rosenberg:

This is in reply to your letter addressed to Felix Ehrat, our Group General Counsel, dated May 22, 2015. For ease of reference, we set forth your comment below, followed by our responses.

Item 5. Operating and Financial Review and Prospects

Results of Operations, page 109

SEC request:

1.              We have considered your response to prior comment one but continue to believe that you should amend your filing to remove the table on page 110, which makes no distinction between your continuing and discontinued operations.

Novartis Response:

In response to the Staff’s comment, Novartis AG (the Company) respectfully submits that, in order to assist investors in understanding the Company’s presentation of its 2014 financial results in our Form 20-F for the fiscal year ended December 31, 2015 (2015 20-F), the Company will modify the referenced discussion of its results of operations substantially as proposed in Appendix A to this letter.  As previously stated in response to comment one of the Staff’s letter dated March 30, 2015, the Company respectfully advises the Staff of its view that the 2014 Form 20-F does not need to be amended to remove the table on page 110 of the 2014 Form 20-F.

*       *       *

The Company acknowledges that:

·                  the Company is responsible for the adequacy and accuracy of the disclosure in the filing;

·                  Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the filing; and

·                  the Company may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

We trust that this letter responds to the issues raised in your comment letter.  If you have additional questions, please do not hesitate to contact us.

Respectfully submitted,

Novartis AG

/s/ HARRY KIRSCH

/s/   FELIX R. EHRAT

Harry Kirsch

Felix   R. Ehrat

Chief Financial Officer

General   Counsel

Novartis Group

Novartis   Group

2

APPENDIX A

RESULTS OF OPERATIONS

In evaluating the Group’s performance, we consider not only the IFRS results, but also certain non-IFRS measures, including core results and constant currency results. These measures assist us in evaluating our ongoing performance from year to year and we believe this additional information is useful to investors in understanding our business.

The Group’s core results exclude the amortization of intangible assets and impairment charges. They also exclude expenses relating to divestments, the integration of acquisitions and other income and expense items that are over a $25 million threshold that management deems exceptional. For a reconciliation between IFRS results and core results, see “—Core Results” below.

We present information about our revenue and other key figures relating to operating profit and net income in constant currencies (cc). We calculate constant currency revenue and operating profit by applying the prior-year average exchange rates to current financial data expressed in local currencies in order to estimate an elimination of the impact of foreign exchange rate movements.

These constant currencies, core results and other non-IFRS measures are explained in more detail below at “— Non-IFRS Measures as defined by Novartis,” and are not intended to be substitutes for the equivalent measures of financial performance prepared in accordance with IFRS. These measures may differ from similarly titled non-IFRS measures of other companies.

In addition, following the announcement of the transactions with GlaxoSmithKline plc (GSK) and Eli Lilly and Company (Lilly) on April 22, 2014 (and the subsequent announcement of the transaction with CSL Limited (CSL)), in which we agreed to divest our Vaccines, OTC and Animal Health businesses to those companies, the businesses to be divested were accounted for as discontinuing operations and were not included in our results from continuing operations for 2013 and 2014. In  addition,  on  January 9,  2014,  Novartis  completed  the  divestment  to  Grifols S.A.  of  our  former  blood  transfusion diagnostics unit, which had been included in our former Vaccines and Diagnostics Division. The results of this divested business were also accounted for as discontinuing operations and not included in our results from continuing operations. See “—Factors Affecting Comparability Of Year-On-Year Results Of Operations.”

2014 Compared to 2013

Group overview

Key figures

Change in

Year ended

Year ended

constant

Continuing Operations

Dec 31, 2014

Dec 31, 2013

Change in $

currencies

$ m

$ m

%

%

Net   sales to third parties

52,180

51,869

1

3

Operating   income

11,089

10,983

1

7

Net   income

10,727

9,309

15

21

Attributable   to:

Shareholders of   Novartis AG

10,654

9,189

16

22

Non-controlling   interests

73

120

(39

)

(39

)

Basic   earnings per share ($)

4.39

3.76

17

22

Free   cash flow

10,934

9,521

15

Change in

Year ended

Year ended

constant

Discontinuing Operations

Dec 31, 2014

Dec 31, 2013

Change in $

currencies

$ m

$ m

%

%

Net   sales to third parties

5,816

6,051

(4

)

(1

)

Operating   income

(353

)

(73

)

nm

nm

Net   income

(447

)

(17

)

nm

nm

Attributable   to:

Shareholders of   Novartis AG

(444

)

(14

)

nm

nm

Non-controlling   interests

(3

)

(3

)

nm

nm

Basic   earnings per share ($)

(0.18

)

0.00

nm

nm

Free   cash flow

(172

)

424

nm

Change in

Year ended

Year ended

constant

Total Group

Dec 31, 2014

Dec 31, 2013

Change in $

currencies

$ m

$ m

%

%

Net   income

10,280

9,292

11

17

Attributable   to:

Shareholders of   Novartis AG

10,210

9,175

11

18

Non-controlling   interests

70

117

(40

)

(41

)

Basic   earnings per share ($)

4.21

3.76

12

18

Free   cash flow

10,762

9,945

8

nm : not meaningful

Novartis delivered solid financial performance in 2014, driven by our continued success with growth products and expansion in emerging growth markets, which helped offset the effects of generic competition of approximately $2.4 billion. As a result, we achieved Group net sales to third parties from continuing operations of $52.2 billion. If continuing and discontinuing operations net sales to third parties were added together, then Group net sales would have amounted to $58 billion for the full year, which was at the same level as 2013 on a comparable basis, and up 2% in constant currencies (cc).

Group operating income from continuing operations amounted to $11.1 billion (+1%, +7% cc). Operating income margin was 21.3% of net sales from continuing operations. If continuing and discontinuing operations operating income were added together, then Group operating income would have amounted to $10.7 billion (-2%, +5% cc). Group net income from continuing operations rose  15% (+21% cc)  to  $10.7 billion, or  11% (+17% cc)  to  $10.3 billion if  our discontinuing operations had been included for the full year. Earnings per share (EPS) from continuing operations rose 17% (+22% cc) to $4.39, or 12% (+18% cc) to $4.21 if our discontinuing operations had been included for the full year. Free cash flow from continuing operations in 2014 increased by 15% to $10.9 billion, or 8% to $10.8 billion if our discontinuing operations had been included for the full year, mainly due to higher cash flows from operating activities.

If all of our discontinued operations had been included in 2014 and 2013, except for the results of our blood transfusion diagnostics unit, which was divested on January 9, 2014, then Group net sales were $58.0 billion in 2014, up 3% (cc) from $57.4 billion in 2013, operating income of $10.7 billion was at the prior year level in USD but increased 7% (cc), net income was $10.3 billion, up 19% (cc) compared to $9.1 billion in 2013 and EPS was $4.21 up 20% (cc) from $3.70 in 2013. For more information, see “—Non-IFRS Measures as defined by Novartis—2013 Reconciliation of Group IFRS and core results excluding blood transfusion diagnostics unit”.

May 22 , 2015

Via E-mail
Mr. Felix R. Ehrat
Group General Counsel
Novartis AG
Lichtstrasse 35
4056 Basel, Switzerland

Re: Novartis AG
  Form 20-F for Fiscal Year Ended December 31, 201 4
  Filed January 27, 2015
  File No. 001-15024

Dear  Mr. Ehrat :

We have reviewed your April 24, 2015 response to our March 30, 2015 letter and
have the following comment .

Please respond to this letter within 10 business days by amending your filing, by
providing the requested information or by advising us when you will provide the
requested response. If you do not believe the comment applies to your facts and
circumstances or do not believe an amendment is appropriate, please tell us why in your
response.  Please furnish us a letter on EDGAR under the form type label CORRESP that
keys your response  to our comment .

After reviewing any amendment to your filing and the information you provide in
response to the comment , we may have additional comments.

Item 5. Operating and Financial Review and Prospects
Results of Operations, page 109

1. We have considered your response to prior comment one but continue to believe
that you should amend your filing to remove the table on page 110, which makes
no distinction between your continuing and discontinued operations .

Mr. Felix R. Ehrat
Novartis AG
May 22, 201 5
Page 2

 Please  contact Senior Staff Accountants  Frank Wyman  at (202) 551 -3660 or Mark
Brunhofer  at (202) 551 -3638 if you have a ny questions regarding th e comment . In this
regard, do not hesitate to contact me at (202) 551 -3679.

Sincerely,

       /s/ Jim B. Rosenberg

Jim B. Rosenberg
Senior Assistant Chief Accountant

CORRESP
1
filename1.htm

Novartis   AG

Postfach

4002   Basel

Switzerland

April 24, 2015

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, 2014 (2014 Form 20-F)

Filed   January 27, 2015

File   No. 001-15024

Dear Mr. Rosenberg:

This is in reply to your letter addressed to Felix Ehrat, our Group General Counsel, dated March 30, 2015. For ease of reference, we set forth your comments below, followed by our responses.

Item 5. Operating and Financial Review and Prospects

Results of Operations, page 109

SEC request:

1.              Please amend your filing to remove the table on page 110, which makes no distinction between your continuing and discontinued operations, and provide a table and supporting discussion and analysis that conforms to your consolidated income statements on page F-4.

Novartis Response:

For the reasons discussed below, Novartis AG (the Company) respectfully advises the Staff of its view that the 2014 Form 20-F does not need to be amended to remove the table on page 110 of the 2014 Form 20-F, because the table and the explanatory discussion preceding and following the table have, consistent with the Commission’s guidance, appropriately provided information that permits the reader to view the Company’s results through the eyes of management.  In response to the Staff’s comment, however, the Company respectfully submits that it will provide the additional disclosure discussed below in future filings on Form 20-F.

As background, the Company advises the Staff that, following the announcement of the transactions with GlaxoSmithKline plc (GSK) and Eli Lilly and Company (Lilly) on April 22, 2014 (and the subsequent announcement of the transaction with CSL Limited (CSL)), which included the divestment of certain of our businesses to those companies, in order to comply with International Financial Reporting Standards (IFRS), Novartis separated the Group’s reported financial data for the current and prior years into “discontinuing” and “continuing” operations.

However, because these transactions did not close in 2014, and because the Company remained fully committed to all Group activities during the interim period, the Company determined that comparing its 2014 results of operations for the full Group against comparable 2013 results of operations in Item 5.A would best enable investors to see the Company’s results through the eyes of management.  See 2014 20-F, pages 109 through the top of page 112.  This comparison was explained in the paragraph preceding the table on page 110.

We acknowledge the requirements of Item 303(a)(3) of Regulation S-K, which requires us to “[d]escribe any unusual or infrequent events or transactions or any significant economic changes that materially affected the amount of reported income from continuing operations and, in each case, indicate the extent to which income was so affected.”  For this reason, our presentation of our results through management’s eyes on pages 109 through 112 was then followed by an extensive discussion and analysis of our results of operations broken out into continuing and discontinuing operations.  See 2014 20-F, pages 112 through 121.  These disclosures explained and supplemented the full presentation of our results by segment on page F-26 of the 2014 20-F.

In this regard, it should also be noted that, because the GSK and Lilly transactions closed early in 2015, resulting in the divestment of the vast majority of our discontinuing operations, our discussion and analysis of our 2015 results in our next 20-F will primarily be focused on the results of our continuing operations, as compared against 2014 continuing operations.

Accordingly, commencing with the filing of our Form 20-F for the financial year ended December 31, 2015 (2015 20-F), the Company will modify the discussion of key figures that appears on pages 109-110 of the 2014 20-F, before the table that appears on page 110, as follows:

The following table presents certain key figures for the full Novartis Group, including net sales and net income from both continuing and discontinuing operations, and a comparison of those figures for 2014 against those for 2013. In addition, the table presents the same information adjusted to enable a comparison of our 2014 results against 2013 results excluding the results of our former blood transfusion diagnostics unit, which Novartis divested on January 9, 2014. No other adjustments are made to the 2013 figures. Novartis believes that this comparison will enhance investors’ understanding of the performance of our ongoing business. For more information, see “—Non-IFRS Measures as defined by Novartis—2013 Reconciliation of Group IFRS and core results excluding blood transfusion diagnostics unit”.  Following this table and the related discussion, we present additional information with respect to our continuing and discontinuing operations. See also “Item 18. Financial Statements—Note 3—Table: Segmentation-Consolidated Income Statements 2014 and 2013”.

Notes to the Novartis Group Consolidated Financial Statements

Note 2: Significant Transactions

Transaction with CSL, page F-23

2.              You disclose that entering into the separate divestment agreement with CSL resulted in the vaccines influenza business being a separate cash-generating unit within the Vaccines Division and required you to perform a separate impairment assessment of the influenza

2

vaccines business net assets. Given that impairment testing under IAS 36 is first considered for individual assets then for cash-generating units, please address the following:

·                  Tell us the types and amounts of the vaccines influenza business assets included in the $1.1 billion impairment you recorded in 2014;

·                  Explain to us why the influenza vaccine assets were grouped with all other vaccine assets until the signing of the CSL agreement and not evaluated separately before then as individual assets or groups of assets; and

·                  Explain to us why the influenza vaccine assets were not themselves a separate cash-generating unit before the CSL agreement given that a cash-generating unit as defined in paragraph 6 of IAS 36 is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.

Novartis Response:

As discussed in more detail in our response to your Comment 3, we conducted our impairment testing of the assets associated with the Vaccines Division, including those that are part of the Vaccines influenza business, in accordance with the requirements of IAS 36, including paragraph 6.

In response to your first bullet point, the $1.1 billion impairment that we recorded in 2014 included $734 million for Property, Plants & Equipment, principally with respect to the newly-commissioned production facility located in the US at Holly Springs, NC, together with production facilities located at Liverpool, UK and Marburg, Germany, plus $302 million for separately identified intangible assets and $32 million for goodwill allocated to our Vaccines influenza business.

In response to your second bullet point, on an ongoing basis we evaluated the various assets of the Vaccines influenza business separately for impairment purposes in accordance with IAS 36, and historically concluded that there was no indication of impairment.  This conclusion for 2014 was further supported by the fact that, during the period beginning on April 22, 2014, the sale of assets comprising the entire Vaccines Division, including the influenza business, were the subject of one of the inter-conditional agreements with GSK for an amount which would give rise to a substantial gain.  This agreement committed Novartis to sell to GSK, subject to certain closing conditions, its non-influenza Vaccines business. This agreement also included a related put option on the remaining influenza business, pursuant to which Novartis could unilaterally require GSK to acquire the Vaccines influenza business at a set price.  See 2014 20-F at p. 305.  The separate agreement to sell the Vaccines influenza business to CSL subsequently announced on October 26, 2014 was not conditional on the GSK transaction and therefore created a separate group of cash generating units which needed to be tested for impairment.  This testing resulted in the $1.1 billion impairment charge recognized in 2014.

In this connection, however, we note that the sale of the non-influenza Vaccines business to GSK was completed on March 2, 2015. As a result, in the first quarter of 2015, Novartis recognized a preliminary pre-tax gain on divesting the non-influenza Vaccines business of approximately $2.8 billion. See Form 6-K submitted April 23, 2015.  If the separate transaction with CSL had not been

3

agreed upon in 2014 and the whole Vaccines Division had instead been sold or, with respect to the influenza business, put to GSK, then there would have been no requirement to record the $1.1 billion impairment charge in 2014, and we would have recognized a pre-tax gain on the sale of the entire Vaccines Division in the first quarter of 2015 of approximately $1.7 billion.

In response to your third bullet point, as stated, we agree with your statements as to how impairment testing is to be conducted, and we conducted our impairment testing of the assets associated with the Vaccines influenza business according to IFRS principles and in line with the definitions in paragraph 6 of IAS 36.  Accordingly, in order to assist investors in understanding how the Company conducted impairment testing with respect to the Vaccines Division, commencing with the filing of our 2015 Form 20-F, the Company will modify discussions of impairment testing with respect to the Vaccines Division and the influenza business, including the wording that appears on page F-23 of our 2014 Form 20-F, as follows:

Entering into the separate divestment agreement with CSL resulted in the Vaccines influenza business being a separate disposal group, consisting of a group of cash generating units within the Vaccines Division, requiring the performance of a separate valuation of the Vaccines influenza business net assets.

Note 11: Goodwill and Intangible Assets Movements, page F-47

3.              Please describe to us the cash-generating units that you identified in performing your impairment evaluation. Your disclosure on page F-49 appears to indicate that you have only three cash generating units, Pharmaceuticals, Alcon and Sandoz. If correct, please explain the factors that you considered in concluding that the operational breakdowns for the Pharmaceuticals segment on page 113 (i.e. “Business Franchises”), Alcon on page 118 and Sandoz on page 119 did not constitute separate cash-generating units. Also if correct, explain why there are no cash-generating units at lower levels and how their cash inflows are largely dependent on the cash inflows from other assets or groups of assets.

Novartis Response:

In performing our impairment evaluation, we tested identifiable assets on an individual asset level, or at the level of a cash generating unit containing interdependent identifiable assets. We then allocated goodwill to groups of cash generating units that benefit from the synergies of being combined in a group, and at the level to which goodwill is monitored for internal management purposes. This is primarily at the divisional level. Our disclosure on page F-49 of the 2014 20-F was provided to meet the requirements of IAS 36 paragraph 134, which requires disclosure for each cash generating unit (or group of units) for which the carrying amount of goodwill or intangible assets with indefinite useful lives allocated to that unit (or group of units) is significant in comparison with the entity’s total carrying amount of goodwill or intangible assets with indefinite lives. For us this is at the divisional level. In the introductory sentence above the table at the top of F-49 of the 2014 20-F, the reference to cash generating unit is not meant to imply that we have only three cash generating units, but rather to set forth certain significant assumptions we used in our calculations. Accordingly, in order to assist investors in understanding how the Company conducts impairment evaluations,

4

commencing with the filing of our 2015 Form 20-F, the Company will modify the discussion of impairment evaluations that appears above the table on page F-49 of our 2014 20-F, as follows:

The Pharmaceuticals, Alcon and Sandoz divisions’ cash generating units, to which indefinite life intangibles and goodwill are allocated, each comprise a group of smaller cash generating units. The valuation method of the recoverable amount of the cash generating units, to which indefinite life intangibles and goodwill are allocated, is based on the fair value less costs of disposal.

*       *       *

The Company acknowledges that:

·                  the Company is responsible for the adequacy and accuracy of the disclosure in the filing;

·                  Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the filing; and

·                  the Company may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

We trust that this letter responds to the issues raised in your comment letter.  If you have additional questions, please do not hesitate to contact us.

Respectfully submitted,

Novartis AG

/s/   HARRY KIRSCH

/s/   FELIX R. EHRAT

Harry   Kirsch

Felix   R. Ehrat

Chief   Financial Officer

General   Counsel

Novartis   Group

Novartis   Group

5

CORRESP
1
filename1.htm

Novartis   AG

Postfach

4002   Basel

Switzerland

April 1, 2015

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, 2014

Filed January 27, 2015

File No. 001-15024

Dear Mr. Rosenberg:

We are in receipt of your letter addressed to Felix R. Ehrat, our Group General Counsel, dated March 30, 2015.  As agreed in a recent telephone call between Barry Rosenfeld, of our affiliate Novartis Finance Corporation, and Mark Brunhofer, Senior Staff Accountant at SEC, we will respond to your letter on or before April 27, 2015.

Respectfully submitted,

Novartis AG

/s/ HARRY KIRSCH

/s/   FELIX R. EHRAT

Harry Kirsch

Felix   R. Ehrat

Chief Financial Officer

General   Counsel

Novartis Group

Novartis   Group

March 30, 2015

Via E-mail
Mr. Felix R. Ehrat
Group General Counsel
Novartis AG
Lichtstrasse 35
4056 Basel, Switzerland

Re: Novartis AG
  Form 20-F for Fiscal Year Ended December  31, 201 4
  Filed January 27, 2015
  File No. 001-15024

Dear  Mr. Ehrat :

We have limited our review to only your financial statements and related
disclosures and do not intend to expand our review to other portions of your document.
In some of our comment s, we may ask you to provide us with information , so we may
better understand your disclosure.

Please respond to this letter within 10 business days by  amending your filing, by
providing the requested information or by advising us when you will pro vide the
requested response.   If you do not believe  a comment  applies to your facts and
circumstance s or do not believe an amendment is appropriate , please tell us why in your
response.

After reviewing any amendment to your filing and the information you provide in
response to these comments , we may have  additional comments .

Item 5. Operating and Financial Review and Prospects
Results of Operations, page 109

1. Please amend your filing to remove the table on page 110, which makes no
distinction between your continuing and discontinued operations, and provide a
table and supporting discussion and analysis that conforms to your consolidated
income statements on page F -4.

Mr. Felix R. Ehrat
Novartis AG
March 30, 2015
Page 2

 Notes to the Novartis Group Consolidated Financial Statements
Note 2: Significant Transactions
Transaction with CSL, page F -23

2. You disclose that entering into the separate divestment agreement with CSL
resulted in the vaccines influenza business being a separate cash -generating unit
within the Vaccines Division and required you to perf orm a separate impairment
assessment of the influenza vaccines business net assets.  Given that impairment
testing under IAS 36 is first considered for individual assets then for cash -
generating units, please address the following:

 Tell us the types and amounts of the vaccines influenza business assets
included in the $1.1 billion impairment you recorded in 2014;
 Explain to us why the influenza vaccine assets were grouped with all other
vaccine assets  until the signing of the CSL agreement  and not evalu ated
separately before then as individual assets or groups of assets; and
 Explain to us why the influenza vaccine assets were not themselves a separate
cash-generating unit before the CSL agreement given that a cash -generating
unit as defined in paragraph 6 of IAS 36 is the smallest identifiable group of
assets that generates cash inflows that are largely independent of the cash
inflows from other assets or groups of assets.

Note 11:  Goodwill and Intangible Assets Movements, page F -47

3. Please describe to  us the cash -generating units that you identified in performing
your impairment evaluation. Your disclosure on page F -49 appears to indicate that
you have only three cash generating units, Pharmaceuticals, Alcon and Sandoz. If
correct, please explain the f actors that you considered in concluding that the
operational breakdowns for the Pharmaceuticals segment on page 113 (i.e.
“Business Franchises ”), Alcon on page 118 and Sandoz on page 119 did not
constitute separate cash -generating units.  Also if correct,  explain why there are
no cash -generating units at lower levels and how their cash inflows are largely
dependent on the cash inflows from other assets or groups of assets.

We urge all persons who are responsible for the accuracy and adequacy of the
disclosure in the filing to be certain that the filing include s the information the Securities
Exchange Act of 1934 and all applicable  Exchange Act rules require.  Since the company
and its management are in possession of all facts relating to a company’s disc losure, they
are responsible for the accuracy and adequacy of the disclosures they have made.

 In responding to our comment s, please provide  a written statement from the
company acknowledging that:
 the company is responsible for the adequacy and accurac y of the disclosure in the
filing;

Mr. Felix R. Ehrat
Novartis AG
March 30, 2015
Page 3

  staff comments or changes to disclosure in response to staff comments do not
foreclose the Commission from taking any action with respect to the filing; and
 the company may not assert staff comments as a defense in any pr oceeding
initiated by the Commission or any person under the federal securities laws of the
United States.

Please  contact Senior Staff Accountants Frank Wyman at (202) 551 -3660  or Mark
Brunhofer  at (202) 551 -3638, if you have any questions regarding th e comment s. In this
regard, do not hesitate to contact me at (202) 551 -3679.

Sincerely,

/s/ Jim B. Rosenberg

Jim B. Rosenberg
Senior Assistant Chief
Accountant

August 29 , 2013

Via E-mail
Mr. Jonathan Symonds
Chief Financial  Officer
Novartis AG
CH-4056 Basel
Switzerland

Re: Novartis  AG
  Form 20-F for Fiscal Year Ended December 31, 201 2
  Filed January 23, 2013
File No. 001-15024

Dear  Mr. Symonds :

We have completed our review of your filing. We remind you that our comments
or changes to disclosure in response to our comments do not foreclose the Commission
from taking any action with respect to the company or the filing and the company may
not assert staff comments as a defense in any proceeding initiated by the Commission or
any person under the federal securities laws of the United States. We urge all persons
who are responsible for the accuracy and adequacy of the disclosure in the filing to be
certain that the filing includes the information the Securities Exchange Act of 1934 and
all applicable rules require.

Sincerely,

/s/ Joel Parker

Joel Parker
Accounting Branch Chief

CORRESP
1
filename1.htm

Novartis   AG

Postfach

4002   Basel

Switzerland

August 23, 2013

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, 2012

Filed January 23, 2013

File No. 001-15024

Dear Mr. Rosenberg:

In further reply to your letter addressed to Jonathan Symonds, our former Chief Financial Officer, dated June 19, 2013, and as a follow-up to the teleconference that the Company had with the SEC Staff on August 20, 2013, we wish to clarify and confirm the following points:

The Company’s accounting policies for inventories and intangible assets acquired as part of a business combination can be summarized as follows:

Inventories

Inventories acquired as part of a business combination are valued at fair value. This often includes a component related to separately identified acquired marketing rights. Intangible assets acquired as part of a business combination are fair valued on the basis of all future sales except those sales that will stem from the inventory on hand at the acquisition date that includes or incorporates the intangible asset.  Because the inventory fair value includes a component related to the separately identified acquired marketing right, this portion of the acquired marketing rights intangible assets is recognized in cost of goods sold as that inventory is sold.

Intangible Assets

The portion of the acquired marketing rights intangible assets not included within the cost of acquired inventories is amortized on a straight-line time basis commencing after the acquired inventory is sold and recorded within cost of goods sold in the consolidated income statement.

In response to the Company’s letters to the SEC and during the recent teleconference, the Staff has described an alternate method of accounting for inventories and intangible assets

acquired as part of a business combination. In this approach, the fair value of the acquired inventory did not include a component related to the separately identified acquired marketing rights and the fair value of the acquired marketing-rights intangible asset was based on all expected future sales, including those stemming from inventory on hand at the acquisition date, and which would then be amortized on a straight-line basis from the date of acquisition.

The Company has estimated that the results obtained through its method, summarized above, approximates in all material respects, and was not materially different from, the results that would have been obtained had the alternate method described by the SEC been used instead.  We understand that, for this reason, the Staff has determined not to pursue further the question of whether the Company’s accounting method is acceptable, and that the Staff has not reached a conclusion in this regard.

During 2011, 2012 and currently in 2013, the Company has not entered into any business combinations that have resulted in an issue similar to that of 2010 with respect to the accounting for inventories and intangible assets acquired as part of a business combination. As a result the Company is not proposing to amend its disclosure of its accounting policies in its 2013 Form 20-F to cover the aspects discussed above for business combinations.

In the event that this issue arises again as a result of a future business combination, then, if the Company chooses to retain its current approach, it will determine whether there is a difference between the resulting amounts using its approach and the alternate approach outlined above.  The Company will endeavor to minimize any difference in the results achieved by the different methods and if the amount of the fair value adjustment to acquired inventory is significant will describe in the applicable disclosure documents its accounting policies for valuing and expensing acquired inventory and acquired intangible assets in appropriate detail.

2

*       *       *

The Company acknowledges that:

·                  the Company is responsible for the adequacy and accuracy of the disclosure in the filing;

·                  Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the filing; and

·                  the Company may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

We trust that this letter responds to the issues raised in your comment letter.  If you have additional questions, please do not hesitate to contact us.

Respectfully   submitted,

Novartis   AG

/s/   HARRY KIRSCH

/s/   FELIX R. EHRAT

Harry   Kirsch

Felix   R. Ehrat

Chief   Financial Officer

General   Counsel

Novartis   Group

Novartis   Group

3

CORRESP
1
filename1.htm

Novartis   AG
   Postfach
   4002 Basel
   Switzerland

July 17, 2013

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, 2012

Filed January 23, 2013

File No. 001-15024

Dear Mr. Rosenberg:

This is in reply to your letter addressed to Jonathan Symonds, our former Chief Financial Officer, dated June 19, 2013. For ease of reference, we set forth your comments below, together with our responses.

Item 18. Financial Statements

Notes to consolidated financial statements

Significant accounting policies

Intangible assets available for use, page F-11

SEC comment 1:

1.         We require additional information about the discussion on page 6 of your response, particularly the last paragraph, in order to evaluate the new disclosure you propose at the bottom of page 7, which describes your accounting policies related to the determination of the fair value of inventory and intangible assets acquired in a business combination and the commencement of amortization of those acquired intangibles. We find the last paragraph of page 6 confusing. Please help us understand if the following summary of your response is correct:

·             You measure the fair value of finished goods inventory at the estimated selling prices of the inventory, less the sum of (i) costs of disposal and (ii) a reasonable profit margin for the selling effort all determined using market participant assumptions. That is, the reference you make to “normal distributor’s margin” means a reasonable profit margin for the selling effort.

·             An acquiree, like Alcon, may have profit margins on the selling effort of their products that are disproportionate to those of their competitors because of the existence of internally

generated intangible assets, which the competitors do not have, that support profit margins in excess of their competitors.

·             In order to achieve a margin upon the post-acquisition sale of the inventory that is consistent with the margin of a market participant without the benefit of the internally generated intangible asset, it would be necessary to measure the fair value of the acquired inventory at the acquisition date using a profit margin that contemplates the ability to leverage the internally generated intangible (i.e., a higher profit margin) because the amortization of the intangible asset recognized at the acquisition date and that is required under IAS 38, paragraph 97 to commence at the acquisition date will reduce the post-acquisition profit on the sale of product that contemplates leveraging those intangible assets to the margin of a market participant without the benefit of those assets.

·             Your response implies that rather than use a profit margin that contemplates the ability to leverage the internally generated intangible asset, you used a profit margin of a market participant without the benefit of the internally generated intangible asset (i.e., the profit margin you used is less than the profit margin that contemplates the ability to leverage the internally generated intangible asset). It also implies that you believe that the profit margin of a market participant without the benefit of the internally generated intangible assets contemplates a charge for the use of those assets and therefore you recognized the intangible assets at an amount less than their fair value (i.e., fair value less the charge) and did not commence amortization of the intangible assets as of the acquisition date, as required under IAS 38, paragraph 97, but instead waited until the inventory on hand was sold.

If the summary above is correct, it appears that the fair value of inventory and the fair value of the intangibles may be misstated at the acquisition date by equal and offsetting amounts depending on the appropriateness of your reasonableness check described on page 7. Our basis for suggesting this is twofold. First, the fair value of the intangible asset is not dependent on the fair value of the inventory. In fair valuing the intangible asset, a market participant would contemplate all expected future sales, as you did, but would not reduce the amount determined on that basis by the amount of the charge described in the fourth bullet above because to do so would result in a measurement that does not contemplate all expected future sales. Second, the acquired inventory contemplates the use of the intangibles (e.g., the product brand name). We would appreciate your views on each of these points. We would also appreciate your views as to whether in fair valuing the inventory the use of a profit margin that contemplates the ability to leverage the intangible assets is consistent with the requirement to use market participant rather than entity specific assumptions and if not whether the implication is that you believe it is not possible to comply with the requirement to fair value both the intangible asset and the inventory using market participant assumptions because to do so would double count the charge for the intangible assets thereby having the effect of recognizing, on a post-acquisition basis, a margin that is less than that of a market participant without the benefit of the intangibles.

Novartis response 1:

You have requested additional information about the discussion on page 6, particularly the last paragraph of our letter to you dated May 22, 2013, in order to evaluate the new disclosure

2

we have proposed and to further clarify our application of accounting policies for this area, commencing with the filing of our Form 20-F for the year ending December 31, 2013, on page 7 of this same letter.  For ease of reference, we set forth below these two sections from our previous letter:

Last paragraph of page 6 of our previous letter:

A substantially higher fair value of inventory compared to the acquiree’s production and conversion costs, due to applying the net-realizable-value approach, is considered to relate principally to the existence of additional intangible assets that need to be separately identified as part of the purchase-price allocation process.  These intangible assets were identified to be acquired marketing rights in the specific case of the Alcon acquisition.  Therefore, the purchase- price allocation process ensures the achievement of a normal distributor’s margin after covering not only the production and conversion costs mentioned above, but also a component related to a charge attributable to the owner of the acquired marketing rights.  This charge is represented by the amortization of the acquired marketing rights identified as part of the purchase-price accounting process.

New disclosure proposed for inventories and cost of goods sold, commencing with the filing of our Form 20-F for the year ending December 31, 2013, as outlined on page 7 of our previous letter:

Inventories acquired as part of a business combination are valued at fair value.  This often includes a component related to separately identified acquired marketing rights which is then expensed as the inventory is sold.  Except for this, amortization of acquired marketing rights intangible assets available for use is not included within the cost of inventories but is amortized on a straight-line time basis and recorded within cost of goods sold in the consolidated income statement.

In response to your specific question, we agree in principle that the four bullet points summarized by the Staff generally capture the key issues addressed in our accounting treatment of inventory acquired as part of a business combination.  Despite this, it is the Company’s position that the acquired marketing-rights intangible assets and the acquired inventories have been properly stated at fair value at the change-of-control date.  The consumption of the marketing-rights intangible assets was initiated at this same date, beginning with the recognition of the acquired inventory as cost of goods sold and then on a straight-line amortization basis thereafter. This is because, in the Company’s approach, an appropriate portion of the acquired marketing-rights intangible asset is included in the expensing of the acquired inventory, as explained further below. As a result, the Company commenced recognition of the systematic amortization of the marketing-rights intangible assets as of the acquisition date as required under IAS 38 Intangible Assets, paragraph 97.

The Staff appear to suggest that the fair value of the marketing-rights intangible assets that we acquired as part of our business combination with Alcon potentially should have been considered independently of the inventory value and should have been valued higher, possibly by a pre-tax amount of up to $467 million, with the acquired inventory being valued correspondingly lower, at the change-of-control date of August 25, 2010.   Under this alternative approach, the lower inventory valuation may be an appropriate estimation of market-participant fair value assuming the anticipated near-term sale of this inventory would benefit from, or in other words,

3

require future leverage of the related marketing-rights.  The straight-line amortization of the marketing-rights intangible assets under these assumptions would commence as from the change-of-control date.

We accept that this is an alternative approach to purchase-accounting valuation. However, in our view the Company’s approach is preferable, consistent with related guidance, and also in our experience produces results that are not materially different from the alternative that the Staff has outlined.

In the Company’s valuation analysis performed as part of the purchase-price allocation, sales of the existing inventory at the change-of-control date are included in the projected total future sales. They are part of the calculations to arrive at the total initial value for the marketing-rights intangible assets. However, under our approach this calculated amount is divided into the marketing-rights intangible asset value arising from the sale of the acquired inventory on hand at the change-of-control date (i.e., the $467 million referred to above) and that which relates to future sales.

Our preference for using the approach we have adopted is based on our view that it is consistent with the definition of net realizable value in IAS 2 Inventories as the “estimated selling price…less the estimated costs of completion and the estimated costs to make the sale”. We do not consider the marketing-rights intangible assets to be part of the disposal efforts of a distributor and this was assumed in our valuation analysis. Accordingly, in our view, the expensing of the marketing-rights intangible assets is properly initiated with effect from the date of the acquisition, starting with the recognition of the sale and related cost of goods sold of the acquired inventory.

We accept that this purchase-accounting valuation process could be looked at in different ways.  The central question in our view is what constitutes a normal distributor’s margin. One alternative, as you seem to suggest, might be to establish a much lower valuation for the acquired inventory by setting a higher distribution margin that would be sufficient to absorb the corresponding amortization of the acquired marketing rights. However, since the acquired inventory is generally sold within the first few months after the acquisition and is a component of the calculation of future sales underlying the acquired marketing-rights intangible asset, it seems reasonable and appropriate to attach a portion of this intangible asset to the related inventory.

Moreover, the calculation of the estimated fair value of the acquired inventory, based on selling price less holding and distribution costs and a market-participant distributor’s margin (smaller than the one contemplated under your alternative approach), essentially reflects a significant fair value step-up adjustment to the acquired inventory. This corresponds to the additional value inherent in the expected ultimate sale of the acquired inventory and which is principally attributable to the acquired marketing rights, allocated to such inventories at the change-of-control date.

As outlined in our current and previous replies to your inquires on this subject, we believe that the method and judgments applied by the Company in the determination of its purchase-price allocation, based on estimated fair values using a market participant’s view, for the Alcon business combination are reasonable and compliant with relevant IFRS guidance.

4

SEC comment 2:

2.         We also require additional information to evaluate your reasonableness check on page 7. Please help us understand what the $467 million adjustment to acquired inventory represents and why it is appropriate to compare the $467 million to the approximately $640 million that would have been amortized in 2010 if you acquired no inventory from Alcon. When explaining what the $467 million represents, please tell us whether (A) it is the difference between the market participant profit margin (on selling effort) that contemplates the ability to leverage the internally generated intangible assets and a market participant profit margin (on selling effort) that does not contemplate the ability to leverage the internally generated intangible assets or (B) it is equal to the step-up from Alcon’s book value necessary to achieve the acquisition date fair value. We note that if the $467 million equals the step-up, then it does not appear appropriate to compare the $467 million to the $640 million because the step-up is not limited to the charge for the use of those assets.

Novartis response 2:

As explained above, the referenced $467 million charge is the additional cost of goods sold included in the 2010 consolidated income statement arising from the fair value step-up adjustment of Alcon’s inventory. This is your alternative (B).

In formulating its purchase-accounting judgments, the Company sought to ensure that the operations for the year ended December 31, 2010 would reasonably reflect a charge (for the period from the August 25, 2010 date of acquiring a controlling interest in Alcon) consistent with a time-based period cost of amortizing the acquired marketing rights. The amount recognized in this initial period, through expensing of the acquired inventory, was $467 million. The amount that would have been recognized if the acquired marketing rights had been established in the absence of any existing inventory at the acquisition date would have been approximately $640 million. This analytical difference between the two calculations of $173 million was considered to be immaterial in the context as it represents only approximately 1.5% of the Group’s 2010 income before taxes of $11.7 billion.

While we agree that the approaches are not directly comparable, the Company nevertheless considers that its approach produces amounts which are not materially different from at least one possible alternative scenario outlined by the Staff.

5

*       *       *

The Company acknowledges that:

·                  the Company is responsible for the adequacy and accuracy of the disclosure in the filing;

·                  staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and

·                  the Company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

We trust that this letter responds to the issues raised in your comment letter.  If you have additional questions, please do not hesitate to contact us.

Respectfully   submitted,

Novartis   AG

/s/   HARRY KIRSCH

/s/

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Novartis AG
    Postfach
   4002 Basel
   Switzerland

July 2, 2013

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, 2012

Filed January 23, 2013

File No. 001-15024

Dear Mr. Rosenberg:

We are in receipt of your letter addressed to Jonathan Symonds, our former Chief Financial Officer, dated June 19, 2013.  As agreed in a recent telephone call between Barry Rosenfeld, of our affiliate Novartis Corporation, and Frank Wyman, Staff Accountant at SEC, we will respond to your letter on or before July 17, 2013.

Respectfully submitted,

Novartis AG

/s/   HARRY KIRSCH

/s/   FELIX R. EHRAT

Harry   Kirsch

Felix   R. Ehrat

Chief   Financial Officer

General   Counsel

Novartis   Group

Novartis   Group

June 19, 2013

Via E-mail
Mr. Jonathan Symonds
Chief Financial  Officer
Novartis AG
CH-4056 Basel
Switzerland

Re: Novartis  AG
  Form 20-F for Fiscal Year Ended December 31, 201 2
  Filed January 23, 2013
File No. 001-15024

Dear  Mr. Symonds :

We have reviewed your May 22 , 2013 response to our Ma y 3, 2013 letter and have
the following comments.

Please respond to this letter within 10 business days by providing the requested
information or by advising us when you will provide the requested response. If you do not
believe a comment applies to your facts and circumstances, please tell us why in your
response. Please furnish us a letter on EDGAR under the form type label CORRESP that
keys your responses to our comments.

After reviewing the information provided, we may raise additional comments and/or
request that you amend your filing .

Item 18. Fi nancial Statements
Notes to Consolidated Financial Statements
1. Significant Accounting Policies
Intangible Assets Available For Use, page F-11

1. We require additional information about the discussion on page 6 of your
response, particularly the last paragr aph, in order to evaluate the new disclosure
you propose at the bottom of page 7, which describes your accounting policies
related to the determination of the  fair value of inventory and intangible assets
acquired in a business combination and the commence ment of amortization o f
those acquired intangibles. We find the last paragraph of page 6 confusing.
Please help us understand i f the following summary of your response is correct:
 You measure the fair value of finished goods inventory at the estimated
selling prices  of the inventor y, less  the sum of (i) costs  of disposal and  (ii) a

Mr. Jonathan Symonds
Novartis AG
June 19, 201 3
Page 2

 reasonable  profit margin for  the selling  effort all determined using market
participant assumptions. That is, the reference you make to “normal
distributor’s margin” means a reasonable profit margin for the selling effort.
 An acquiree, like Alcon, may have profit margins on the selling effort of their
products that are disproportionate to those of their competitors because of the
existence of internally generated intangible as sets, which the competitors do
not have, that support profit margins in excess of their competitors.
 In order to achieve a margin upon the post -acquisition sale of the inventory
that is consistent with the margin of a market participant without the benefit  of
the internally generated intangible asset, it would be necessary to measure the
fair value of the acquired inventory at the acquisition date using a profit
margin that contemplates the ability to leverage the internally generated
intangible (i.e., a  h igher profit margin) because the  amortization of the
intangible asset recognized at the acquisition date and that is required under
IAS 38, paragraph 97 to commence at the acquisition date will reduce the
post-acquisition profit on the sale of product tha t contemplates leveraging
those intangible assets to the margin of a market participant without the
benefit of those assets.
 Your response implies that rather than use a profit margin that contemplates
the ability to leverage the internally generated intangible asset, you used a
profit margin of a market participant without the benefit of the internally
generated intangible asse t (i.e., the profit margin you used is less than the
profit margin that contemplates the ability to leverage the internally generated
intangible asset).   It also implies that you believe that the profit margin of a
market participant without the benefit of  the internally generated intangible
assets contemplates a charge for the use of those assets and therefore you
recognized the intangible assets at an amount less than their fair value (i.e.,
fair value less the charge)   and did not commence amortization o f the
intangible assets as of the acquisition date, as required under IAS 38,
paragraph 97, but instead waited until the inventory on hand was sold.

If the summary above is correct, it appears that the fair value of inventory and the
fair value of the i ntangibles may be misstated at the acquisition date by equal and
offsetting amounts depending on the appropriateness of your reasonableness
check described on page 7.   Our basis for suggesting this is twofold.   First, the fair
value of the intangible asset  is not dependent on the fair value of the
inventory.    In fair valuing the intangible asset, a market participant would
contemplate all expected future sales, as you did, but would not reduce the
amount determined on that basis by the amount of the charge  described in the
fourth bullet above because to do so would result in a measurement that does not
contemplate all expected future sales.  Second, the acquired inventory
contemplates the use of the intangibles (e.g., the product brand name).   We would
appreciate your views on each of these points.   We would also appreciate your
views as to whether in fair valuing the inventory the use of a profit margin that

Mr. Jonathan Symonds
Novartis AG
June 19, 201 3
Page 3

 contemplates the ability to leverage the intangible assets is consistent with the
requirement to use  market participant rather than entity specific assumptions and
if not whether the implication is that you believe it is not possible to comply with
the requirement to fair value both the intangible asset and the inventory using
market participant assumpti ons because to do so would double count the charge
for the intangible assets thereby having the effect of recognizing, on a post -
acquisition basis, a margin that is less than that of a market participant without the
benefit of the intangibles.

2. We also r equire additional information to evaluate your reasonableness check on
page 7.  Please help us understand what the $467 million adjustment to acquired
inventory represents and why it is appropriate  to compare the $467 million to the
approximately $640 mill ion that would have been amortized in 2010 if you
acquired no inventory from Alcon .  When explaining what the $467 million
represents, please tell us whether (A) it is the difference between the market
participant profit margin (on selling effort) that con templates the ability to
leverage the internally generated intangible assets and a market participant profit
margin (on selling effort) that does not contemplate the ability to leverage the
internally generated intangible assets or (B) it is equal to the s tep-up from Alcon’s
book value necessary to achieve the acquisition date fair value.   We note that if
the $467 million equals the step -up, then it does not appear appropriate to
compare the $467 million to the $640 million because the step -up is not limit ed to
the charge for the use of those assets.

Please contact Frank Wyman, Staff Accountant, at (202) 551 -3660  or Mark
Brunhofer, Senior Staff Accountant , at (202) 551 -3638 if you have any questions
regarding th e comment s. In this regard, do not hesitate to contact me at (202) 551 -3679.

Sincerely,

        /s/ Jim B. Rosenberg

Jim B. Rosenberg
Senior Assistant Chief
Accountant

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Novartis AG

Postfach

4002   Basel

Switzerland

May 22, 2013

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, 2012

Filed January 23, 2013

File No. 001-15024

Dear Mr. Rosenberg:

This is in reply to your letter addressed to Jonathan Symonds, our former Chief Financial Officer, dated May 3, 2013. For ease of reference, we set forth your comments below, followed by our responses.

Item 18. Financial Statements

Notes to consolidated financial statements

Significant accounting policies

Intangible assets available for use, page F-11

SEC request:

1.              We found your response to our prior comment 1 confusing. For example, we did not understand your references to “as a practical matter,” “economic rent,” and “more properly,” as well as your proposed disclosure which referenced the costs of inventories “at period end.” Please provide a more fulsome analysis of whether the amortization of intangible assets included within currently marketed products, marketing know-how, and a portion of technologies, which you classify as cost of goods sold, represents inventoriable costs and are accounted for as such. Please include in your response, but do not limit it to, an evaluation of each material intangible asset within these three categories in the context of the requirements in IAS 2, paragraphs 10 to 18, with particular focus on production and non-production overhead, as well as IAS 38, paragraphs 97 to 99.

2.              As a further follow-up to your proposed disclosure that amortization of intangible assets is not included in the costs of inventories at period end, please tell us whether you have

applied this policy consistently for all periods presented. If you have applied this policy consistently, please help us understand the apparent change in policy between 2010 and 2011, suggested by the following disclosure. We note on page 128 that your consolidated amortization expense recognized in the income statement increased $1.9 billion, from $1.1 billion in 2010 to $3.0 billion in 2011 “… as a result of a full year of incorporating Alcon.” We also note on pages 122 and 137 that Alcon’s amortization of intangible assets recognized in the income statement was $1.9 billion for each of 2011 and 2012. Because the increase in your consolidated amortization expense from 2010 to 2011 equaled a full year of amortization expense on Alcon acquired intangible assets and the changes in amortizable intangible assets in 2011 as disclosed in Note 11 to the consolidated financial statements appear to be relatively insignificant, the disclosure suggests that amortization of the Alcon intangible assets acquired may not have been recognized in the 2010 income statement and thus remained capitalized on the balance sheet as of the 2010 period end.

Novartis response-overall conclusions:

In response to these two questions with respect to our Form 20-F for the year ended December 31, 2012 (the “2012 Form 20-F”) our overall conclusions are as follows:

1.              We classify the amortization of intangible assets such as currently marketed products, marketing procedure know-how and existing surgical technologies (hereafter “acquired marketing rights”) within Cost of Goods Sold in the consolidated income statement but not as inventoriable costs on the consolidated balance sheet. These intangible assets are related to patents, licenses, distribution networks, and customer relationships which enable the marketing of the acquired company’s products in established markets. These intangible assets are not related to production activities and therefore it is inappropriate to include these costs as a component of inventory valuation except in the specific case of acquisition accounting mentioned below where inventory is required to be valued at fair value. Accordingly, we expense these non-production-related acquired marketing rights on a straight-line basis over the comparable period underlying the related valuation used in the purchase-price allocation.

2.              The accounting policy for the amortization of the acquired marketing-rights intangible assets has been applied on a consistent basis. As indicated below we will make certain clarifications to our disclosures with respect to our accounting policy in our next annual report on Form 20-F. The figures referred to by the Staff were impacted by the inventory acquired with our acquisition of Alcon. As set forth below, inventory acquired in a business combination must be valued at “fair value” as of the date of the acquisition. In the case of inventory acquired at the Alcon acquisition date of August 25, 2010, this fair value effectively included an allocation of the separately identified acquired marketing-rights value. This

2

acquired inventory was fully expensed over the inventory-turn period of approximately four months in 2010, and this portion of the acquired marketing-rights value therefore did not remain on the consolidated balance sheet at December 31, 2010.

Inventory newly produced after August 25, 2010 has been valued on a lower basis and as indicated in point 1 above, includes production costs (including conversion costs) but does not include any value related to the acquired marketing  rights.

Acquired marketing rights not allocated to inventory on August 25, 2010 have been amortized on a straight-line basis as of January 1, 2011 since this was estimated to be the date from which all the acquired inventory had been sold. As explained more fully below, we believe that the period and method of amortization elected for these acquired marketing-rights intangible assets are consistent with the underlying valuations and in conformity with related IFRS guidance.

Novartis response-detailed comments:

Amortization of acquired marketing rights are considered Costs of Goods Sold, and are not required to be included as components of the cost of inventory produced.

The Company considers that it is appropriate to classify the amortization of acquired marketing rights as a time-based period cost and not an inventory item.  This is appropriate because these intangible assets and related amortization are more related to the marketing of the acquired products than to their production.  The classification of this expense in the consolidated income statement, within Cost of Goods Sold as a non-production-related item, is considered to be the most appropriate description of the underlying items, as they relate to the Company’s acquired rights to market these products. This classification is disclosed on page F-11 of our 2012 Form 20-F in our Significant Accounting Policies section. As the Staff indicates with their reference to page 128 of the 2012 Form 20-F Operating & Financial Review, Item 5.A provides disclosure of the amounts and classification of acquired marketing-rights amortization. It should further be noted that this classification of non-production items to Cost of Goods Sold is not unique, as the Company has other costs recorded as non-production Cost of Goods Sold items, principally royalty costs related to sales which are also not appropriate to be included in inventory values.

3

Under IAS 2 Inventories paragraph 10, “the cost of inventories shall comprise all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition”. We note that IAS 2 paragraph 15 permits, but does not require, that in certain circumstances non-production overheads may be recorded as a component of inventory. The Company has concluded that the amortization of acquired marketing rights is not required to be included as a component of inventory as it relates to the marketing and selling of the products rather than to their production.

Paragraph 99 of IAS 38 Intangible Assets provides further guidance that amortization is included in the cost of inventories if it relates to production. It stipulates that “...sometimes the future economic benefits embodied in an asset are absorbed in producing other assets. In this case, the principal amortization charge constitutes part of the cost of the other asset and is included in its carrying amount. For example, the amortization of intangible assets used in a production process is included in the carrying amount of inventories (see IAS 2 Inventories)”.

As indicated in our April 3, 2013 response, the Staff noted in the publication of its paper “An Analysis of IFRS in Practice” issued in November 2011, that some companies included the amortization of such items as acquired marketing rights and other product-related intangible assets in the cost of inventories while others did not, even in cases when the nature of the product and the intangible asset appeared to be similar.

Given the diversity in practice, the Company therefore considers that it is acceptable to classify the amortization of acquired marketing rights as a time-based period cost and not as an inventory item.  The Company further considers that this is appropriate in its circumstances as these intangible assets and related amortization are more related to the marketing of the acquired products than to their production.  The Company applies an accounting policy acceptable under relevant IFRS guidance and the Company also considers that it appropriately classifies the amortization expense as a non-production component of Cost of Goods Sold.

The valuation of inventory acquired in a business combination must be valued at “fair value,” including an allocation of separately identified acquired marketing-rights values.

While it is appropriate to treat the amortization of acquired marketing rights within Cost of Goods Sold but not as inventoriable costs, a different rule applies with respect to inventory acquired in a business combination. In that case, under IFRS 3 Business Combinations, paragraph 18, an “acquirer shall measure the identifiable assets acquired and the liabilities assumed at their acquisition date fair values”. IAS 2 paragraph 6 defines

4

fair value as “the amount for which an asset could be exchanged, or a liability settled between knowledgeable, willing parties in an arm’s length transaction”.

On August 25, 2010, the Company completed the acquisition of an approximately 77% controlling interest in Alcon. The purchase price amounted to $38.7 billion. The Company applied the purchase method of accounting to its acquisition of the controlling interest in Alcon on August 25, 2010 in accordance with IFRS 3 and valued the acquired assets obtained at their fair value as of the acquisition date.

The majority of the additional separately identified intangible assets arising from this business combination relate to Alcon’s acquired marketing rights which had been internally generated by Alcon within its Pharmaceuticals, Surgical and Consumer franchises. These were identified as separately acquired intellectual property not related to the production process.

The following table outlines the allocation of the purchase price to acquired marketing rights. As discussed further below, a portion of the total acquired marketing-rights value has been allocated to the acquired inventory in order to adjust it to fair value.

Acquired marketing rights after allocation of a portion to acquired
   inventory in order to adjust it to fair value

Pre-tax amount of acquired marketing
   rights allocated to acquired inventory to
   adjust to fair value

Alcon’s
   carrying
   value
   ($m)

Revaluation
   due to
   acquisition
   accounting
   ($m)

Fair
   value as
   of
   August
   25,
   2010
   ($m)

Estimated
   useful life
   (years)

2010 expense
   in
   consolidated
   income
   statement
   ($m)

Revaluation
   due to
   acquisition
   accounting
   ($m)

Estimated
   inventory
   turnover
   (months)

2010 expense
   in
   consolidated
   income
   statement
   ($m)

Currently marketed products

186

10,375

10,561

5-15

6

162

4

162

Marketing procedure know-how

—

5,960

5,960

25

0

305

4

305

Existing surgical technologies

689

4,771

5,460

10

21

*

4

*

Total

875

21,106

21,981

27

467

467

* Existing surgical technologies are valued using the “Relief from Royalties” Income Approach. A charge for use of this asset is taken into account when arriving at the amount of the Marketing procedure know-how to be included in the fair value of inventory.

5

The acquired marketing rights valued are made up of three categories: currently marketed products, marketing procedure know-how and existing surgical technologies.

Currently marketed products represent the composite value of acquired intellectual property, patents and distribution rights and product trade names. In total nine major product groups were separately identified and valued for the Pharmaceuticals franchise and three product groups were separately identified and valued for the Consumer franchise. The fair value adjustments were $7.9 billion and $2.5 billion, for the Pharmaceuticals and Consumer franchises, respectively.

The marketing procedure know-how is unique to the Surgical franchise of Alcon and represents the expertise, support and training infrastructure to market and deliver its state-of-the-art surgical products to ophthalmologists in eye hospitals and ophthalmological clinics.

The existing technologies acquired with Alcon represent the value drivers (or key features) embedded in the three Surgical franchise key categories of cataract, vitreoretinal and refractive surgical activities which enable the ophthalmology surgeon to perform high quality procedures. As part of the Company’s analysis of the characteristics of these existing technologies, an investigation was undertaken as to whether or not these related to production activity. The conclusion was that these related almost wholly to meeting the needs of the surgeons and were not related to production activities. The fair value adjustments were $4.2 billion, $0.5 billion and $0.1 billion, for the cataract, vitreoretinal and refractive activities, respectively.

These separately identified acquired marketing-rights intangible assets were valued using the Income Approach which takes into account the value from the expected future sale of specified products.  The amortization period and method were determined to align with the expected future economic benefits embodied in these intangible assets.

We calculated the fair value of the acquired inventory for the purpose of the purchase-price allocation, as of the August 25, 2010 change-of-control date, based on the inventory item’s selling price less holding and distribution costs and a normal distributor’s margin. This approach is supported by the definition in IAS 2 paragraph 6 of net realizable value as being “the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale”.

A substantially higher fair value of inventory compared to the acquiree’s production and conversion costs, due to applying the net realizable value approach, is considered to relate principally to the existence of additional intangible assets that need to be separately identified as part of the purchase-price allocation process. These intangible assets were identified to be acquired marketing rights in the specific case of the Alcon acquisition. Therefore the purchase price allocation process ensures the achievement of a normal distributor’s margin after covering not only the production and conversion costs mentioned above, but also a component related to a charge attributable to the owner of the

6

acquired marketing rights. This charge is represented by the amortization of the acquired marketing rights identified as part of the purchase-pri

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Novartis   AG
   Postfach
   4002 Basel
   Switzerland

May 17, 2013

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, 2011

Filed   January 25, 2012

File   No. 001-15024

Dear Mr. Rosenberg:

We are in receipt of your letter addressed to Jonathan Symonds, our former Chief Financial Officer, dated May 3, 2013.  As agreed in a May 15, 2013 telephone call between Barry Rosenfeld, of our affiliate Novartis Corporation, and Frank Wyman, Staff Accountant at SEC, we will respond to your letter on or before May 31, 2013.

Respectfully   submitted,

Novartis   AG

/s/   HARRY KIRSCH

/s/   FELIX R. EHRAT

Harry   Kirsch

Felix   R. Ehrat

Chief   Financial Officer

General   Counsel

Novartis   Group

Novartis   Group

May 3, 2013

Via E-mail
Mr. Jonathan Symonds
Chief Financial  Officer
Novartis AG
CH-4056 Basel
Switzerland

Re: Novartis  AG
  Form 20-F for Fiscal Year Ended December 31, 201 2
  Filed January 23, 2013
File No. 001-15024

Dear  Mr. Symonds :

We have reviewed your April 3, 2013 response to our March 20, 2013 letter and have
the following comments.

Please respond to this letter within 10 business days by providing the requested
information or by advising us when you will provide the requested response. If you do not
believe a comment applies to your facts and circumstances, please tell us why in your
response. Please furnish us a letter on EDGAR under the form type label CORRESP that
keys your responses to our comments.

After reviewing the information provided, we may raise additional comments and/or
request that you amend your filing .

Item 18. Fi nancial Statements
Notes to Consolidated Financial Statements
1. Significant Accounting Policies
Intangible Assets Available For Use, page F-11

1. We found your response to our prior comment 1 confusing.   For example, we did
not understand your references to  “as a practical matter,” “economic rent,” and
“more properly ,” as well as your proposed disclosure which referenced the costs
of inventories “at period end.”   Please provide a more fulsome analysis of whether
the amortization of intangible assets included  within currently marketed products,
marketing know -how, and a portion of technologies, which you classify as cost of
goods sold, represent s inventoriable costs and are accounted for as such.   Please
include in your response, but do not limit it to, an eva luation of each material
intangible asset within these three categories in the context of the requirements in

Mr. Jonathan Symonds
Novartis  AG
May 3, 201 3
Page 2

 IAS 2, paragraphs 10 to 18, with particular focus on production and non -
production overhead, as well as IAS 38, paragraph s 97 to 99.

2. As a furthe r follow -up to your proposed disclosure that  amortization of intangible
assets is not included in the costs of inventories at period end, please tell us
whether you have applied this policy consistently for all periods presented.   If you
have applied this policy consistently, please help us understand the apparent
change in policy between 2010 and 2011 , suggested by the following
disclosure.   We note on page 128 that your consolidated amortization expense
recognized in the income statement increased $1.9 bi llion, from $1.1 billion in
2010 to $3.0 billion in 2011 “… as a result of a full year of incorporating
Alcon.”   We also note on pages 122 and 137 that Alcon’s amortization of
intangible assets recognized in the income statement was $1.9 billion for each o f
2011 and 2012.  Because the increase in your consolidated amortization expense
from 2010 to 2011 equaled a full year of amortization expense on Alcon acquired
intangible assets and the changes in amortizable intangible assets in 2011 as
disclosed in Note  11 to the consolidated financial statements appear to be
relatively insignificant, the disclosure suggests that amortization of the Alcon
intangible assets acquired may not have been recognized in the 2010 income
statement and thus remained capitalized on  the balance sheet as of the 2010
period end.

2. Contingent Consideration, page F -15

3. Please refer to prior comment 2. Please provide us proposed disclosure to be
included in future filings that describes the factors that you consider in
determining when those future events that will trigger a payment obligation
outside of a business combination are reasonably likely to occur and result in
corresponding liability recognition. Also, quantify for us those possibl e future
payment obligations relating to these asset acquisitions that have not been
recorded or reflected in the table of aggregate contractual obligations on page
198.

Please contact Frank Wyman, Staff Accountant, at (202) 551 -3660  or Mark
Brunhofer, Senior Staff Accountant , at (202) 551 -3638, if you have any questions
regarding th e comment s. In this regard, do not hesitate to contact me at (202) 551 -3679.

Sincerely,

        /s/ Jim B. Rosenberg

Jim B. Rosenberg
Senior Assistant Chief
Accountant

CORRESP
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Novartis   AG
    Postfach
   4002 Basel
   Switzerland

April 3, 2013

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, 2012

Filed   January 23, 2013

File   No. 001-15024

Dear Mr. Rosenberg:

This is in reply to your letter addressed to Jonathan Symonds, our Chief Financial Officer, dated March 20, 2013. For ease of reference, we set forth your comments below, followed by our responses.

Item 18. Financial Statements

Notes to consolidated financial statements

1. Significant accounting policies

Intangible assets available for use, page F-11

SEC request:

1.              Your disclosure herein suggests that amortization of currently marketed products, marketing know-how, and a portion of technologies classified as cost of goods sold are accounted for as inventoriable costs. Please tell us if our understanding is correct, and provide us proposed revisions to your inventories accounting policy note on F-14 to be included in future filings that explicitly identifies which of these intangible assets’ amortization is included as an inventoriable cost. Please also provide us an analysis of each aspect included within these three categories that supports your accounting treatment of amortization as inventoriable costs under IAS 2. For example, your description of the categories suggests there are four parts that comprise the value of currently marketed products, two parts that comprise the value of marketing know-how and that there may be three types of know-how for technologies (i.e. research, development and production).

Novartis response:

In our Form 20-F for the year ended December 31, 2012 (the “2012 Form 20-F”), the Company’s accounting policy for “Intangible assets available for use” on page F-11 indicates the location in the consolidated income statement in which the respective amortization and any potential impairment charges are recognized.  As a practical matter such costs are charged directly to Cost Of Goods Sold, as appropriate, and are not included within the standard costs of inventories at the balance sheet date.  The majority of product-based intangible asset amortization derives from the value attributable to the economic rent arising from the Company’s ability to market the acquired intellectual property over the estimated useful life of the respective intangible asset. As such we believe that this amortization is more properly a time-based expense of the intellectual property rather than a production cost to be included in inventory values under the provisions of IAS 38 Intangible Assets, paragraph 99, and IAS 2 Inventories, paragraph 2.

As the staff noted in the publication of its paper “An Analysis of IFRS in Practice” issued in November 2011, there is diversity in practice on the inclusion of this item in inventory.  An excerpt from this paper is presented below.

Inventory Cost Capitalization

IFRS requires that “the cost of inventories shall comprise all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.” Most companies did not specify the nature of the costs that were capitalized as inventory. Such disclosures could help facilitate investor comparisons of financial statements, as specific capitalized costs may vary across companies.

IFRS also requires “a systematic allocation of fixed and variable production overheads that are incurred in converting materials into finished goods” to be included in inventory. In one case, a company disclosed that it did not include production overhead in the cost of inventory. The Staff also noted that some companies included the amortization of product-related intangible assets in the cost of inventories while others did not, even in cases when the nature of the product and the intangible asset appeared to be similar.

In response to your comment, and consistent with the recommendation mentioned above, to further clarify our application of accounting policies for this area, commencing with the filing of our Form 20-F for the year ending December 31, 2013, we will provide the following additional sentence to our “Inventories” accounting policy note (page F-14 of the 2012 Form 20-F): “Amortization of intangible assets available for use is not included within the cost of inventories at the period end.”

2

2. Contingent Consideration, page F-15

SEC request:

2.              Please explain to us the factors governing your recognition of contingent payments “outside of a business combination,” which you appear to record only when they become “unconditional.” Refer us to the technical guidance upon which you have relied.

Novartis response:

As disclosed, the Company accounts for contingent consideration in the acquisition of a business in accordance with IFRS 3 (2008) Business Combinations.  This standard requires accrual of a liability for the estimated contingent future payments to previous owners representing contractually defined potential amounts payable, conditional upon future events.  Asset acquisitions which do not meet the definition of a business are generally accounted for in accordance with IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets.  Under these standards, the acquirer is generally required to recognize consideration that is contingent on future events in the cost of the asset at the acquisition date only if the corresponding liability is recognized.  The accounting for the potential liability related to the contingent payments is based on the guidance in IAS 32 and IAS 39 under which a financial liability is only recognized for an obligation to deliver cash. However, Novartis is of the view that it does not have an obligation for contingent consideration outside of a business combination, since it could avoid paying the contingent consideration by discontinuing the activities required to achieve the uncertain event (which for the Company is typically a payment based on the outcome of a prospective clinical trial) on which the contingent consideration is based. Accordingly, the Company does not generally recognize such contingent consideration associated with asset purchases outside of a business combination that are conditional upon future events which are within the Company’s control. This topic is currently under consideration by the IFRS Interpretations Committee (see Staff Paper Variable payments for the separate acquisition of property, plant and equipment and intangible assets, dated March 2013).

3. Associated companies, page F-31

SEC request:

Regarding your accounting for your investment in Roche Holding AG, please provide us the following information:

Tell us how your use of a survey of analyst estimates of Roche’s net income to estimate your share of its earnings complies with the guidance in paragraphs 24 and 25 of IAS 28, revised in 2003. In your response, please tell us the amount of any adjustments recorded in 2012 to correct your estimate at December 31, 2011 and the

3

amount of any adjustments you will record in 2013 to correct your estimate at December 31, 2012. In addition, please tell us why you changed the presentation of the second table on page F-32 to remove the prior-year adjustment line item existing in the corresponding table of your Forms 20-F in 2011 and earlier.

Novartis response:

The Company first adopted the equity method of accounting for Roche Holding AG (Roche) following its substantial investment in Roche in 2001. IAS 28 requires the latest financial statements of an investee to be used in applying the equity method. Roche publishes its consolidated financial results only twice a year for the six months to June and twelve months to December. Its results for the year to December are published after those of Novartis. Roche is a publicly quoted company in Switzerland and cannot share information with the Company prior to the release of its results to its shareholders and the broader public. The Company does not believe that it is in the best interests of its shareholders to delay publication of its own results until Roche publishes its financial results, especially since any prior year adjustment arising from the Company’s current procedure has historically been small as indicated below. As soon as Roche publishes its half yearly or annual results the amounts recorded by the Company based on estimates are adjusted by the Company in its next quarterly reporting. In order to use current financial data for the equity method accounting of Roche we have considered it appropriate to take into account publicly available information provided by Roche on its current financial performance. The Company has concluded that the best approach to interpreting this publicly available information is to use a survey of analyst estimates of the future Roche financial results. These estimates are available during each quarter. As explained on page F-31 any change in this estimate is recorded as a prior period adjustment in the period when Roche reports their financial results.

The prior year adjustment that will be recorded in the first quarter of 2013 in relation with the Company’s 2012 share in the estimated net income of Roche will be a reduction of the Company’s share of Roche’s net income of USD 59 million representing 0.6% of the Company’s net income for 2012. In the first quarter of 2012, we recorded an adjustment to the Company’s 2011 share in the estimated net income of Roche of USD 18 million, amounting to 0.2% of the Company’s net income for 2011.

In the Company’s 2012 Form 20-F, the line detailing the prior year adjustments was removed from the tabular reconciliation on page F-32 due to the relative immateriality of the amounts.

4

SEC request:

Tell us how the accumulated equity accounting adjustments reflect the net income effect and dividends received for each year presented. In your response, please tell us why the dividends you received from Roche are not effectively included in your share of its net assets and why the equity accounting adjustments are not reflected in your share of the re-appraised intangible assets and implicit goodwill.

Novartis response:

In accordance with IAS 28 paragraph 11, the dividends received from the investee are deducted from the carrying value of the Company’s investment in Roche (see page F-32). This is stated in the tabular reconciliation of the carrying value presented in the Company’s disclosure. The tabular reconciliation distinguishes between the current carrying value of the assets recognized as part of the separate purchase price allocation, and the subsequent equity accounting adjustments, including the dividends received, as the Company considers this helps the reader of the financial statements in understanding the evolution of the carrying value of the investment on the balance sheet.

SEC request:

Tell us how the change in “Novartis share of re-appraised intangible assets” relates to the amortization of fair value adjustments, net of taxes.

Novartis response:

The amortization of fair value adjustments, net of taxes, reflects the yearly amortization of the Company’s share in fair value adjustments to intangible assets determined in the purchase price allocation when the Company acquired its equity interest in Roche.

A more detailed summary of the amounts recorded for 2012 and 2011 in the underlying currency of Roche of Swiss francs (CHF) and translated into US dollars is as follows:

5

2012

2011

(all amounts in millions)

CHF

USD

CHF

USD

Novartis share of Roche’s estimated net assets

2,519

2,753

2,658

2,828

January 1 Novartis share of   re-appraised intangible assets

1,769

1,882

1,955

2,077

Annual amortization of   re-appraised intangible assets

-186

-153

-186

-162

Currency translation

1

-33

December 31 Novartis share of re-appraised   intangible assets

1,583

1,730

1,769

1,882

Implicit Novartis goodwill

2,848

3,112

2,848

3,030

Current value of share in net   identifiable assets and goodwill

6,950

7,595

7,275

7,740

Dividend received in the year

-363

-396

-352

-377

Dividends received in prior periods since 2001

-1,826

-1,725

-1,474

-1,348

Share of Roche estimated net income in the year

704

709

667

702

Adjustment in the year related to prior period   share of net income

-16

-18

-39

-41

Share in Roche net income and other comprehensive income   in prior periods since 2001

2,410

2,423

1,782

1,686

Accumulated equity accounting   adjustments

909

993

584

622

December 31 balance sheet   value

7,859

8,588

7,859

8,362

SEC request:

Tell us your consideration of profits/losses from upstream and downstream transactions in accounting for your collaborations and other arrangements with Roche, as discussed in paragraph 22 of IAS 28, revised 2003.

Novartis response:

The material transactions between the Company and Roche consist of transactions in connection with the products Lucentis® and Xolair®. Profit and losses generated by the related “upstream” and “downstream” transactions were analyzed on the basis of the requirements set out by IAS 28. The Company concluded that only the transactions related to the acquisition from Roche of the active ingredient for the production of Lucentis® could require any potential elimination of unrealized intercompany profits, amounting to approximately 6% of the net income achieved by Roche on these transactions. Since the amount of such active ingredient acquired from Roche in the Company’s inventory as of December 31, 2012 and 2011 was immaterial at approximately USD 14 million and USD 15 million respectively, it was concluded that no elimination was required as the amount would have been clearly de minimis.

6

*       *       *

The Company acknowledges that:

·                  the Company is responsible for the adequacy and accuracy of the disclosure in the filing;

·                  staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and

·                  the Company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

We trust that this letter responds to the issues raised in your comment letter.  If you have additional questions, please do not hesitate to contact us.

Respectfully   submitted,

Novartis   AG

/s/   JONATHAN SYMONDS

/s/   FELIX R. EHRAT

Jonathan   Symonds

Felix   R. Ehrat

Chief   Financial Officer

General   Counsel

Novartis   Group

Novartis   Group

March 20 , 2013

Via E-mail
Mr. Jonathan Symonds
Chief Financial  Officer
Novartis AG
CH-4056 Basel
Switzerland

Re: Novartis  AG
  Form 20-F for Fiscal Year Ended December 31, 201 2
  Filed January 23, 2013
File No. 001-15024

Dear  Mr. Symonds :

We have limited our review to only your financial statements and related
disclosures and do not intend to expand our review to other portions of your document.
In our comment s, we ask you to provide us with information so we may better understand
your disclosure.

Please respond to this letter within 10 business days by  providing the requested
information or by advising us when you will provide the requested response.   If you do
not be lieve a comment applies to your facts and circumstances, please tell us why in your
response.   Please furnish us a letter on EDGAR under the form type label CORRESP that
keys your response s to our comment s.

After reviewing the information provided, we m ay raise additional comments
and/or request that you amend your filing.

Item 18. Financial Statements
Notes to Consolidated Financial Statements

1. Significant Accounting Policies
Intangible Assets Available For Use, F -11

1. Your disclosure herein suggests that amortization of currently marketed products,
marketing know -how, and a portion of technologies  classified as cost of goods
sold are accounted for as inventoriable costs.   Please tell us if our understanding is
correct, and provide us proposed revisio ns to your inventories accounting policy
note on F -14 to be included in future filings that explicitly  identifies which of
these intangible assets’ amortization is included as an inventoriable cost.   Please

Mr. Jonathan Symonds
Novartis AG
March  20, 201 3
Page 2

 also provide us an analysis of each aspect includ ed within these three categories
that supports your accounting treatment of amortization as inventoriable costs
under IAS 2.   For example, your description of the categories suggests there are
four parts that comprise the value of currently marketed produc ts, two parts that
comprise the value of marketing know -how and that there may be three types of
know -how for technologies (i.e. research, development and production).

Contingent Consideration, page F -15

2. Please explain to us the factors governing you r recognition of contingent
payments “outside of a business combination,” which you appear to record only
when they become “unconditional.”  Refer us to the technical guidance upon
which you have relied.

4. Associated Companies, page F -31

3. Regarding your accounting for your investment in Roche Holding AG, p lease
provide us the following information:

 Tell us how your use of a survey of analyst estimates of Roche’s net
income to estimate your share of its earnings complies with the guidance
in paragra phs 24 and 25 of IAS 28, revised in 2003.  In your response,
please tell us the amount of any adjustments recorded in 2012 to correct
your estimate at December 31, 2011 and the amount of any adjustments
you will record in 2013 to correct your estimate at D ecember 31, 2012.  In
addition, please tell us why you changed the presentation of the second
table on page F -32 to remove the prior -year adjustment line item existing
in the corresponding table of your Forms 20 -F in 2011 and earlier.
 Tell us how the accum ulated equity accounting adjustments reflect the net
income effect and dividends received for each year presented.  In your
response, please tell us why the dividends you received from Roche are
not effectively included in your share of its net assets and why the equity
accounting adjustments are not reflected in your share of the re -appraised
intangible assets and implicit goodwill.
 Tell us how the change in “Novartis share of re -appraised intangible
assets” relates to the amortization of fair value adjust ments, net of taxes.
 Tell us your consideration of profits/losses from upstream and
downstream transactions in accounting for your collaborations and other
arrangements with Roche, as discussed in paragraph 22 of IAS 28, revised
2003.

Mr. Jonathan Symonds
Novartis AG
March  20, 201 3
Page 3

 We urge all persons who are responsible for the accuracy and adequacy of the
disclosure in the filing to be certain that the filing includes the information the Securities
Exchange Act of 1934 and all applicable Exchange Act rules require.   Since the compa ny
and its management are in possession of all facts relating to a company’s disclosure, they
are responsible for the accuracy and adequacy of the disclosures they have made.

 In responding to our comments, please provide  a written statement from the
company acknowledging that:
 the company is responsible for the adequacy and accuracy of the disclosure in the
filing;
 staff comments or changes to disclosure in response to staff comments do not
foreclose the Commission from taking any action with respect to  the filing; and
 the company may not assert staff comments as a defense in any proceeding
initiated by the Commission or any person under the federal securities laws of the
United States.

Please contact Frank Wyman, Staff Accountant, at (202) 551 -3660  or Mark
Brunhofer, Senior Staff Accountant , at (202) 551 -3638, if you have any questions
regarding th e comment s. In this regard, do not hesitate to contact me at (202) 551 -3679.

Sincerely,

/s/ Jim B. Rosenberg

Jim B. Rosenberg
Senior Assistant Chief
Accountant

August 14 , 201 2

Via E -mail
Mr. Jonathan Symonds
Chief Financial  Officer
Novartis AG
Lichtstrasse 35
4056 Basel, Switzerland

Re: Novartis AG
   Form 20-F for the Fiscal Year Ended December 31 , 2011
   Filed January 25, 201 2
File No. 001-15024

Dear M r. Symonds :

We have completed our review of your filing.  We remind you that our comments or
changes to disclosure in response to our comments do not foreclose the Commission from taking
any action with respect to the company or the filing and the company may not assert staff
comments as a defense in any proceeding initiated by the Commission or any person under the
federal securities laws of the United States.  We urge all persons who are responsible for the
accuracy and adequacy of the disclosure in the filing to be certain that the filing includes the
information the Securities Exchange Act of 1934 and all applicable rules require.

Sincerely,

 /s/ Gus Rodriguez

Gus Rodriguez
Accounting Branch Ch ief

CORRESP
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Novartis AG

Postfach

4002   Basel

Switzerland

July 26, 2012

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, 2011

Filed   January 25, 2012

File   No. 001-15024

Dear Mr. Rosenberg:

This is in reply to your letter addressed to Jonathan Symonds, our Chief Financial Officer, dated July 20, 2012, which was in response to our June 22, 2012 letter. For ease of reference, we set forth your comments below, followed by our responses.

Notes to the consolidated financial statements

15. Trade receivables, page F-48

SEC request:

1.                                       Please refer to your response to comment two. You indicate that “these amounts appear likely to be significant as of today.” In your May 10th response, you indicated that the “requested information is not material to investors at December 31, 2011.” Please tell us the facts, events and circumstances that have occurred since December 31, 2011 resulting in this change and why you believe the amounts are likely significant. In addition, please tell us the amount of trade receivables for Greece, Italy, Spain and Portugal and the amounts that are past due for each of these countries separately as of June 30, 2012 and whether you would consider the amounts significant.

Novartis response:

As was made clear in our May 10th letter, we do not consider our outstanding trade receivables for the four countries in question to be material.  In response to your further request, and in order to assist investors, in our June 22 letter we stated that we would evaluate our outstanding receivables for each of the four countries in question at year-end to determine whether they were significant, and, if they were, we would disclose the requested information

with respect to any such countries.  We stated, as you note, that as of the date of our June 22 letter, it appeared likely that our overdue receivables for Spain and Italy would be significant at year-end.  Since the date of that letter, due to payments received from Spain and Italy, our overdue receivables from these countries have been substantially reduced, from a total amount overdue for more than one year of $214 million as of December 31, 2011 to $138 million as of June 30, 2012 — as compared against our annual net sales of $58.6 billion for 2011.

As a result, as supported by the table below, at this point, it now appears that only the outstanding receivables from Italy may reasonably be considered likely to be significant as of year-end.

in USD m

Greece

Italy

Portugal

Spain

Total

Gross trade receivables at 12/31/11

207

761

88

495

1,551

Gross trade receivables at 6/30/12

207

718

116

344

1,385

Past due for more than one year at 12/31/11

16

91

9

98

214

Past due for more than one year at 6/30/12

29

85

18

6

138

Clearly, absent a specific regulatory requirement, we are not required to disclose financial information that is not material to the Novartis Group.  However, in order to assist investors, and as an accommodation to SEC, we would be willing to disclose the requested information with respect to any of these countries if, as of year-end, the amounts past due for more than one year from that country are considered significant.

*       *       *

The Company acknowledges that:

·                  the Company is responsible for the adequacy and accuracy of the disclosure in the filing;

·                  staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and

·                  the Company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

2

We trust that this letter responds to the issues raised in your comment letter.  If you have additional questions, please do not hesitate to contact us.

Respectfully submitted,

Novartis AG

/s/   JONATHAN SYMONDS

/s/   FELIX R. EHRAT

Jonathan   Symonds

Felix   R. Ehrat

Chief   Financial Officer

General   Counsel

Novartis   Group

Novartis   Group

3

July 20, 201 2

Via E -mail
Mr. Jonathan Symonds
Chief Financial  Officer
Novartis AG
Lichtstrasse 35
4056 Basel, Switzerland

Re: Novartis AG
   Form 20-F for the Fiscal Year Ended December 31 , 2011
   Filed January 25, 201 2
File No. 001-15024

Dear M r. Symonds :

We have reviewed your June 22 , 201 2 response to our June 8 , 201 2 letter and  have the
following comment .

Please respond to this letter within 10 business days by  providing us the requested
information or  by advising us when you will provide the requested response.   If you  do not
believe the comment appl ies to your facts and circumstances, please tell us why in your
response.  Please furnish us a letter on EDGAR un der the form type label CORRESP that key s
your response to our comment.

After reviewing the information provide d, we may raise additional comments  and/or
request that you amend your filing .

Notes to the consolidated financial statements
15. Trade recei vables, page F -48

1. Please refer to your response to comment two.  You indicate that “t hese amounts appear
likely to be significant as of today .”  In your May 10th response, you indicated that the
“requested information is not material to investors at Dece mber 31, 2011.”  Please tell us
the facts, events and circumstances that have occurred since December 31, 2011 resulting
in this change  and why you believe the amounts are likely significant .  In addition, please
tell us the amount of trade receivables for  Greece, Italy, Spain and Portugal and the
amounts that are past due for each of these countries separately as of June 30, 2012  and
whether you would consider the amounts significant .

Jonathan Symonds
Novartis AG
July 20, 2012
Page 2

 You may contact Vanessa Robertson, Staff Accountant, at (202) 551 -3649 or Lisa
Vanjoske, Assistant Chief Accountant, at (202) 551 -3614  if you have any questions regarding
the comments.  In this regard, do not hesitate to contact me at (202) 551 -3679.

Sincerely,

 /s/ Jim B. Rosenberg

Jim B. Rosenberg
Senior Assistant Chief Accountant

CORRESP
1
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Novartis   AG
   Postfach
   4002 Basel
   Switzerland

June 22, 2012

Mr. Joel Parker

Accounting Branch Chief

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, 2011

Filed   January 25, 2012

File   No. 001-15024

Dear Mr. Parker:

This is in reply to your letter addressed to Jonathan Symonds, our Chief Financial Officer, dated June 8, 2012, which was in response to our May 10, 2012 letter. For ease of reference, we set forth your comments below, followed by our responses.

Item 5. Operating and Financial Review and Prospects

Item 5.A Operating Results

Factors Affecting Results of Operations

Patent Expirations, Generic Competition Pressure the Industry, page 89

SEC request:

1.                                      Please refer to your response to comment one. Your response does not appear to address the second part of our original comment to include the factors that would impact the magnitude of the negative impact in your disclosure. Please provide us proposed disclosure to be included in future periodic reports that explains the factors that could change the estimate of the impact that the loss of exclusivity will have on results of operations.

Novartis response:

In addition to providing the information described in our May 10, 2012 letter regarding the potential impact of the loss of exclusivity of key Group products on Group operating income, in response to your further comment, and in order to assist investors, commencing with the filing of our 2012 Form 20-F we will provide information regarding factors, if any, that could materially impact the magnitude of the potential impact so disclosed.  Such factors would be difficult to formulate in advance, and could be expected to

vary by product.  However, depending on the product that will be exposed to loss of exclusivity, such factors could include:

·             The number of generic competitor products approved

·             The ease of manufacture of the product

·             The geographies in which generic competitor products are approved and the comparative profitability of branded pharmaceutical products in such geographies, and the strength of the market for generic pharmaceutical products in such geographies

·             The time of year at which such exclusivity would be lost

·             Regarding biologic pharmaceutical products, the ease of manufacture of such products, and the impact of the regulatory scheme for biosimilar products in the markets in which patent protection has been lost

·             Any unusual factors regarding a particular product which might impact the acceptance of a generic version of the product

Notes to the consolidated financial statements

15. Trade receivables, page F-48

SEC request:

2.                                      Please refer to your response to comment three. We believe disclosure of the information in your response would be useful to readers of your financial statements and should be made. Please confirm that, starting with your 2012 Form 20-F, you will disclose the total due, the amount past due for more than a year and the provision for Greece, Italy, Spain and Portugal separately. In addition, please confirm that you will disclose that substantially all of the trade receivables are due directly from local governments or from government-funded entities.

Novartis response:

In response to your further comment, and in order to assist investors, commencing with the filing of our 2012 Form 20-F, if the amounts past due for more than a year at December 31, 2012 are considered to be significant, we will provide the requested information with respect to Italy and Spain. These amounts appear likely to be significant as of today. We will further disclose that substantially all of the trade receivables from such countries are due directly from local governments or from government-funded entities.  During the course of preparing our 2012 Form 20-F, we will also review the status of our receivables with respect to Portugal and Greece, and will make a similar disclosure with regard to one or both of those countries if we consider our exposure to be significant. In

2

addition, in the event that the uncertainties with respect to Europe remain substantially unresolved at year-end, we will enhance our risk disclosures in this regard.

*       *       *

The Company acknowledges that:

·                  the Company is responsible for the adequacy and accuracy of the disclosure in the filing;

·                  staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and

·                  the Company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

We trust that this letter responds to the issues raised in your comment letter.  If you have additional questions, please do not hesitate to contact us.

Respectfully   submitted,

Novartis   AG

/s/   JONATHAN SYMONDS

/s/   FELIX R. EHRAT

Jonathan   Symonds

Felix   R. Ehrat

Chief   Financial Officer

General   Counsel

Novartis   Group

Novartis   Group

3

June 8 , 201 2

Via E -mail
Mr. Jonathan Symonds
Chief Financial  Officer
Novartis AG
Lichtstrasse 35
4056 Basel, Switzerland

Re: Novartis AG
   Form 20-F for the Fiscal Year Ended December  31, 2011
   Filed January 25, 201 2
File No. 001-15024

Dear M r. Symonds :

We have reviewed your May 10 , 201 2 response to our April 12, 201 2 letter and  have the
following comments .

Please respond to this letter within 10 business days by  providing us the requested
information or  by advising us when you will provide the requested response.   If you  do not
believe a comment appl ies to your facts and circumstances, please tell us why in your response.
Please furnish us a letter on EDGAR unde r the form type label CORRESP that key s your
response s to our comment s.

After reviewing the information provide d, we may raise additional comments  and/or
request that you amend your filing .

Item 5. Operating and Financial Review and Prospects
Item 5.A Operating Results
Factors Affecting Results of Operations
Patent Expirations, Generic Competition Pressure the Industry, page 89

1. Please refer to your response to comment one.  Your response does not appear to address
the second part of our original commen t to include the factors that would impact the
magnitude of the negative impact in your disclosure .  Please provide us proposed
disclosure to be included in future periodic reports  that explains the factors that could
change the estimate of the impact that  the loss of exclusivity will have on results of
operations.

Jonathan Symonds
Novartis AG
June 8 , 2012
Page 2

Notes to the consolidated financial statements
15. Trade receivables, page F -48

2. Please refer to your response to comment three.  We believe disclosure of the information
in your response would be useful to readers of your financial statements and should be
made. Please confirm that, starting with your 2012  Form 20-F, you will disclose the total
due, the amount past due for more than a year  and the provision  for Greece, Italy, Spain and
Portugal separately .  In addition, please confirm that you will disclose that substantially all of
the trade receivables are due directly from local governments or from government -funded
entities.

You may contact Vanessa Robertson, Staff Accountant, at (202) 551 -3649 or Lisa
Vanjoske, Assistant Chief Accountant, at (202) 551 -3614  if you have any questions regarding
the comments.  In this regard, do not hesitate to contact me at (202) 551 -3651.

Sincerely,

 /s/ Joel Parker

Joel Parker
Accounting Branch Chief

CORRESP
1
filename1.htm

Novartis AG

Postfach

4002 Basel

Switzerland

May 10, 2012

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, 2011

Filed January 25, 2012

File No. 001-15024

Dear Mr. Rosenberg:

This is in reply to your letter addressed to Jonathan Symonds, our Chief Financial Officer, dated April 12, 2012. For ease of reference, we set forth your comments below, followed by our responses.

Item 5. Operating and Financial Review and Prospects

Item 5.A Operating Results

Factors Affecting Results of Operations

Patent Expirations, Generic Competition Pressure in the Industry, page 89

SEC request:

1.                                      Your disclosure states that the loss of exclusivity for one or more important products will have a material negative impact on the Group’s results of operations. Please provide us proposed disclosure to be included in future periodic reports that includes to what degree you expect erosion from generic competition to impact net income in the following year and include the factors that would impact the magnitude of the negative impact.

Novartis response:

In order to assist investors in assessing the expected impact of the loss of exclusivity of key Group products, commencing with the filing of our Form 20-F for the year ending December 31, 2012 (the “2012 20-F”) we will provide information regarding the products’ aggregate total net sales in the preceding year, will set forth our estimate of the impact that the loss of exclusivity will have on the products’ aggregate total net sales in the following year, and state that, because we typically have substantially reduced marketing and R&D

expenses related to a product in its final year of exclusivity, it is expected that the impact on operating income will correspond to a significant portion of the lost sales.

Item 5.B Business Overview

Notes to the consolidated financial statements

11. Goodwill and intangible asset movements, page F-42

SEC request:

2.                                      Paragraphs 50 and 55 of IAS 36 require estimates of future cash flows and the discount rate to be determined on a pre-tax basis. Therefore, please provide us proposed disclosure to be included in future periodic reports that states the company’s impairment policy uses post-tax cash flows and a post-tax discount rate to arrive at value in use, if true, as well as:

·                  An assertion in your accounting policy note that the use of post-tax assumptions does not result in a value in use that is materially different had pre-tax assumptions been used; and

·                  The pre-tax discount rate

Novartis response:

IAS 36 paragraph 18 defines the recoverable amount as the higher of an asset’s or cash-generating unit’s (i) ‘fair value less costs to sell’ and (ii) its ‘value in use’.

The Company usually measures the recoverable amounts of its intangible assets and its cash generating units including any goodwill on a ‘fair value less costs to sell’ basis. This method allows post-tax cash flows and post-tax discount rates to be utilized. Where this calculation produces a recoverable amount that is higher than the asset’s carrying value, it is generally unnecessary to also consider the ‘value in use’ calculation.  This is due to the fact that if the ‘value in use’ calculation produces a higher value, then an impairment charge is even more remote, and if it produces a lower value than the ‘fair value less costs to sell’ method, then this will not be used to assess the recoverable value of the asset as only the higher value needs to be considered. When the ‘value in use’ method is utilized the Company uses pre-tax cash flows and will utilize and disclose the pre-tax discount rate that is used.

Accordingly, in order to assist investors in understanding how the Company conducts such analyses, commencing with the filing of our 2012 Form 20-F the Company will modify the section Impairment of long-lived intangible and tangible assets in the accounting policies described in note 1 (which begins on page F-12 of our 2011 Form 20-F) as follows:

Usually, Novartis uses the ‘fair value less costs to sell’ method for its impairment tests with post-tax cash flows and post-tax discount rates.  In the limited cases where the ‘value in use’ method is applied, pre-tax cash flows and discount rates are used.

2

15. Trade receivables, page F-48

SEC request:

3.                                      Please provide us proposed disclosure to be included in future periodic reports that breaks out the amount of trade receivables from product sales by country in Greece, Italy, Spain and Portugal and also disclose the amounts that are past due from each of these countries separately. Disclose the portion in each of these countries that is due directly from the government or funded by the government. Tell us the amount of allowance for doubtful accounts at December 31, 2011 related to receivables in each of these countries and why you consider that amount to be adequate.

Novartis response:

In our Form 20-F for the year ending December 31, 2011 (the “2011 Form 20-F”), we disclosed an aging and provision analysis for trade receivables as of December 31, 2011 on page F-48, and provided qualitative comments on the risks related to the distressed Eurozone countries.

In response to your request, the following are the total trade receivables overdue for more than one year for the four specified Eurozone countries, substantially all of which was due directly from local governments or from government-funded entities, and related allocated allowances for doubtful accounts at December 31, 2011:

in USD m

Total

Gross trade receivables for Greece, Italy, Spain   and Portugal

1,551

Past due for more than one year

214

Provision

70

Trade receivables in Italy and Spain represent approximately 90% of the amounts past due for more than one year for the four countries shown above and approximately 70% of the related provision. We considered this provision to be adequate based on the stated positions of the applicable governments; customary relationships and contractual terms with government-sponsored institutions within the EU, including historical payment patterns; and our experience with distressed settlement situations such as Greece and the experience gained from negotiating factoring arrangements with commercial banks in the countries involved during late 2011.

With respect to your request regarding future periodic reports, given the size of the amounts at issue as compared with (i) our total net sales in 2011 of $58.6 billion, (ii) our total gross trade receivables as of December 31, 2011 of $10.5 billion; and (iii) our total receivables overdue more than one year as of December 31, 2011 of $305 million, we believe

3

that the requested information is not material to investors in Novartis AG shares, and therefore not required to be disclosed.

20. Provisions and other non-current liabilities

Legal matters, page F-65

SEC request:

4.                                      Please provide us proposed disclosure to be included in future periodic reports to include, where practicable, an estimate of the financial effect for each legal proceeding discussed.  If it is not practicable to disclose this information, that fact should be stated. Please refer to paragraphs 86 and 91 of IAS 37.

Novartis response:

In order to assist investors in understanding the Company’s legal proceedings, commencing with the filing of our 2012 Form 20-F, the Company will revise its disclosures concerning legal contingencies by providing an estimate, where practicable, of the financial effect for each major legal proceeding discussed, or relevant groups of such proceedings, or alternately stating that such estimates are not practicable, as applicable.  Specifically, we will amend note 20 to include additional disclosures for the amount included in a line in the table ‘provisions for product liability, governmental investigations and other legal matters’ substantially as follows:

The provisions for product liability, governmental investigations and other legal matters represent our current best estimate of the total financial effect for the above-mentioned and other less-significant matters for items where there is a probable potential cash outflow. We have not provided for certain adverse trial court verdicts in xxx cases against our affiliates amounting to an aggregate $xxx million since we currently believe that we will ultimately win these cases on appeal. In an additional xxx cases against our affiliates which have not yet gone to trial, plaintiffs’ alleged claims amount to an aggregate of $xxx million which we did not provide for, since we currently believe that we will ultimately prevail in these cases.  A number of other legal matters are currently in such early stages that we have not made any provisions other than for legal fees since we cannot estimate any potential outcome of these cases and potential losses.

4

*       *       *

The Company acknowledges that:

·                  the Company is responsible for the adequacy and accuracy of the disclosure in the filing;

·                  staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and

·                  the Company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

We trust that this letter responds to the issues raised in your comment letter.  If you have additional questions, please do not hesitate to contact us.

Respectfully   submitted,

Novartis   AG

/s/   JONATHAN SYMONDS

/s/   FELIX R. EHRAT

Jonathan   Symonds

Felix   R. Ehrat

Chief   Financial Officer

General   Counsel

Novartis   Group

Novartis   Group

5

CORRESP
1
filename1.htm

Novartis   AG
    Postfach
   4002 Base
   Switzerland

April 25, 2012

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, 2011

Filed   January 25, 2012

File   No. 001-15024

Dear Mr. Rosenberg:

We are in receipt of your letter addressed to Jonathan Symonds, our Chief Financial Officer, dated April 12, 2012.  As agreed in an April 17, 2012 telephone call between Barry Rosenfeld, of our affiliate Novartis Corporation, and Lisa Vanjoske, Assistant Chief Accountant at SEC, our time to respond to your letter is extended through and including May 10, 2012.

Respectfully   submitted,

Novartis   AG

/s/   JONATHAN SYMONDS

/s/   FELIX R. EHRAT

Jonathan   Symonds

Felix   R. Ehrat

Chief   Financial Officer

General   Counsel

Novartis   Group

Novartis   Group

April 12, 2012
 Via E-mail

Mr. Jonathan Symonds Chief Financial Officer  Novartis AG Lichtstrasse 35 4056 Basel, Switzerland
Re: Novartis AG
   Form 20-F for the Fiscal Year Ended December 31, 2011
   Filed January 25, 2012
File No. 001-15024

Dear Mr. Symonds:
 We have reviewed your filing and have the following comments.  In our comments, we
ask you to provide us with information so we may better understa nd your disclosures.
 Please respond to this letter within 10 business days by providing us the requested
information or by advising us when you will provide the requested response.  If you do not believe a comment applies to your facts and circ umstances, please tell us why in your response.
Please furnish us a letter on EDGAR under the fo rm type label CORRESP that keys your
responses to our comments.

After reviewing the information provided, we may raise additional comments and/or
request that you amend your filing.

Item 5. Operating and Financial Review and Prospects

Item 5.A Operating Results
Factors Affecting Results of Operations
Patent Expirations, Generic Competit ion Pressure the Industry, page 89

1. Your disclosure states that the loss of excl usivity for one or more  important products will
have a material negative impact on the Group’s results of operations.  Please provide us
proposed disclosure to be included in future periodic reports that includes to what degree
you expect erosion from generic competition to impact net income in the following year
and include the factors that would impact  the magnitude of the negative impact.

Jonathan Symonds Novartis AG April 12, 2012 Page 2

 Notes to the consolidated financial statements

11. Goodwill and intangible asset movements, page F-42

2. Paragraphs 50 and 55 of IAS 36 require estimat es of future cash flows and the discount
rate to be determined on a pre-tax basis.   Therefore, please provide us proposed
disclosure to be includ ed in future periodic reports that states the company’s impairment
policy uses post-tax cash flows a nd a post-tax discount rate to arrive at value in use, if
true, as well as:
 An assertion in your accounting policy not e that the use of post-tax assumptions
does not result in a value in use that is materially different had pre-tax
assumptions been used; and
 The pre-tax discount rate.

15. Trade receivables, page F-48

3. Please provide us proposed disclosure to be incl uded in future periodic reports that breaks
out the amount of trade receivables from pr oduct sales by country in Greece, Italy, Spain
and Portugal and also disclose the amounts that  are past due from each of these countries
separately.  Disclose the portion in each of these countries th at is due directly from the
government or funded by the government.  Tell us the amount of allowance for doubtful accounts at December 31, 2011 related to receiva bles in each of these countries and why
you consider that amount to be adequate.
 20. Provisions and other non-current liabilities

Legal matters, page F-65

4. Please provide us proposed disclosure to be incl uded in future periodic reports to include,
where practicable, an estimate of the financia l effect for each legal proceeding discussed.
If it is not practicable to disclose this information, that fact should be stat ed.  Please refer
to paragraphs 86 and 91 of IAS 37.  We urge all persons who are responsible for th e accuracy and adequacy of the disclosure
in the filing to be certain that the filing include s the information the Securities Exchange Act of
1934 and all applicable Exchange Act rules requir e.  Since the company and its management are
in possession of all facts relating to a company’s disclosure, they are responsible for the accuracy
and adequacy of the disclosures they have made.

In responding to our comments, please provi de a written statement from the company
acknowledging that:
 the company is responsible for the adequacy an d accuracy of the disclo sure in the filing;
 staff comments or changes to disclosure in response to staff comments do not foreclose
the Commission from taking any action with respect to the filing; and
 the company may not assert staff comments as  a defense in any proceeding initiated by
the Commission or any person under the federa l securities laws of  the United States.

Jonathan Symonds Novartis AG April 12, 2012 Page 3

You may contact Vanessa Robe rtson, Staff Accountant, at (202) 551-3649 or Lisa
Vanjoske, Assistant Chief Accountant, at (202)  551-3614 if you have any questions regarding
the comments.  In this regard, do not he sitate to contact me at (202) 551-3679.

Sincerely,

 /s/ Jim B. Rosenberg
Jim B. Rosenberg
Senior Assistant Chief Accountant

December 22, 2011
 Via E-mail

Mr. Jonathan Symonds
Chief Financial Officer
Novartis AG
Lichtstrasse 35
4056 Basel, Switzerland

Re: Novartis AG
  Form 20-F for Fiscal Year Ended December 31, 2010
  Filed January 27, 2011
  File No. 1-15024

Dear Mr. Symonds:
 We have completed our review of your filing. We remind you that our comments or
changes to disclosure in res ponse to our comments do not for eclose the Commission from taking
any action with respect to the company or th e filing and the company may not assert staff
comments as a defense in any proceeding ini tiated by the Commission or any person under the
federal securities laws of the United States. We urge all persons who are responsible for the
accuracy and adequacy of the disclosure in the fi ling to be certain that the filing includes the
information the Securities Exchange Act of 1934 and all applicable rules require.
 Sincerely,  /s/ Jim B. Rosenberg  Jim B. Rosenberg  Senior Assistant Chief Accountant

CORRESP
1
filename1.htm

Novartis AG

Postfach

4002   Basel

Switzerland

October 31, 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 the SEC Staff’s oral comments, expressed during a conference call on October 18, 2011, with respect to our October 7, 2011 letter.

Item 4.B Business Overview

Pharmaceuticals
 Compounds in Development, page 38

During the conference call the Staff expressed issues with the portion of our October 7, 2011 letter which discussed the topic of disclosure regarding the potential patent life of development projects in Phase III not yet in registration, with the Staff expressing concerns regarding exclusivity periods, potential patent-life maximums and our expected experience with our development compounds.  In response to SEC’s concerns, we propose to substitute the paragraphs below for the first two paragraphs in the “Intellectual Property” portion of the Pharmaceuticals Division section of Item 4.B (which begins on page 55 of our 2010 Form 20-F).  Should the standard rules of materiality require us to add any additional disclosures in any particular year, we will certainly comply with our legal obligations.

We attach great importance to patents, trademarks, and know-how, including research data, in order to protect our investment in research and development, manufacturing and marketing. It is our policy to seek the broadest protection available under applicable laws for significant product developments in all major markets. Among other things, patents may cover the products themselves, including the product’s active ingredient and its formulation. Patents may cover processes for

manufacturing a product, including processes for manufacturing intermediate substances used in the manufacture of the products. Patents may also cover particular uses of a product, such as its use to treat a particular disease, or its dosage regimen. In addition, patents may cover assays or tests for certain diseases or biomarkers, which will improve patient outcomes when administered certain drugs, as well as assays, research tools and other techniques used to identify new drugs. The protection offered by such patents extends for varying periods depending on the grant and duration of patents in the various countries or region. The protection afforded, which may vary from country to country, depends upon the type of patent and its scope of coverage.

In addition to patent protection, various countries offer data or marketing exclusivities for a proscribed period of time. Data exclusivity may be available which would preclude a potential competitor from filing a regulatory application for a set period of time that relies on the sponsor’s clinical trial data, or the regulatory authority from approving the application. The data exclusivity period can vary depending upon the type of data included in the sponsor’s application. When it is available, market exclusivity, unlike data exclusivity, precludes a competitor from obtaining FDA approval for a product even if a competitor’s application relies on its own data.

United States

Patents.  In the United States, a patent issued for an application filed today will receive a term of 20 years from the application filing date, subject to potential adjustments for Patent Office delay. A US pharmaceutical patent which claims a product, method of treatment using a product, or method of manufacturing a product, may be eligible for an extension of the patent term based on the time the FDA took to approve the product. This type of extension may only extend the patent term for a maximum of 5 years, and may not extend the patent term beyond 14 years from regulatory approval. Only one patent may be extended for any product based on FDA delay.

In practice, however, it is not uncommon for significantly more than the 5 year maximum patent extension period to pass between the time that a patent application is filed for a product and the time that the product is approved by the FDA.  As a result, it is rarely the case that, at the time a product is approved by FDA, it will have the full 20 years of remaining patent life.  Rather, in our experience, it is not uncommon that, at the date of approval, a product will have from 13 to 16 years of patent life remaining, including all extensions available at that time.

2

Data and Market Exclusivity.  In addition to patent exclusivities, the FDA may provide data or market exclusivity for a new chemical entity or an “orphan drug,” each of which run in parallel to any patent protection. Data exclusivity prevents a potential generic competitor from relying on clinical trial data which were generated by the sponsor when establishing the safety and efficacy of its competing product.  Market exclusivity prohibits any marketing of the same drug for the same indication.

·                  A new small-molecule active pharmaceutical ingredient shall have 5 years of data exclusivity, during which time a competitor generally may not submit an application to the FDA based on a sponsor’s clinical data.

·                  Orphan drug exclusivity provides 7 years of market exclusivity for drugs designated by the FDA as “orphan drugs,” meaning drugs that treat rare diseases, as designated by the FDA. During this period, a potential competitor may not market the same drug for the same indication even if the competitor’s application does not rely on data from the sponsor.

·                  A new biologic active pharmaceutical ingredient shall have 12 years of market exclusivity, during which time a competitor may not market the same drug for the same indication.

·                  The FDA may also request that a sponsor conduct pediatric studies, and in exchange will grant an additional 6-month period of market exclusivity, if the FDA accepts the data, the sponsor makes a timely application for approval for pediatric treatment, and the sponsor has either a patent-based or regulatory-based exclusivity period for the product which can be extended.

European Community

Patents.  Patent applications in Europe may be filed in the European Patent Office (EPO) or in a particular country in Europe. The EPO system permits a single application to be granted for the whole of the EU, plus other non-EU countries, such as Switzerland and Turkey. A patent granted by the EPO or a European country office will expire no later than 21 years from the earliest patent application on which the patent is based. Pharmaceutical patents can also be granted a further period of exclusivity under the Supplementary Protection Certificate (SPC) system. SPCs are designed to compensate the owner of the patent for the time it took to receive marketing authorization by the European Health Authorities. An SPC may be granted to provide, in combination with the patent, up to 15 years of exclusivity from the date of the first European marketing authorization.  But the SPC cannot last longer than 5 years. The SPC duration can additionally be extended by a further 6 months if the

3

product is the subject of an agreed pediatric investigation plan. The post-grant phase of patents, including the SPC system, is currently administered on a country-by-country basis under national laws which, while differing, are intended to, but do not always, have the same effect.

As in the US, in practice, however, it is not uncommon for the granting of an SPC to not fully compensate the owner of a patent for the time it took to receive marketing authorization by the European Health Authorities.  Rather, since it can often take from 5 to 10 years to obtain a granted patent in Europe after the filing of the application, and since it can commonly take longer than this to obtain a marketing authorization for a pharmaceutical product in Europe, it is not uncommon that a pharmaceutical product, at the date of approval, will have a patent lifetime of 10 to 15 years, including all extensions available at that time.

Data and Market Exclusivity.  In addition to patent exclusivity, the EU also provides a system of regulatory data exclusivity for authorized human medicines, which runs in parallel to any patent protection.  The system for drugs being approved today is usually referred to as “8+2+1” because it provides:  an initial period of 8 years of data exclusivity, during which a competitor cannot rely on the relevant data; a further period of 2 years of market exclusivity, during which the data can be used to support applications for marketing authorization, but the competitive product cannot be launched; and a possible 1 year extension of the market exclusivity period if, during the initial 8 year data exclusivity period, the sponsor registered a new therapeutic indication with “significant clinical benefit.” This system applies both to national and centralized authorizations. Since it has been in force only since late 2005, the first 8 year period of data exclusivity has not yet expired, and many medicines are instead covered by the previous system in which EU member states provided either 6 or 10 years of data exclusivity.

The EU also has an orphan drug system for medicines similar to the US system. If a medicine is designated as an orphan drug, then it benefits from 10 years of market exclusivity after it is authorized, during which time a similar medicine for the same indication will not receive marketing authorization.

Japan

In Japan, a patent can be issued for active pharmaceutical ingredients. Although methods of treatment, such as dosage and administration, are not patentable in Japan, pharmaceutical compositions for a specific dosage or administration method are patentable. Processes to make a pharmaceutical composition are also patentable.

4

The patent term granted is generally 20 years from the filing date of the patent application on which the patent is based. It can be extended up to 5 years under the Japanese Patent Act to compensate for erosion against patent term caused by the time needed to obtain marketing authorization from the MHLW. Typically, it takes approximately 7 to 8 years to obtain marketing authorization in Japan. A patent application on a pharmaceutical substance is usually filed shortly before or at the time when clinical testing begins. Regarding compound patents, it commonly takes approximately 4 to 5 years or more from the patent application filing date to the date that the patent is ultimately granted. As a result, it is not uncommon for the effective term of patent protection for an active pharmaceutical ingredient in Japan to be approximately 20 to 21 years, if duly extended.

*       *       *

The Company acknowledges that:

·                  the Company is responsible for the adequacy and accuracy of the disclosure in the filing;

·                  staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and

·                  the Company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

We trust that this letter responds to the issues raised in your comment letter.  If you have additional questions, please do not hesitate to contact us.

Respectfully   submitted,

Novartis   AG

/s/   JONATHAN SYMONDS

/s/   FELIX EHRAT

Jonathan   Symonds

Felix   Ehrat

Chief   Financial Officer

General   Counsel

Novartis   Group

Novartis   Group

5

CORRESP
1
filename1.htm

Novartis AG
   Postfach
   4002 Basel
   Switzerland

October 7, 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 September 9, 2011, which was in response to our August 26, 2011 letter.  For ease of reference, we set forth your comment below, followed by our response.

Item 4.B Business Overview

Pharmaceuticals
 Compounds in Development, page 38

SEC Comment No. 1

We have reviewed the information provided in your response to prior comment two.  We acknowledge that you are unable to estimate the remaining patent life of your confirmatory development projects without making significant judgments and assumptions and your concern that disclosure of identifying information about your patents could cause competitive harm.  Based on the information in your response, however, it appears that there is information available to understand potential exclusivity periods within a reasonable range for those development compounds in phase III on pages 38-42.  Please provide us revised proposed disclosure to disclose information for each development compound designated as approved or in registration.  These ranges could be expressed as a “floor-to-ceiling” exclusivity range based on currently known information, indicating the extent that the range represents exclusivity due to patents, without indicating the name or other identifying information about the patent, versus other exclusivity available, and indicating under what conditions and to what extent each “floor-to-ceiling” may be affected by future delays in the approval process or by other factors.  Also, we believe that similar disclosure at the aggregate level for all development projects in Phase III not yet in registration would be informative.  Please revise your proposed disclosure accordingly by providing a separate narrative section

discussing generally the floors and ceilings associated with exclusivity for these projects and indicating the factors that may effect the ceilings and floors.  To the extent that there may be outliers not covered by the general narrative, identify them and explain the reasons therefore.

Novartis Response

We acknowledge SEC’s comment.  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 Compounds in Development 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 and other regulatory 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 generally run from the date the products are approved, and so their expiration dates cannot be known with certainty 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 product development and regulatory review.  The law recognizes that product development and 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 conduct of clinical trials and for the health authority’s review.  However, the length of this extension and the patents to which it applies cannot be known in advance, but can only determined after the product is approved.

Subject to these uncertainties, we provide the following information regarding our Compounds in Phase III Clinical Development, if any, which have been submitted for registration to the FDA or the EU’s EMA:

2

·                  [To be followed by bullet-pointed paragraphs regarding each such Compound in Development, if any, which has not already had its patent life disclosed in the preceding marketed products portion of our Intellectual Property disclosure.  The paragraphs will disclose the patent and regulatory exclusivity lives of the products in ranges, and disclose the basis for the ranges.]

In further response to this comment, SEC has asked that we provide a “similar disclosure at the aggregate level for all development projects in Phase III not yet in registration.”  We have examined the patent status of our Phase III development projects, and have found that such a disclosure would produce a floor to ceiling patent range for this particular aggregate group of products which exceeds 10 years from the earliest possible expiration date for any one product to the last possible expiration date for any other.  Given, as we have discussed in prior correspondence, that these dates are in any event uncertain at best, we find it difficult to see how such information would provide any meaningful disclosure to investors.  Accordingly, in order to avoid investor confusion, we would propose not providing such a disclosure.

*       *       *

The Company acknowledges that:

·                  the Company is responsible for the adequacy and accuracy of the disclosure in the filing;

·                  staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and

·                  the Company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

3

We trust that this letter responds to the issues raised in your comment letter.  If you have additional questions, please do not hesitate to contact us.

Respectfully submitted,

Novartis AG

/s/ JONATHAN SYMONDS

/s/ THOMAS WERLEN

Jonathan Symonds

Thomas Werlen

Chief Financial Officer

General Counsel

Novartis Group

Novartis Group

4

CORRESP
1
filename1.htm

Novartis   AG

Postfach

4002   Basel

Switzerland

September15, 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:

We are in receipt of your letter addressed to Jonathan Symonds, our Chief Financial Officer, dated September 9, 2011, which was in response to our letter dated August 26, 2011.  As agreed in a telephone call between Barry Rosenfeld, of our affiliate Novartis Corporation, and Frank Wyman, Staff Accountant at SEC, our time to respond to your letter is extended through and including October 7, 2011.

Respectfully submitted,

Novartis AG

/s/   JONATHAN SYMONDS

/s/   THOMAS WERLEN

Jonathan   Symonds

Thomas   Werlen

Chief   Financial Officer

General   Counsel

Novartis   Group

Novartis   Group

September 9, 2011
 Via E-mail

Mr. Jonathan Symonds
Chief Financial Officer
Novartis AG
Lichtstrasse 35
4056 Basel, Switzerland

Re: Novartis AG
  Form 20-F for Fiscal Year Ended December 31, 2010
  Filed January 27, 2011
  File No. 1-15024

Dear Mr. Symonds:
 We have reviewed your August 26, 2011 re sponse to our July 29, 2011 comment
letter and have the following comment. We c ontinue to evaluate your responses to prior
comments three and four and may have additional comments.
Please respond to this letter within te n business days by providing the requested
information or by advising us when you will provide the requested response.  If you do not believe the comment applies to your fact s and circumstances, please tell us why in
your response.  Please furnish us a le tter on EDGAR under the form type label
CORRESP that keys your response to our comment.
 After reviewing the information provi ded, we may raise additional comments
and/or request that you amend your filing.  Item 4.B Business Overview

Pharmaceuticals
Compounds in Development, page 38

1. We have reviewed the information provi ded in your response to prior comment
two.  We acknowledge that you are unable to estimate the remaining patent life of
your confirmatory development project s without making significant judgments
and assumptions and your concern that disclosure of identifying information
about your patents could cause competi tive harm. Based on the information in
your response, however, it appears that th at there is information available to
understand potential exclusivity periods within a reasonable  range for those
development compounds in phase III on pa ges 38-42.  Please provide us revised
proposed disclosure to disclose info rmation for each development compound

Mr. Jonathan Symonds
Novartis AG September 9, 2011 Page 2
 designated as approved or in registrati on. These ranges could be expressed as a
“floor-to-ceiling” exclusivity range  based on currently known information,
indicating the extent that th e range represents exclusivit y due to patents, without
indicating the name or othe r identifying information about the patent, versus other
exclusivity available, and indicating unde r what conditions and to what extent
each “floor-to-ceiling” may be affected by fu ture delays in the approval process or
by other factors.  Also, we believe that si milar disclosure at the aggregate level for
all development projects in Phase III not ye t in registration would be informative.
Please revise your proposed disclosure accordingly by providing a separate narrative section discussing generally the floors and cei lings associated with
exclusivity for these projects and indicating the factors that may effect the ceilings
and floors. To the extent there may be  outliers not covered by the general
narrative, identify them and expl ain the reasons therefore.
 Please contact Frank Wyman, Staff Acc ountant, at (202) 551-3660 or Mark
Brunhofer, Senior Staff Acc ountant, at (202) 551-3638, if you have any questions
regarding this comment. In th is regard, do not hesitate to  contact me at (202) 551-3679.

Sincerely,  /s/ Jim B. Rosenberg

Jim B. Rosenberg
Senior Assistant Chief
Accountant

CORRESP
1
filename1.htm

Novartis AG

Postfach

4002 Basel

Switzerland

September 6, 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 further response to your letter addressed to Jonathan Symonds, our Chief Financial Officer, dated July 29, 2011 setting forth comments regarding our filing, and seeking certain information.  For ease of reference, we set forth your comment below, followed by our response.

SEC Comment No. 4

Please analyze for us whether the written put associated with the 52% interest in Alcon or the related purchased call are financial assets or liabilities required to be accounted for at fair value through profit or loss from your transaction 2008 through settlement in 2010.  Please reference for us the authoritative literature you rely upon to support your accounting.

Novartis Response

The Purchase and Option Agreement between Nestlé S.A. and Novartis AG dated as of April 6, 2008 (hereafter the “Option Agreement”) included the following relevant terms:

At any time between January 1, 2010 and July 31, 2011:

·      Novartis had the right to purchase 52% of Alcon, Inc. shares from Nestlé for USD 181 per share.

·      Nestlé had the right to sell 52% of Alcon, Inc. shares to Novartis at the shares’ listed market price plus a 20.5% premium, but not to exceed USD 181 per share.

The Option Agreement was considered by the Company to represent a single combined financial instrument. The principal relevant authoritative guidance for accounting under IFRS is provided under IAS 39-Financial Instruments: Recognition and Measurement.

For purposes of responding, the Company has segregated the following discussion into two parts:  pre-January 1, 2010 and post-January 1, 2010.

Pre-January 1, 2010

Prior to January 1, 2010, the Option Agreement was excluded from accounting as a financial instrument because it was considered to be outside of the scope of IAS 39 under scope paragraph 2(g), since it was a contract between an acquirer and a vendor in a business combination to buy or sell and acquire at a future date.

Accordingly, the Company did not recognize or measure the fair value of the combined put and call financial instrument contained in the Option Agreement through its consolidated income statement in its 2008 and 2009 consolidated financial statements, or include any related amounts in its consolidated balance sheets for those years.

The Company did, however, provide substantial disclosures about the existence and terms and conditions of the Option Agreement in its 2008 Form 20-F, including at page F-19, as follows:

Acquisitions in 2008

Corporate — Alcon

On April 7, Novartis announced an agreement with Nestlé S.A. under which Novartis obtained rights to acquire in two steps majority ownership of Alcon Inc. (NYSE: ACL), a Swiss-registered company only listed on the New York Stock Exchange. The potential total value of the two steps is up to approximately USD 39 billion. The first step was completed on July 7, 2008, when Novartis acquired an initial 24.8% stake in Alcon, representing 74 million shares, from Nestlé for USD 10.4 billion in cash. Alcon’s closing share price was USD 148.44 on April 4, the last trading day before the signing of this agreement. However, the investment reflects a price of USD 140.68 per share. The transaction price of USD 143.18 was determined by using Alcon’s volume-weighted average share price between January 7, 2008, and April 4, 2008. This price was later reduced by approximately USD 2.50 per share to account for the

2

dividend paid by Alcon in May 2008. Novartis has paid for this stake from internal cash reserves and external short-term financing.

In the optional second step, Novartis has the right to acquire Nestlé’s remaining 52% majority stake in Alcon between January 1, 2010, and July 31, 2011, for a fixed price of USD 181.00 per share, or up to approximately USD 28 billion. During this period, Nestlé has the right to require Novartis to buy its remaining stake at a 20.5% premium to Alcon’s share price at the time of exercise, but not exceeding USD 181.00 per share. Novartis has no obligation to purchase the remaining 23% of shares held by Alcon minority shareholders.

The Group has determined that the put and call options represent contracts in a business combination to buy, sell or acquire at a future date, and are therefore exempt from recognition under IAS 39.

See also Novartis 2009 Form 20-F at page F-102 (describing our January 2010 exercise of the call option as an event subsequent to the December 31, 2009 balance sheet date).

Post-January 1, 2010

In April 2009, IAS 39 paragraph 2(g) was amended so that IAS would apply to put and call options.  However, under the revised paragraph “forward contracts between an acquirer and a selling shareholder to buy or sell an acquiree that will result in a business combination at a future acquisition date” remained out of scope for recognition under IAS 39. Further, according to specified transitional requirements, this change was to be applied prospectively to contracts in existence at January 1, 2010.

The Company exercised its call option on Sunday, January 3, 2010, prior to the Zurich and New York Stock Exchanges opening for the year 2010.  This was the earliest possible exercise date under the terms of the Option Agreement. Given that the call option was exercised on the earliest possible exercise date in 2010, and that the exercise converted the Option Agreement into a forward purchase contract which was still specifically outside the scope of the revised IAS 39 paragraph 2(g), there was no need for any subsequent fair value adjustment through the consolidated income statement in 2010.

The Company also concluded that since the revised IAS 39 required only prospective changes to the fair value of financial instruments related to future business combinations (other than forward contracts) to be recorded through profit and loss, any fair value

3

adjustment as of January 1, 2010 of such financial instruments should be recorded as an adjustment to opening consolidated equity as of that date.

The Company acknowledges that the Option Agreement could have potentially had a value at January 1, 2010.  But, as explained below, the Company is of the opinion that such value, if any, was not material to its consolidated financial statements.

In valuing the Option Agreement, it was necessary to recognize that the value of the put and call options contained in the Option Agreement were interlinked — if either the put or call option were exercised the other option expired. Due to the complexity of the agreement we consulted with our investment bank advisors to assist us in our valuation judgment.

According to our analysis there was a range of possible market-participant fair values for the Option Agreement which depended on assumptions taken concerning the control premium for a purchase (call) of a 52% interest, the block discount for a sale (put) of a 52% interest and the fair value of the underlying shares. We came to the conclusion, supported by our investment bank advisors, that the Option Agreement had no significant value based on a USD 137 share price for Alcon, Inc. (arrived at after excluding from the quoted share price estimates of the impact of speculation related to the Company’s potential offer for the outstanding 23% quoted non-controlling interest) and a control premium of 20 to 30% for the controlling 52% interest. Furthermore, we performed a sensitivity analysis around these assumptions, confirming that application of a reasonable range of alternative values for the input parameters would not alter the conclusion that the fair value of the Option Agreement was immaterial in relation to the Company’s consolidated equity of USD 57.5 billion as at December 31, 2009. Accordingly, no adjustment to opening equity was required.

4

*       *       *

The Company acknowledges that:

·      the Company is responsible for the adequacy and accuracy of the disclosure in the filing;

·      staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and

·      the Company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

We trust that this letter responds to the issues raised in your comment letter.  If you have additional questions, please do not hesitate to contact us.

Respectfully   submitted,

Novartis   AG

/s/   JONATHAN SYMONDS

/s/   THOMAS WERLEN

Jonathan   Symonds

Thomas   Werlen

Chief   Financial Officer

General   Counsel

Novartis   Group

Novartis   Group

5

CORRESP
1
filename1.htm

Novartis AG

Postfach

4002   Basel

Switzerland

August 26, 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 July 29, 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

Please refer to prior comment one.  We acknowledge your assertions that development decisions are made on a project-by-project basis and that R&D expenditures are not managed on a therapeutic or some other “project grouping” basis.  Please provide us proposed disclosure to be included under “Research and Development” in your “Operating and Financial Review and Prospects” disclosure of future filings to address the following.

·                  Quantify the portion of total research and development expenditures for each period presented spent on “exploratory development” activities and the portion spent on “confirmatory development” activities (listed on pages 38-42).  In addition, explain the factors underlying any changes in trends for each of these activities in 2010 as compared to 2009 and expected in 2011 as compared to 2010.

·                  Novartis Response.  We acknowledge SEC’s comment, and will enhance our disclosure of our research and development expenditures

commencing with the filing of our Form 20-F for 2011 by adding to the section entitled “Research and Development” in our “Operating and Financial Review and Prospects” (set forth on page 149 of our 2010 Form 20-F) information regarding our Pharmaceuticals Division research and development expenditures broken down into two categories:  research and exploratory development, and confirmatory development.  We will also add general information necessary to explain any changes in trends for each of these activities as compared with the prior year.  However, since we do not provide outlook information to investors at a level below sales and profit margin, we will not provide our expectations for research and development expenditures in the forthcoming year.

·                  Identify and quantify those projects listed on pages 42-46 that represent a significant amount of expenses for each period presented in the “confirmatory development” phase.

·                  Novartis Response:  As set forth above, we will provide general information necessary to explain any changes in trends in our research and development expenditures.  With respect to our confirmatory development expenditures, significant expenditures on particular projects could constitute such a change in trends which would need to be described.  However, the amount of such expenditures would be considered trade secrets, and disclosing them could put us at a competitive disadvantage.  As a result, while we would foresee providing the name of the projects giving rise to such significant expenditures in appropriate circumstances, we would not foresee quantifying the expenditures involved.

SEC Comment No. 2

We acknowledge your response to prior comment two (third bullet).  However we request further information in order to understand your assertion that the ultimate patent terms of your development projects cannot be known with certainty prior to product approval and would inherently be speculative.  In this connection, we believe that you should provide us this information where reasonable estimates can be made, as opposed to a threshold of “known with certainty.”  For any three of your projects that, at December 31, 2010, you had a planned filing date in 2011, please provide us with the following information assuming the product received approval as of December 31, 2010:

·                  The remaining years of the last patent that protects the product;

2

·                  The nature of and number of years of regulatory exclusivity available in excess of remaining years of the patent in bullet one;

·                  How each year beyond December 31, 2010, the assumed approval date, to get actual approval impacts the number of years in bullets one and two; and

·                  The nature of other significant factors and how each could impact the number of years in bullets one and two.

In providing the above information, it is not necessary to provide the actual name of the product in your response and it is sufficient to address only one jurisdiction in which you intend to get approval.

Novartis Response

We acknowledge SEC’s comment, and its request that we provide information related to the remaining patent life on certain development compounds listed in the Compounds in Development table in our Form 20-F.  In response to your request, we provide the following information with respect to three of our late-stage development compounds.   The information is provided under US patent law.

·                  Project A.  SEC asks that we disclose the remaining years of the last patent that protects this product.  But it would not be possible to provide a reasonable estimate of the remaining patent life for Project A.  This is because, while certain patents have been granted with respect to this product (with the last expiring in 2022), multiple patent applications have been filed with respect to the product that have not yet been granted.  If the last-filed of these applications were granted, then that patent would expire in 2025, subject to any patent term adjustment that may be granted by the US Patent and Trademark Office to lengthen the patent term as a result of any delays in the patent review process.  This patent term adjustment is separate from potential patent term extensions based on the length of the FDA review process.  We cannot speculate as to what the Patent Office would do in response to a request for an adjustment.

·                  Project B.  Project B has a compound patent that expires in 2016 and secondary patents that expire between 2023 and 2027.  It is expected that one of these patents would be eligible for a patent term extension based on half of the length of time that the project has been in clinical trials, and the full length of time that the project is under review by the FDA.  These two extensions are collectively capped at 5 years.  In this case, it is expected that the extension will be capped at the maximum 5 years.  However, it is our option whether to attach the 5-year extension to the compound

3

patent which would otherwise expire in 2016, or whether we would attach it to one of the secondary patents which would otherwise expire between 2023 and 2027.  While it is impossible to state with certainty in advance of approval how we would make such a strategic decision, one factor which would enter into such a decision would be the timing of the FDA’s approval of the product.  The later the approval, the less the value of an extension of the compound patent, and the more likely that we would choose to extend one of the secondary patents instead.

·                  Project C.  Project C has a compound patent that expires in 2021 and secondary patents that expire in 2026.  Again, because of the time that this particular product has been in development, one of these patents would be entitled to the maximum 5-year patent extension.  However, because of its relatively late-expiring patents, it is also subject to a second patent extension cap.  Patents cannot be extended for more than 14 years from the date that the product is approved.  So if, as SEC has asked us to assume, the product was approved on December 31, 2010, then the patent would expire on December 31, 2024.  However, each successive year that approval is delayed does not provide full one-year extensions of the patent life.  Because of a complex interaction of the original patent grant date, the 5-year patent cap and the 14-year patent cap, a delay of one year in approving the product would lead to an expiration the following year earlier in December; and a delay of two years would lead to an expiration in 2026 in August.  Further delays in approval of the product lead to further complexity.

With regard to regulatory exclusivity periods, none of these projects would have their exclusivity periods extended as a result.  This is in part because none of these projects involve biologic drugs.  However, many of the other projects in our pipeline are biologic drugs, and the regulatory exclusivity period for a biologic in the US is 12 years from the date of FDA approval.  (The exclusivity period for non-biologic drugs in the US is three to five years.)  In cases of biologic drugs with a long development period, and thus a shorter patent life at the time of approval, this 12-year regulatory exclusivity period can be longer than the patent exclusivity period.   Once again, since this time period does not commence until FDA approval of the product, the end of the time period cannot be known until the date of approval is known.

In sum, even with late-stage development projects, where much about the project is already known, these examples demonstrate that we are unable to provide a simple disclosure about the remaining patent life of our development compounds without making significant judgments and assumptions about each.  And this is so even in a situation where SEC has artificially posited for us a key unknown — the date on which FDA will approve the product.

4

Making disclosures about patent life becomes even more difficult with our early-stage compounds.  In our 2010 Form 20-F, we disclose development compounds with planned FDA filing dates of as late as 2014 and even “>2015”, meaning 2015 or later.  Given that (i) many patent applications filed for such projects have not yet been granted; (ii) it is likely that additional patent applications will still be filed for such projects; (iii) there can be no certainty about planned FDA filing dates that are projected that far out; and (iv) it is extremely speculative when we would obtain approval of such projects (if ever), any information about the potential patent life of such early-stage projects would be highly speculative.

Further, while SEC has asked us to limit our response in this letter to an analysis of the patent life of development projects under one country’s laws, if we were required to make such a disclosure in our Form 20-F, we would not be so limited.  This would clearly add to the complexity of the disclosure and the uncertainty of the information disclosed.

Finally, if we were 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 preparing for a generic challenge of our products.  Disclosing such information could provide generic competitors insights into our intellectual property which might enable the generic challengers to direct and focus the development of their competing products, and their supporting legal strategy, significantly earlier than they would have been able to had we not been required to disclose this information.

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 reasonably estimated 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

5

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 product development and regulatory review.  The law recognizes that product development and 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 conduct of clinical trials and for the health authority’s review.  However, the length of this extension and the patents to which it applies cannot be known in advance, but can only determined after the product is approved.

SEC Comment No. 3

We are evaluating your responses to prior comments four through eight and may have additional comments.

Novartis Response

We acknowledge your comment No. 3.  We anticipate that the issues which are the subject of prior comments four through eight will be discussed at our scheduled August 29, 2011 conference call.

SEC Comment No. 4

Please analyze for us whether the written put associated with the 52% interest in Alcon or the related purchased call are financial assets or liabilities required to be accounted for at fair value through profit or loss from your transaction 2008 through settlement in 2010.  Please reference for us the authoritative literature you rely upon to support your accounting.

6

Novartis Response

We acknowledge your comment No. 4.  We anticipate that your comment No. 4 will be discussed at our scheduled August 29, 2011 conference call.

*       *       *

The Company acknowledges that:

·                  the Company is responsible for the adequacy and accuracy of the disclosure in the filing;

·                  staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and

·                  the Company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

We trust that this letter responds to the issues raised in your comment letter.  If you have additional questions, please do not hesitate to contact us.

Respectfully   submitted,

Novartis   AG

/s/   JONATHAN SYMONDS

/s/   THOMAS WERLEN

Jonathan   Symonds

Thomas   Werlen

Chief   Financial Officer

General   Counsel

Novartis   Group

Novartis   Group

7

CORRESP
1
filename1.htm

Novartis   AG

Postfach

4002   Basel

Switzerland

August 15, 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:

We are in receipt of your letter addressed to Jonathan Symonds, our Chief Financial Officer, dated July 29, 2011, which was in response to our letter dated June 30, 2011.  As agreed in telephone calls between Barry Rosenfeld, of our affiliate Novartis Corporation, and Frank Wyman, Staff Accountant at SEC, our time to respond to your letter is extended through and including August 26, 2011.  However, we anticipate that Comment 4 of your July 29 letter will be discussed during the scheduled August 29, 2011 conference call between SEC and Novartis.

Respectfully submitted,

Novartis AG

/s/   JONATHAN SYMONDS

/s/   THOMAS WERLEN

Jonathan   Symonds

Thomas   Werlen

Chief   Financial Officer

General   Counsel

Novartis   Group

Novartis   Group

July 29, 2011
 Via E-mail

Mr. Jonathan Symonds
Chief Financial Officer
Novartis AG
Lichtstrasse 35
4056 Basel, Switzerland

Re: Novartis AG
  Form 20-F for Fiscal Year Ended December 31, 2010
  Filed January 27, 2011
  File No. 1-15024

Dear Mr. Symonds:
 We have reviewed your June 30, 2011 response to our June 2, 2011 comment
letter and have the following comments.

Please respond to this letter within te n business days by providing the requested
information or by advising us when you will provide the requested response.  If you do not believe a comment applies to your facts a nd circumstances, please tell us why in your
response.  Please furnish us a letter on EDGA R under the form type label CORRESP that
keys your response to our comments.
 After reviewing the information provi ded, we may raise additional comments
and/or request that you amend your filing.

Business Overview

Pharmaceuticals
Compounds in Development, page 38

1. Please refer to prior comment one.  We acknowledge your assertions that
development decisions are made on a pr oject-by-project basis and that R&D
expenditures are not managed on a therapeu tic or some other “project grouping”
basis. Please provide us proposed disclosure to be included under “Research and
Development” in your “Operating and Financial Review and Prospects”
disclosure of future filings to address the following.

 Quantify the portion of total research and development expenditures for each
period presented spent on “explorator y development” activities and the
portion spent on “confirmatory developm ent” activities (listed on pages 38-

Mr. Jonathan Symonds
Novartis AG July 29, 2011 Page 2
 42). In addition, explain the factors unde rlying any changes in trends for each
of these activities in 2010 as comp ared to 2009 and expected in 2011 as
compared to 2010.
 Identify and quantify those projects listed on pages 42-46 that represent a
significant amount of expenses for each period presented in the “confirmatory
development” phase.

2. We acknowledge your response to prior co mment two (third bullet).  However,
we request further information in orde r to understand your a ssertion that the
ultimate patent terms of your develo pment projects cannot be known with
certainty prior to product approval and woul d inherently be speculative.  In this
connection, we believe that you should provide us this information where
reasonable estimates can be made, as opposed to a threshold of “known with
certainty.”  For any three of your projects that were in regist ration at December
31, 2010 and for any three of your projects that, at December 31, 2010, you had a planned filing date in 2011,  please provide us with the following information assuming the product received approval as of December 31, 2010:

 The remaining years of the last patent that protects the product;
 The nature of and number of years of  regulatory exclusivity available in
excess of remaining years of  the patent in bullet one;
 How each year beyond December 31, 2010, th e assumed approval date, to get
actual approval impacts the number of years in bullets one and two; and
 The nature of other significant factor s and how each could impact the number
of years in bullets one and two.
 In providing the above information, it is not necessary to provide the actual name
of the product in your response and it is sufficient to address only one jurisdiction
in which you intend to get approval.
 Notes to the Novartis Group Cons olidated Financial Statements

Note 2:  Significant transactions, business combinations and divestments
Acquisitions in 2010: Corporate—Alcon, Inc., page F-21

3. We are evaluating your responses to prior comments four through eight and
may have additional comments.

4. Please analyze for us whether the written put associated with the 52% interest in
Alcon or the related purchased call are fina ncial assets or liabilities required to
be accounted for at fair value through profit or loss from your transaction in
2008 through settlement in 2010.  Please  reference for us the authoritative
literature you rely upon to support your accounting.

Mr. Jonathan Symonds
Novartis AG July 29, 2011 Page 3
 Please contact Frank Wyman, Staff Acc ountant, at (202) 551-3660 or Mark
Brunhofer, Senior Staff Acc ountant, at (202) 551-3638, if you have any questions
regarding these comments. In this regard, do not hesitate to c ontact me at (202) 551-
3679.
Sincerely,  /s/ Jim B. Rosenberg
Jim B. Rosenberg
Senior Assistant Chief
Accountant

CORRESP
1
filename1.htm

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.

2

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

3

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.

4

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

5

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.

6

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

7

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

CORRESP
1
filename1.htm

Novartis   AG
   Postfach
   4002 Basel
   Switzerland

June 15, 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:

We are in receipt of 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.  As agreed in a June 14, 2011 telephone call between Thomas Werlen, our General Counsel, and Frank Wyman, Staff Accountant at SEC, our time to respond to your letter is extended through and including June 30, 2011.

Respectfully   submitted,

Novartis   AG

/s/   JONATHAN SYMONDS

/s/   THOMAS WERLEN

Jonathan   Symonds

Thomas   Werlen

Chief   Financial Officer

General   Counsel

Novartis   Group

Novartis   Group

June 2, 2011

Mr. Jonathan Symonds
Chief Financial Officer
Novartis AG
Lichtstrasse 35
4056 Basel, Switzerland

Re: Novartis AG
  Form 20- F for Fiscal Year Ended December 31, 2010
  File No. 1 -15024

Dear  Mr. Symonds :
 We have reviewed your April 22, 2011 response to our April 8, 2011 comment
letter and have the following comments.
 Please respond to this letter within ten business days by  providing the requested
information or by advising us when you will provide the requested response.  If you do
not believe a comment applies to your facts and circumstances, please tell us why in your response.  Please furnish us a letter on EDGAR under the form type label CORRESP that keys your response to our comments .
 After reviewing the information provided, we may raise additional comments
and/or request that you amend your filing.

Item 4.B Business Overview
Pharmaceuticals
 Compounds in Development, page 38
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 expenditure s for that Division  for 2010 and 2009, consistent
with your manage ment of these activities ; e.g. a breakdown using information
provided to the IMB by therapeutic class, development phase or other b asis
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 dis closure
describing these circumstances to be included in future periodic reports . To the
extent that you t rack research and development costs by project groupings, please

Mr. Jonathan Symonds
Novartis AG
June 2, 2011
Page 2

provide to us cost information and a description of  each of th ese 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.

2. Please refer to prior comment one. Please address the following f or the project s
listed in the Selected Development Projects table on pages 38 to 42:

• 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 determ ined during the period that the clinical results did not meet
the necessary standards for  regulatory approval).

•  Provide us proposed disclosure to be included in future periodic reports
that indicates the year th at each project entered the “current phase.”

• 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) associa ted with a project(s),
please tell us the specific facts and circumstances  governi ng this
limitation.
 Where we have requested proposed disclosure, please feel free to propose any additional disclosure that you believe is necessary to describe  limitations
necessary to provide furthe r context.

Item 5. Operating and Financial Review and Prospects
 Impairment of long -lived intangible and intangible assets, page 129
3. Please refer to prior comment two. You use either the excess earnings or the relief from 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.

Mr. Jonathan Symonds
Novartis AG
June 2, 2011
Page 3

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
4. Please refer to prior comment six. You a ssert that market speculation increased
Alcon’s stock price  prior to August 25, 2010, effectively adding a premium that
should be excluded in determining fair value for the previously -held 25%
ownership interest in Alcon.  Please provide us with your analysis supporting the
existe nce of this  speculative “potential premium ” in Alcon’s quoted market price,
as discussed in the last paragraph on page 19 of your response .  In your response ,
please explain whether you performed a valuation of Alcon, supporting your $38.7 billion fair value for the 77%  stake controlled, how that value incorporated
the control premium you paid and how your allocation of that value to the initial and second stakes d id not effectively result in a valuation of your  previously -held
first stake at  your 2008 purchase price .

5. As described on page  18 of your response, you attributed a $10.4 billion value to
your previously -held ownership interest in Alcon, which reflected a price of
$140.68 per share. However, you state on page 19 that the resulting per share fair value assigned to the initial tran che was $139 per share, which you assert was a
reasonable estimate for a non -controlling minority interest absent any speculation
that control would be transferred. Please explain why these amounts differ.

6. Please provide us an analysis showing how the $1 81 price per share reflected
Alcon’s market price per share at the exercise date, the 20.5% control premium and an adjustment for the $181 per share cap.

7. We acknowledge your reference to paragraph BC335 of IFRS 3, where the IASB decided not to include in the revised IFRS 3 guidance on using valuation techniques to measure the acquisition- date fair value of the acquirer’s interest in
the acquiree. However, paragraphs 27A and 27B of IFRS 7 require disclosure using a fair value hierarchy, under  which the highest level is quoted prices in
active markets for identical assets or liabilities. As Alcon was trading  on the  New
York Stock Exchange , its market price appears to have represented  the highest
level under this fair value hierarchy, and therefore the most reliable measure of fair value. Please explain how you considered this guidance in valuing your
previously -held 25% ownership interest in Alcon.

8. Please explain to us how you considered the guidance in paragraph B44 of IFRS
3, which provides guidance for measuring non- controlling interests at fair value,
when elected. Although you did not elect to measure the remaining non -
controlling interest at fair value, this guidance indicates that an acquirer should use other valuation techniques when active market prices are not available.  Explain to us how you considered this guidance in valuing your previously -held

Mr. Jonathan Symonds
Novartis AG
June 2, 2011
Page 4

interest in Alcon. Tell us why it would be appropriate to value non- controlling
interests, but not the previously -held equity interest, using a quoted market price.

Please contact Frank Wyman, Staff Accountant, at (202) 551- 3660 or Mark
Brunhofer, Senior Staff Accountant, at (202) 551 -3638, if you have any questions
regarding th ese comments. In this regard, do not hesitate to contact me at (202) 551-
3679.

Sincerely,

Jim B. Rosenberg
Senior Assistant Chief
Accountant

CORRESP
1
filename1.htm

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.

2

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,

3

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

5

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

6

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.

7

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

April 8, 2011
 Mr. Jonathan Symonds
Chief Financial Officer
Novartis AG
Lichtstrasse 35
4056 Basel, Switzerland

Re: Novartis AG
  Form 20-F for Fiscal Year Ended December 31, 2010
  File No. 1-15024

Dear Mr. Symonds:
 We have limited our review of your filing to those issues we have addressed in
our comments.  In our comments, we ask you to  provide us with information so we may
better understand your disclosure.

Please respond to this letter within te n business days by providing the requested
information or by advising us when you will provide the requested response.  If you do not believe a comment applies to your facts a nd circumstances, please tell us why in your
response.  Please furnish us a letter on EDGA R under the form type label CORRESP that
keys your responses to our comments.
 After reviewing the information provi ded, we may raise additional comments
and/or request that you amend your filing.  Item 4.B Business Overview

Pharmaceuticals
Compounds in Development, page 38

1. In order to help us evaluate your disclo sure about your research and development
activities, please provide us the following information:
 A description of your research and de velopment process for each of your
segments, including to what extent regul atory approval is required to market
products.  In your response , please describe the ke y management activities
within your “development paradigm,” pa rticularly the “confirmatory” phase,
including a description of  your process for monitoring development progress
for individual projects (e.g. board review s), your criteria fo r prioritizing and
funding projects, your key decision points  for determining project continuance

Mr. Jonathan Symonds
Novartis AG April 8, 2011 Page 2
or termination and financial measures us ed to evaluate performance of your
“development paradigm.”
 For each segment that requires regulat ory approval, quantify the number of
projects that were in preclinical deve lopment and Phase I, Phase II and Phase
III of clinical development and those for which a submission requesting regulatory approval was filed as of December 31, 2010.
 For each segment requiring regulatory appr oval, 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.
 For your key projects in the Confirma tory development stage listed in the
Selected Development Projects table, i ndicate the month and the year that it
entered that phase.
 For your key projects in the Confirma tory development stage listed in the
Selected Development Projects tabl e, identify the significant patents
associated with the projec t and their expiration date.
 For your key projects in the Confirma tory development stage listed in the
Selected Development Projects table, tell  us the projects added to and deleted
from the table since 2009.  For those removed from this table clarify whether they were commercialized or terminated.  For each terminated project, such as
those listed on page 47, disclose the ev ents and their timing leading to your
decision to terminate the project.
 Tell us about any Confirmatory developm ent stage projects that are not listed
here and the reason not listed.

Item 5. Operating and Financial Review and Prospects

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

2. You assert that the assumptions used to estimate the fair value of Alcon’s other
intangible assets are based on assumptions  “deemed reasonable by management.”
Please tell us how these assumptions are consistent with IFRS and reference for
us the authoritative literature re lied upon to support your position.

3. Given the significance of the currently marketed products and marketing know-
how intangibles acquired in the Alcon ac quisition as identified in the table on
page F-50, please provide us proposed revise d disclosure to be included in future
periodic reports that shows a break-d own of these intangibles by product.

4. Given that it appears that your portion of the net assets  recorded associated with
Alcon is close to your share of its ma rket valuation, pleas e tell us whether a
reasonably possible change in a key assumption you use to evaluate the
impairment of the Alcon cash-generating unit would result in its carrying amount
exceeding its recoverable amount.  If s o, please provide us proposed revised

Mr. Jonathan Symonds
Novartis AG April 8, 2011 Page 3
disclosure to be incl uded in future peri odic reports that discloses the information
described in paragraph 134(f) of IAS 36.
 Results of Operations

 Vaccines and Diagnostics Division, page144

5. You disclose that revenue was generated from delivery for supply contracts with
governments around the world for A(H1N1) pa ndemic flu vaccines and adjuvants.
It is unclear whether you maintain st ockpiles for these governments or whether
you physically deliver vaccines and adjuvant s to them. Please explain to us your
revenue recognition policy for product or dered by customers but not shipped to
them and reference for us the authorit ative literature upon which you relied in
determining your accounting treatment.  In  your response, please differentiate
between governmental stockpile  transactions and any othe r customer transactions
and, at a minimum, please provide  the following information:

 Please explain to us the material terms of these arrangements, including when
product is shipped to the customer;
 Please provide us your understanding of  your customers’ business purpose for
accepting title to product that remains in your possession;
 Please explain to us how you transferre d the significant risks and rewards of
ownership of the goods and how you reta in neither continuing managerial
involvement to the degree usually asso ciated with ownership nor effective
control over the goods sold as required by paragraphs  14(a) and 14(b) of IAS
18;
 Please explain how you meet the criteri a for ‘bill and hold’ transactions
identified in paragraph 1 of  the Appendix to IAS 18; and
 To the extent you participate in gover nment stockpile arrangements, please
explain to us whether yo u undertake any obligation to  rotate stock into the
stockpile to maintain currently dated product.  If so, please:
o Explain whether you receive compensati on for the service of rotating the
stock and, if so, how you account for that compensation;
o Explain whether you receive payment for the new inventory rotated into
the stockpile and, if so, how you account for that payment;
o Explain whether you can sell the inventor y rotated out of the stockpile and
your accounting for that inventory; and
o Considering the contingent nature of  government stockpiles and that the
government may never tap the stockpile , explain how you can assert that it
is probable that delivery will be made as stipulated in paragraph 1(a) of the Appendix to IAS 18.

Mr. Jonathan Symonds
Novartis AG April 8, 2011 Page 4  Notes to the Novartis Group Cons olidated Financial Statements

Note 2:  Significant transactions, business combinations and divestments
Acquisitions in 2010; Corporate—Alcon, Inc., page F-21

6. In a table on page F-23, you disclose that the estimated fair value of your initial
25% ownership interest in Alcon as of the August 25, 2010 majority interest
acquisition date was $10,320 million.  It a ppears that you calculate this amount by
reference to a formula negotiated in 2 008 for your ultimate acquisition of Alcon
from Nestlé.  As Alcon is traded on the New York Stock Exchange, please
explain to us why you did not  utilize the market value of your previously held
investment in Alcon in determini ng your goodwill in the August 25, 2010
business combination achieved in stages under paragraph 32 of IFRS 3.  In this
regard, it appears that the $11,877 million fair value obtained by multiplying the
74.061 million shares you initially owned by the $160.37 per share August 25, 2010 closing stock price is a more reliabl e estimate of the acquisition-date fair
value of the component identified in para graph 32(a)(iii) of IFRS 3 than an
amount derived from a negotiation in  2008.  Please reference for us the
authoritative literature you rely upon to support your accounting.

We urge all persons who are responsible for the accuracy and adequacy of the
disclosure in the filing to be certain that the filing includes the information the Securities
Exchange Act of 1934 and all applicable Exch ange Act rules require.  Since the company
and its management are in possession of all f acts relating to a company’s disclosure, they
are responsible for the accuracy and adequacy  of the disclosures they have made.

 In responding to our comments, please provide a written statement from the
company acknowledging that:
 the company is responsible for the adequacy  and accuracy of the disclosure in the
filing;
 staff comments or changes to disclosure  in response to staff comments do not
foreclose the Commission from taking any action with respect to the filing; and
 the company may not assert staff comme nts as a defense in any proceeding
initiated by the Commission or any person under the federal secu rities laws of the
United States.

Mr. Jonathan Symonds
Novartis AG April 8, 2011 Page 5
Please contact Frank Wyman, Staff Acc ountant, at (202) 551-3660 or Mark
Brunhofer, Senior Staff Acc ountant, at (202) 551-3854, if you have any questions
regarding these comments. In this regard, do not hesitate to c ontact me at (202) 551-
3679.
Sincerely,
Jim B. Rosenberg
Senior Assistant Chief
Accountant

CORRESP
1
filename1.htm

Thomas Werlen

Novartis AG

General Counsel

Novartis Campus

CH-4056 Basel

Jonathan   Symonds

Switzerland

Chief Financial Officer

February 23, 2011

Jeffrey P. Riedler

Assistant Director

Division of Corporation Finance

United States Securities and Exchange Commission

100 F Street, N.E.

Washington, D.C. 20549

Registration Statement on F-4

Registration Number 333-171381

Dear Mr. Riedler:

In accordance with Rule 461 under the Securities Act of 1933, as amended (the “Securities Act”), Novartis AG (the “Company”) hereby respectfully requests acceleration of effectiveness of the above-referenced Registration Statement to 9:00 a.m., Eastern Standard Time, on February 25, 2011, or as soon thereafter as practicable on such date.

In the event that there is any change in the acceleration request set forth in the preceding paragraph, the Company will promptly notify the U.S. Securities and Exchange Commission (the “Commission”) of such change, in which case the Company may be making an oral request for acceleration of the effectiveness of the above-referenced Registration Statement, as amended, in accordance with Rule 461 under the Securities Act. Such request may be made by any officer of the Company or by any lawyer with Allen & Overy LLP.

In requesting acceleration of effectiveness of the Registration Statement, the Company acknowledges that:

·                  should the Commission or the staff, acting pursuant to delegated authority, declare the filing effective, it does not foreclose the Commission from taking any action with respect to the filing;

·                  the action of the Commission or the staff, acting pursuant to delegated authority, in declaring the filing effective does not relieve the Company from its full responsibility for the adequacy and accuracy of the disclosures in the filing; and

1

·                  the Company may not assert staff comments and the declaration of effectiveness as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

Please contact Eric Shube of Allen & Overy LLP at (212) 610-6366 with any questions you may have concerning this request. In addition, please notify Mr. Shube when this request for acceleration has been granted.

Sincerely,

Novartis AG

By:

/s/ Jonathan Symonds

Name:

Jonathan Symonds

Title:

Chief Financial Officer

By:

/s/ Dr. Thomas Werlen

Name:

Dr. Thomas Werlen

Title:

General Counsel

cc:

Eric Shube

(Allen & Overy)

2

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

       DIVISION OF
CORPORATION FINANCE

February 15, 2011
 Via Facsimile (212) 610-6399 & US Mail

Thomas Werlen, Esq. Group General Counsel Novartis AG Lichtstrasse 35 4056 Basel Switzerland
 Re: Novartis AG
 Amendment No. 1 to Schedule 13E-3  Filed by Novartis AG and Alcon, Inc.  Filed on February 2, 2011  File No. 1-150204

Novartis AG
Amendment No. 1 to Form F-4 Filed February 2, 2011
 File No. 333-171381

Dear Mr. Werlen:
We have reviewed your amended filings and have the following comments.  In some of
our comments, we may ask you to provide us wi th information so we may better understand your
disclosure.
 Please respond to this letter by amendi ng your filings, by providing the requested
information, or by advising us when you will provide the requested response.  If you do not believe our comments apply to your facts and circ umstances or do not believe an amendment is
appropriate, please tell us  why in your response.
 After reviewing any amendment to your f ilings and the information you provide in
response to these comments, we may have additional comments.

Mr. Thomas Werlen
Novartis AG February 15, 2011 Page 2  Schedule 13e-3

 General

1. We note the statement in response to prior co mment 1 that Dr. Vasella was not involved
in any deliberations with the Alcon Board regarding the transa ction.  Please clarify this
statement in your disclosure and supplement the discussion in the background section to
more clearly describe Dr. Vasella’s involveme nt in deliberations with other members of
the Novartis Board or his de liberations on behalf  of the Novartis Board regarding the
current proposed transaction.
2. We note your response to prior comment 2.  As done in your response, please revise your
disclosure in the background discussion to more clearly identify the meetings and
deliberations involving Mr. Buehler.  Furthe r, please update your disclosure as may be
appropriate to discuss the terms of any compensatory arrangements negotiated.  If
unknown, please revise to state whether Novart is expects the compensation offered to
Mr. Buehler to materially deviate from Mr. Buehler’s current compensatory package and
if so, how.
Selected Historical Fi nancial Data, page 25

3. We partially reissue prior comm ent 10.  Revise to specify th e ratio of earnings to fixed
charges.  The cross reference to Item 503 of Regulation S-K does not eliminate the
requirement to provide such disclosure in th e context of a going private transaction.
 Background of the Merger, page 34

4. We partially reissue prior comm ent 11.  Please supplement your disclosure to describe in
greater detail each meeting held and/or  discussions amongst the Novartis Board
members.  For example, describe who was present at the Decemb er 1, 2009 meeting and
exactly what was discussed.  Please specify a ny of the investment and “strategic options”
discussed.  In this regard, given that the Board approved both the exercise of the call
option and the acquisition of the remaini ng Alcon shares on January 2, 2010, disclose
when the decisions to take such actions we re discussed and the pros and cons, if any,
discussed at that time.
5. Further to our comment above.  While you have  set forth the rationale for the chosen
structure, please revise to discuss any mee tings of the Novartis Board in which the
structure or any alternative was first presen ted and who presented the structure and/or
alternatives (i.e., financial advisors, members of the Board).  Expand upon any
discussions the Novartis Board had regardi ng the fairness of the proposed structure to
Alcon minority shareholders both prior to the January 3, 2010 letter being sent and after
receipt of the responses by the Independent  Committee to the Alcon Board received
thereafter.   Please refer also to  our subsequent comment 8 below.

Mr. Thomas Werlen
Novartis AG February 15, 2011 Page 3

6. Please supplement disclosure on page 35 to a ddress the meetings at which the exchange
ratio was first discussed.  Please clarify fu rther how the analyses and methodologies the
Board considered resulted in the decision to offer an exchange ratio of 2.8.   Clarify
whether the Board considered any particular analyses as indicative of the appropriateness
of the ratio.
7. Your revised disclosure stat es that the Board did not c onsider proposing an exchange
ratio greater than 2.8.   Please clarify and s upplement your disclosure to address whether
an exchange ratio of greater than 2.8 was discussed
, even if the Board ultimately
considered proposing only a ratio of 2.8.  If s o, revise to indicate the ratio(s) discussed
and the reason(s) for rejection.
8. We partially reissue bullet point 6 of prior comment 11.  The revised disclosure does not
include sufficient discussion of the  materi al aspects of the opinions provided and the
parties’ considerations thereof.  Pl ease revise your disclosure accordingly.

9. We refer to your response to prior comm ent 12.  Please provide supplementally an
English translation of the opinions refe renced.  We may have further comment.

10. We note your response to prior comment 15 and the disclosure you reference.  Explain in
greater detail why the timing was opportune.  Describe any other f actors considered by
the Novartis Board that resulted in the Bo ard’s decision to exerci se the option at the
earliest possible date.  In addition, while we  note the Novartis Board’s assertion of
unending speculation in the market, the basi s for the Board’s conclusion that the
speculation would not have benefited anyone is not apparent.  Please further clarify your
disclosure and set forth the basi s for the conclusions asserted.

11. We partially reissue prior comment 22.  Please revise this section to  include disclosure
stating that the safe harbor provisions in the Form 20-F that you incorporate by reference
do not apply to any forward- looking statements the company is making in connection
with the going private transaction.
 We urge all persons who are responsible for the accuracy and adequacy of the disclosure
in the filings to be certain that the filing include s the information the Secu rities Exchange Act of
1934 and all applicable Exchange Act rules require.   Since the filing persons are in possession of
all facts relating to the disclosure, they are re sponsible for the accuracy and adequacy of the
disclosures they have made.

Mr. Thomas Werlen
Novartis AG February 15, 2011 Page 4   If you have questions or comments please contact me at (202) 551-3757.  You may also
contact me via facsimile at (202) 772-9203.  Please send all correspondence to us at the
following ZIP code:  20549-3628.

         S i n c e r e l y ,             M e l l i s s a  C a m p b e l l  D u r u          S p e c i a l  C o u n s e l          O f f i c e  o f  M e r g e r s  &  A c q u i s i t i o n s   cc: Via Facsimile

Eric Shube, Esq.  Allen & Overy LLP

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

       DIVISION OF
CORPORATION FINANCE

January 21, 2011
 Via Facsimile (212) 610-6399 & US Mail

Thomas Werlen, Esq. Group General Counsel Novartis AG Lichtstrasse 35 4056 Basel Switzerland
 Re: Novartis AG
 Schedule 13E-3  Filed by Novartis AG and Alcon, Inc.  Filed on December 23, 2010  File No. 1-150204

Novartis AG
Form F-4 Filed December 23, 2010
 File No. 333-171381

Dear Mr. Werlen:
We have reviewed your filings and have the following comments.  In some of our
comments, we may ask you to provide us with  information so we may better understand your
disclosure.
 Please respond to this letter by amendi ng your filings, by providing the requested
information, or by advising us when you will provide the requested response.  If you do not believe our comments apply to your facts and circ umstances or do not believe an amendment is
appropriate, please tell us  why in your response.
 After reviewing any amendment to your f ilings and the information you provide in
response to these comments, we may have additional comments.

Mr. Thomas Werlen
Novartis AG January 21, 2011 Page 2

Schedule 13e-3

 General

 1. Based on disclosure of the background to the merger, it would app ear that Dr. Vasella
was a part of the initiation and structuring of  the going private transaction in his role as
Chairman of the Board of Novartis and while serving as a director and then Chairman of
the Board of Alcon.  We remind you that Rule  13e-3 requires that each affiliate engaged
in a going private transaction f ile a Schedule 13E-3 and furnis h the required disclosure.
Please revise to include Dr. Va sella as a filing person or ad vise.  For guidance, please
refer to Compliance and Disclosure Interp retation 201.05 of the Division of Corporation
Finance’s Compliance and Disclosure Interp retations of Going Private Transactions,
Exchange Act Rule 13e-3, and Schedule 13E-3.
2. We note the disclosure throughout  the prospectus that Mr. Bu ehler recused himself from
the vote approving the merger transaction.  Revise to id entify Mr. Buehler and the
conflict that led to the decision to recuse himself from the vote on the merger each time
reference is made to the recusal.  Also, s upplementally advise us of any involvement Mr.
Buehler had in the initiation, ne gotiation, or structuring of th e merger transaction and the
negotiation of post-merger employment and/or  benefits.  Your analysis should also
address whether Mr. Buehler should be considered an affiliate engaged in the going
private transaction.  Please refer to the gui dance cited to in ou r prior comment.

3. Please note that each new filing person mu st individually comply with the filing,
dissemination and disclosure re quirements of Schedule 13E-3.  Therefore, please revise
the disclosure to include all of the in formation required by Schedule 13E-3 and its
instructions for any filing persons added in  response to the preceding comments.  For
example, include a statement as to whet her each person believes the Rule 13e-3
transaction to be substantively and procedurally fair to unaffiliated security holders and an analysis of the material factors upon which they relied in reaching such a conclusion.
Refer to Item 8 of Schedule 13E-3 and Q& A No. 5 of Exchange Act Release No. 17719
(April 13, 1981).  In this rega rd, the reasons for the trans action and the alternatives
considered by these affiliates may be different  than those of the ot her filing parties, and
this fact should be reflected in the disclosure .  Alternatively, and to the extent applicable,
the affiliates may adopt the analysis and conclu sions of another filing party.  In addition,
ensure that each new filer signs the Schedule 13E-3.

4. Please revise so that the information requi red by Items 7, 8, and 9 of Schedule 13E-3 is
prominently disclosed in a “Special Factors” section in the front of the prospectus.  See
Exchange Act Rule 13e-3(e)(1)(ii).

Mr. Thomas Werlen
Novartis AG January 21, 2011 Page 3  Form F-4

 Questions & Answers, page 3

5. In addition to the Q&A you include on page 5 regarding appraisal ri ghts, please include a
question and answer in the forefront of th e Q&A that informs shareholders of the
consequences of voting against the merger.
 6. Further to our comment above.  Please suppl ement disclosure on page 84 regarding the
procedure and process under Swiss law for pur poses of exercising a ppraisal rights.  For
example, revise to include a brief descripti on of the valuation reference points that may
be considered under Swiss law with respect  to the value of the Alcon shares.
 What will I receive in the merger…,” page 3

 7. Please revise to more succinctly and clearly ex plain the merger consideration receivable.
For example, provide a hypothetical example to demonstrate the potential components of
the merger consideration receiv able in the event the Novartis  share value is equal to, less
than or greater than $60 on the relevant measur ement date.  Also, revise to include a cross
reference to disclosure regardi ng the risk associated with fluc tuations in value of Novartis
shares between the date of the meeting and the completion of the merger.

When is the merger expected to be completed…, page 6

 8. Whenever the voting requirements to approve the merger are discussed, please revise to
reference the percentage  of outstanding securities held by Novartis and its intention to
vote all of its shares to  approve the merger.
 Summary, page 11

 9. The summary term sheet should be in bullet point format and should highlight the most
important terms of the transact ion, with cross-references to more detailed discussion later
in the prospectus.  See Item 1001 of Regula tion M-A.  Please revise your term sheet
accordingly.  Also, consider combining the existing summary term sheet section with the Question and Answer section that precedes it.
 Selected Historical Fi nancial Data, page 21

 10. We note that you have incorporated your fina ncial statements by reference, but have not
included all of the summarized financial in formation specified in Item 1010(c) of
Regulation M-A in the prospectus.  For example, but without limitation, you do not
appear to have disclosed th e ratio of earnings to fixed charges.  Please revise the
registration statement to provide all disclosu re required by Item 1010(c) of Regulation M-
A.

Mr. Thomas Werlen
Novartis AG January 21, 2011 Page 4

Special Factors, page 31

 Background of the Merger, page 31

 11. Please revise this section to further descri be each contact, meeti ng, or negotiation that
took place and the substance of the discussions  or negotiations at each meeting.  Please
identify the advisors or othe r counsel and the members of management who were present
at each meeting and the persons who initiate d the meetings.  For example, revise to
disclose:
• details of discussions that occurred pr ior to January 3, 2010 amongst the Novartis
Board and/or any advisors regarding th e timing of the Second Stage Acquisition
and the Board’s decision to seek full owne rship of Alcon upon exercise of the call
option;
• when the decision was first made regarding the type of transaction best suited to
accomplish the acquisition of the minority interest in Alcon and the reasons for
the chosen structure;

• all discussions prior to January 3, 20 10 amongst the Novartis Board and/or
advisors regarding the appropriate m eans of valuing a minority squeeze out
transaction and the valua tion methods and valuation ranges considered with
respect to Alcon;

• when and how the fixed exchange rati o was chosen and whether there was a
discussion amongst the Novartis Board of any ratio greater than the 2.8 exchange
ratio proposed;

• further details of discussions at each of the meetings held during February, March,
April and May, 2010 involving the financ ial advisors to the Independent
Committee and Novartis and/or the I ndependent Committee, in which the
appropriate value per Alc on share was discussed;

• details of any discussions amongst the filing parties and/or their advisors
regarding relevant Swiss law and cor porate governance considerations with
respect to the proposed merger and the tr eatment of the minority shareholders
(i.e., before and after the receipt of opi nions from Professor Hans Caspar von der
Crone and Professor Peter Nobel);

• the discussions amongst the Novartis part ies regarding the need to change the
merger consideration structure to include  the contingent cash value amount; and,

Mr. Thomas Werlen
Novartis AG January 21, 2011 Page 5
• material aspects of Swiss law applicab le to the merger agreement discussed
amongst the parties’ Swiss legal advi sors at the December 3, 2010 meeting.

12. Each presentation, discussion or report held with or presente d by an outside party that is
materially related to the Rule 13e-3 transac tion, whether oral or written, is a separate
report that requires a reasonabl y detailed description meeting the requirements of Item
1015 of Regulation M-A.  Please advise us of the consideration given to filing the
opinions of Professors Caspar von der Crone and Nobel given what appears to be the
nexus between the substance of their opinion and the current going private transaction.

13. Please see our comment above.  We note refe rence to materials shared between the
financial advisors of the Independent Committee and Novartis at meetings held in February, March, April and May, 2010.  As noted  in our prior comment, please revise to
include a materially complete description of any such reports or materials and/or
presentations, whether oral or written.  In  addition, please file all relevant written
materials as exhibits to  the Schedule 13E-3.
 Position of Novartis Regarding th e Fairness of the Merger, page 51

14. As required by Item 1013(b) of Re gulation M-A, please revise to  disclose the alternatives
to the current transaction that were considered by each  filing party and the reasons for
their rejection.
15. While we note the viewpoints expressed by N ovartis’ board in the January 3, 2010 letter,
further supplement your disclosure to expl ain why Novartis deci ded to undertake the
going private transaction at this time .  This comment applies also to Alcon’s disclosure.
Refer to Item 1013(c) of Regulation M-A.
16. Item 1013(d) of Regulation M-A re quires a reasonably detailed discussion of the benefits
and detriments of the transaction to the comp any, its affiliates a nd unaffiliated security
holders, and the benefits and detriments must  be quantified to the extent practicable.
Further, the description must include, but not be limited to, the effect of the Rule 13e-3
transaction on each affiliate’s interest in the net book value and net earnings of the
company in terms of both dollar amounts and pe rcentages.  Please revise to include this
disclosure.  See Instruction 2 and Instruc tion 3 to Item 1013 of Regulation M-A.

17. Item 1014 of Regulation M-A requires the disc losure to include an assessment of the
fairness of the transaction to unaffiliated  shareholders.  The curre nt disclosure under this
heading references the filing party’s assessmen t of fairness to Minority Shareholders as
opposed to unaffiliated shareholders.  Please revise accordingly.

18. The recommendation and analysis by Novar tis does not sufficiently address the
procedural fairness considerations or explai n in sufficient detail w hy certain factors were
not considered.  For example, disclose why N ovartis chose not to structure the transaction

Mr. Thomas Werlen
Novartis AG January 21, 2011 Page 6
so that the merger would require approval of  at least a majority of the unaffiliated
security holders.  Refer to Item 1014(c) of Regulation M-A.  Further, similar to the
disaggregated discussion provi ded by Alcon of the Board’s consideration of substantive
and procedural fairness, expa nd and separately address Nova rtis’ consideration of other
procedural safeguards implemented while structuring the deal.

19. The factors listed in Instruction 2 to It em 1014 of Regulation M-A are those generally
considered relevant in addressing the substa ntive fairness of a goi ng private transaction
and should be discussed.  See
 Q & A No. 20 in Exchange Act Release 17719 (April 13,
1981).  While we note reference to the valua tions methodologies used or considered by
the various financial advisors, further discus sion is warranted to clarify the parties’
conclusions regarding fairness.  For exam ple, expand the discussion to address:

• whether and if so, how, the Novartis Bo ard considered the valuation of $181 per
share paid to Nestlé for Alcon shar es in the Second Stage Acquisition;

• the consideration by Novartis of the prem ium paid for shares in prior squeeze out
transactions involving Novartis;

• the Novartis and Alcon Boards’ consideration of premiums paid in comparable
transactions;

• Novartis’ considerati on of the upper end of the range of trading prices for the 52
weeks ended December 13, 2010 considered by Credit Suisse;  and,

• the various other analyses of Credit Suisse which incl uded per share prices and
valuations in excess of the $168.

 In revising your disclosure in response to our comments, please be advised that all
disclosure required by Item 8, as well as Item s 7 and 9, must be included in the document
disseminated to security holders  in full, including responses in the negative.  See General
Instruction E to Schedule 13E-3.
 20. Note that if a filing party ha s based its fairness determination on the analyses of factors
undertaken by others (e.g., by the financial a dvisors and/or Independent Committee), the
filing party must expressly adopt
 such analysis and discussi on as its own in order to
satisfy the disclosure obligations of Item 1014(b) of Regulation M-A.  Refer to Question
Nos. 20 &21 of Exchange Act Release No. 34-17719 (April 13, 1981).  As such, revise to
disclose whether Novartis expressly adopted  the Credit Suisse di scussion commencing on
page 43 or any other portion of an analyses  undertaken by another party.  If not, please
revise to address each of the f actors listed in paragraphs (c), (d), and (e) and Instruction 2
to Item 1014.  We note for example, the absence of a discussi on regarding the going
concern value or the purchase price paid in recent transactions i nvolving Alcon shares.

Mr. Thomas Werlen
Novartis AG January 21, 2011 Page 7

21. We note the reference to the multiple of 20 times Alcon’s 2011 earnings based on IBES
consensus estimates.  Please supplement your disclosure to provide further context to this statement.  For example, clarify how such estimates were produced and whether the 2011
earnings projections used to produce the estim ates were approved or agreed upon by the
Independent Committee or Alcon Board as being representative  of projected 2011
earnings.
Forward Looking Statements, page 89

 22. Please note that the safe harbor  provisions of the Private S ecurities Litigation Reform Act
of 1995 are not available to statements ma de in connection with a going private
transaction.  Refer to Exchange Act S ection 21E(b)(1)(E) and Question and Answer
117.05 of the Division of Corporation Fi nance’s Compliance and Disclosure
Interpretations for Going Private Transacti ons, Exchange Act Rule 13e-3 and Schedule
13E-3.  Please revise this section accordingly.  Additionally, revise to include disclosure
stating that the safe harbor provisions in the 20-F incorporated by reference into the
registration statement do not apply to any forward-looki ng statements the company
makes in connection with the going private transaction.
 The Extraordinary General Meeting of Alcon Shareholders, page 90

23. Notwithstanding the limitations on enforcement of United States laws, please revise to
clarify to state, if true, that a vote with re spect to the discharge fo r purposes of Swiss law
would not prec

January 5, 2011

Joseph Jimenez Chief Executive Officer  Novartis AG Lichtstrasse 35 4056 Basel Switzerland
 Re: Novartis AG
  Registration Statement on Form F-4
Filed December 23, 2010
  File No. 333-171381

Dear Mr. Jimenez:

 This is to advise you that we  have limited our review of your  registration statement to the
resolution of all outstanding comments by the Office of Mergers & Acqui sitions and the Office
of International Corporate Finance.  We will not be in a position to accelerate the effectiveness of your registration statement until all comments are resolved.
 We urge all persons who are responsible for th e accuracy and adequacy of the disclosure
in the filing to be certain that the filing incl udes the information the Securities Act of 1933 and
all applicable Securities Act rules require.  Since the company and its management are in
possession of all facts relating to a company’s disclosure, they are responsible for the accuracy and adequacy of the disclosures they have made.

In the event you request acceler ation of the effective date  of the pending registration
statement please provide a written statem ent from the company acknowledging that:

• should the Commission or the staff, acting purs uant to delegated authority, declare the
filing effective, it does not foreclose the Co mmission from taking any action with respect
to the filing;

• the action of the Commission or the staff, acting pursuant to delegated authority, in
declaring the filing effective, does not relieve the company from its full responsibility for
the adequacy and accuracy of the disclosure in the filing; and

• the company may not assert staff comments a nd the declaration of effectiveness as a
defense in any proceeding initiated by the Commission or any person under the federal
securities laws of the United States.

Mr. Joseph Jimenez
Novartis AG January 5, 2011 Page 2

Please refer to Rules 460 and 461 regarding re quests for acceleration.  We will consider a
written request for acceleration of  the effective date of the regi stration statement as confirmation
of the fact that those reques ting acceleration are aware of thei r respective responsibilities under
the Securities Act of 1933 and the Securities Excha nge Act of 1934 as they relate to the proposed
public offering of the securities specified in the above registration stat ement.  Please allow
adequate time for us to review any amendment prior to the requested effective date of the registration statement.
 Please contact Johnny Gharib at (202) 551- 3170 or me at (202) 551-3715 with any
questions.
Sincerely,

Jeffrey P. Riedler Assistant Director
cc: Eric S. Shube  Allen & Overy LLP
 1221 Avenue of the Americas
 New York, New York 10020

July 20, 2010
 Jonathan Symonds Chief Financial Officer
Novartis AG
Lichtstrasse 35
4056 Basel, Switzerland
 Re: Novartis AG
  Form 20-F for the Fiscal Year Ended December 31, 2009
 Filed January 26, 2010
  File Number:  001-15024
 Dear Mr. Symonds:
  We have completed our review of your f iling and do not have any further comments at
this time.
Sincerely,

Joel Parker
        A c c o u n t i n g  B r a n c h  C h i e f

CORRESP
1
filename1.htm

  Novartis
  AG

  Postfach

  4002 Basel

  Switzerland

July 2,
2010

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, 2009

Filed
January 26, 2010

File
No. 001-15024

Dear
Mr. Rosenberg:

This
is in further reply to your letter addressed to Raymund Breu, our former Chief
Financial Officer, dated June 11, 2010, which was in response to our
letter of May 11, 2010.  This letter
follows our June 25, 2010 letter, which was our initial response to your June 11,
2010 letter.  For ease of reference, we
set forth your comments, as contained in your June 11 letter, below.

Item 5.
Operating and Financial Review and Prospects

Item 5.A Operating Results

CORE RESULTS AS DEFINED BY NOVARTIS, page 98

SEC Comments

1.             Please refer to our response
to comment one.  We continue to believe
that it is not appropriate to present an entire non-IFRS income statement since
this gives undue prominence to the non-IFRS information.  Therefore please revise your disclosure to
reconcile each non-IFRS measure separately.

2.             Please
refer to your response to comment two.
Please revise your disclosure to include specific information on how the
tax effect was calculated such as the effective tax rate and the items that the
tax rate takes into account.

Novartis Further Response

In our June 25 letter, we stated that we will
revise our disclosure commencing with the filing of  our Form 20-F for 2010 by including the
requested information.  Attached hereto
as Exhibit A is the format that we intend to use for that disclosure.  For demonstration purposes, Exhibit A
was prepared using our full-year 2009 data.

*       *       *

The Company acknowledges that:

·                  the Company is responsible
for the adequacy and accuracy of the disclosure in the filing;

·                  staff comments or changes to
disclosure in response to staff comments do not foreclose the Commission from
taking any action with respect to the filing; and

·                  the Company may not assert
staff comments as a defense in any proceeding initiated by the Commission or
any person under the federal securities laws of the United States.

We
trust that this letter responds to the issues raised in your comment
letter.  If you have additional
questions, please do not hesitate to contact us.

Respectfully
submitted,

Novartis
AG

  /s/
  JONATHAN SYMONDS

  /s/
  THOMAS WERLEN

  Jonathan
  Symonds

  Thomas
  Werlen

  Chief
  Financial Officer

  General
  Counsel

  Novartis
  Group

  Novartis
  Group

2

Exhibit A

CORE
RESULTS

Reconciliation
from IFRS results to core results — Group — 2009 (unaudited)

  2009

  IFRS results

  USD m

  Amortization of
  intangible assets(1)

  USD m

  Impairments(2)

  USD m

  Acquisition-related

  restructuring and

  integration items(3)

  USD m

  Exceptional
  items(4)

  USD m

  2009

  Core results

  USD m

  Gross profit

  32924

  938

  -69

  18

  -28

  33783

  Operating income

  9982

  1025

  75

  18

  337

  11437

  Income before taxes

  9922

  1594

  167

  18

  434

  12135

  Taxes(5)

  -1468

  -1868

  Net income

  8454

  10267

  EPS (USD)(6)

  3.70

  4.50

  The following are adjustments to  arrive at Core Gross Profit

  Other revenues

  836

  -28

  808

  Cost of Goods
  Sold

  -12179

  938

  -69

  18

  -11292

  The following are adjustments to arrive at Core Operating Income

  Research &
  Development

  -7469

  87

  95

  -7287

  Other income

  782

  -65

  717

  Other expense

  -1924

  49

  430

  -1445

  The following are adjustments to arrive at Core Income before taxes

  Income from
  associated companies

  293

  569

  92

  97

  1051

1

(1)
Amortization of intangible assets: Cost of Goods Sold includes recurring
amortization of acquired rights to in-market products and other
production-related intangible assets; R&D includes the recurring amortization
of acquired rights for core technology platforms; Income from associated
companies includes the recurring amortization of the purchase price allocation
related to intangible assets, primarily for the Roche and Alcon investments.

(2)
Impairments: Cost of Goods Sold includes impairments of acquired rights to
in-market products and other production-related impairment charges, including a
partial reversal of USD 100 million in Pharmaceuticals for an impairment taken
in 2007 for Famvir; R&D includes write-offs
related to in-process R&D; Other expense includes impairments, primarily
for financial assets; Income from associated companies reflects the USD 92
million impairment charge taken for an Alcon pharmaceutical development
project.

(3)
Acquisition-related restructuring and integration items: Cost of Goods Sold
includes charges of USD 18 million related to the EBEWE Pharma speciality
generics business acquisition.

(4)
Exceptional items: Other revenues reflects a USD 28 million gain from a
settlement of Vaccines and Diagnostics; Other income reflects divestment
gains  in Pharmaceuticals; Other expense includes an increase of USD 345 million in
legal provisions, litigations and exceptional settlements principally for the Trileptal and Tobi US government investigations; Income from
associated companies reflects a USD 97 million one-time charge for the Novartis
share of Roche’s restructuring charges for Genentech.

(5)
Taxes on the adjustments between IFRS and core results take into account, for
each individual item included in the adjustment, the tax rate that is
applicable to the item in the jurisdiction where the adjustment arises.
Generally this results in amortization of intangible assets and
acquisition-related restructuring and integration items having a full tax
impact whereas tax impacts on impairments can only be taken into account if the
changes in value in the underlying asset are tax deductible in the respective
jurisdiction where the asset is recorded. There is usually a tax impact on
exceptional items although this is not the case for items arising from criminal
settlements in certain jurisdictions. Adjustments related to income from
associated companies are recorded net of any related tax effect. Due to these
factors and the differing effective tax rates in the various jurisdictions, the
tax on the total adjustments of USD 2213 million to arrive at the core results
before tax amounts to USD 400 million. This results in the average tax rate on
the adjustments being 18.1%.

(6)
Earnings per share (EPS) is calculated on the amount of net income attributable
to shareholders of Novartis AG.

2

CORE
RESULTS

Reconciliation
of operating income to core operating income — 2009 (unaudited)

  Pharmaceuticals

  Vaccines and
  Diagnostics

  Sandoz

  Consumer Health

  Corporate

  Total

  USD m

  USD m

  USD m

  USD m

  USD m

  USD m

  Operating income

  8392

  372

  1071

  1016

  -869

  9982

  Amortization of intangible assets

  366

  312

  260

  84

  3

  1025

  Impairments

  Intangible
  assets

  -11

  18

  6

  13

  26

  Property,
  plant & equipment

  4

  5

  9

  Financial
  assets

  37

  3

  40

  Total impairment charges

  30

  18

  6

  18

  3

  75

  Acquisition-related restructuring and integration items (including
  acquisition-related accounting impact of inventory adjustments), net

  18

  18

  Exceptional
  items

  Exceptional
  gain from divesting brands, subsidiaries and financial investments

  -65

  -65

  Other
  restructuring expenses

  40

  40

  Legal
  provisions, litigations and exceptional settlements

  345

  17

  362

  Total exceptional items

  280

  17

  40

  337

  Total adjustments

  676

  347

  324

  102

  6

  1455

  Core operating income

  9068

  719

  1395

  1118

  -863

  11437

  Core return on net sales

  31.8

  %

  29.7

  %

  18.6

  %

  19.2

  %

  25.8

  %

3

CORRESP
1
filename1.htm

  Novartis
  AG

  Postfach

  4002 Basel

  Switzerland

June 25,
2010

BY
FACSIMILE AND REGULAR MAIL

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, 2009

  Filed
  January 26, 2010

  File
  No. 001-15024

Dear
Mr. Rosenberg:

This
is in reply to your letter addressed to Raymund Breu, our former Chief
Financial Officer, dated June 11, 2010, which was in response to our
letter of May 11, 2010.  For ease of
reference, we set forth your additional comments below, followed by our
responses.

Item 5.
Operating and Financial Review and Prospects

Item 5.A Operating Results

CORE RESULTS AS DEFINED BY NOVARTIS, page 98

SEC Comments

1.             Please refer to our response
to comment one.  We continue to believe
that it is not appropriate to present an entire non-IFRS income statement since
this gives undue prominence to the non-IFRS information.  Therefore please revise your disclosure to
reconcile each non-IFRS measure separately.

2.             Please
refer to your response to comment two.
Please revise your disclosure to include specific information on how the
tax effect was calculated such as the effective tax rate and the items that the
tax rate takes into account.

Novartis Response to SEC Comments 1 and 2

We will revise our disclosure commencing with the filing
of  our Form 20-F for 2010 by
including the requested information.

*       *       *

The Company acknowledges
that:

·                  the Company is responsible
for the adequacy and accuracy of the disclosure in the filing;

·                  staff comments or changes to
disclosure in response to staff comments do not foreclose the Commission from
taking any action with respect to the filing; and

·                  the Company may not assert
staff comments as a defense in any proceeding initiated by the Commission or
any person under the federal securities laws of the United States.

We
trust that this letter responds to the issues raised in your comment
letter.  If you have additional
questions, please do not hesitate to contact us.

Respectfully
submitted,

Novartis
AG

  /s/
  JONATHAN SYMONDS

  /s/
  THOMAS WERLEN

  Jonathan
  Symonds

  Thomas
  Werlen

  Chief
  Financial Officer

  General
  Counsel

  Novartis
  Group

  Novartis
  Group

2

June 11, 2010
 Raymond Breu Chief Financial Officer
Novartis AG
Lichtstrasse 35
4056 Basel, Switzerland
  Re: Novartis AG
  Form 20-F for the Fiscal Year Ended December 31, 2009
 Filed January 26, 2010
  File Number:  001-15024

Dear Mr. Breu:
 We have reviewed your May 11, 2010 response to our April 30, 2010 letter and have the
following comments.  In some of our comments, we may ask you to provide us with information
so we may better understand your disclosure.
 Please respond to this letter within te n business days by providing the requested
information, or by advising us when you will provide the requested response.  Where a comment requests you to revise disclosu re, the information you provide s hould show us what the revised
disclosure will look like and identify the filing in which you intend to first include it.  If you do
not believe a comment applies to your facts a nd circumstances, please tell us why in your
response.  Please furnish us a letter on EDGAR under the form type label CORRESP that keys
your responses to our comments.
 After reviewing the information provided, we may raise additional comments and/or
request that you amend your filing.               Item 5. Operating and Financial Review and Prospects

Item 5.A Operating Results
CORE RESULTS AS DEFINED BY NOVARTIS, page 98
 1. Please refer to your response to comment one. We continue to believe that it is not
appropriate to present an entire non-IFRS  income statement since this gives undue
prominence to the non-IFRS information. Ther efore please revise your disclosure to
reconcile each non-IFRS measure separately.
 2. Please refer to your response to comment two. Please revise your di sclosure to include
specific information on how the tax effect was calculated such as the effective tax rate
and the items that the tax ra te takes into account.

Raymond Breu
Novartis AG
June 11, 2010
Page 2

You may contact Vanessa Robe rtson, Staff Accountant, at (202) 551-3649 or Lisa
Vanjoske, Assistant Chief Accountant, at (202)  551-3614 if you have any questions regarding
these comments.  In this regard, do not hesitate to contact me, at (202) 551-3679.

Sincerely,

Jim B. Rosenberg
Senior Assistant Chief Accountant

CORRESP
1
filename1.htm

  Novartis AG

  Postfach

  4002 Basel

  Switzerland

May 11,
2010

BY
FACSIMILE AND REGULAR MAIL

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, 2009

Filed
January 26, 2010

File
No. 001-15024

Dear
Mr. Rosenberg:

This
is in response to your letter addressed to Raymund Breu, our former Chief
Financial Officer, dated April 30, 2010 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 5.
Operating and Financial Review and Prospects

Item
5.A Operating Results

CORE
RESULTS AS DEFINED BY NOVARTIS, page 98

SEC Comment 1

We do not believe it is appropriate to present an entire
non-IFRS income statement in an attempt to reconcile non-IFRS measures to IFRS
measures since this gives undue prominence to the non-IFRS information.
Therefore please revise your disclosure to reconcile each non-IFRS measure
separately. Please refer to Question 102.10 of the Compliance and Disclosure
Interpretations related to non-GAAP Financial Measures.

Novartis response

We have reviewed your comment and are aware of the
applicable rules, and of the interpretation contained in Question 102.10 of the
Compliance and Disclosure Interpretations related to non-GAAP Financial
Measures.

In our view, our presentation of the reconciliation of
IFRS measures to “core” measures on pages 98 and following of our Form 20-F
is in compliance with the letter and the spirit of these requirements.  First, Item 10 of Regulation S-K requires us
to disclose “a reconciliation (by schedule or other clearly understandable
method)” (emphasis added).  Given the nature
of the core measures we disclose, including the fact that reconciling

adjustments exist on numerous line items on our income
statement, we believe the presentation we provide is the most clearly
understandable format among the available alternatives.  In our view, investor transparency is better
served by the more comprehensive reconciliation we have given than through a
disaggregated line-by-line approach to reconciliation, which we believe could
lead to investor confusion.

We are aware of the staff’s view, set forth in Question
102.10 of the Compliance and Disclosure Interpretations related to non-GAAP
Financial Measures, that, under certain circumstances, particular methods of
presenting a full non-GAAP income statement for purposes of reconciling
non-GAAP measures “may attach undue prominence to the non-GAAP information” —
i.e., may cause the non-GAAP measures to be given greater prominence than the
GAAP measures, in violation of Item 10 of Regulation S-K.

Nonetheless, while that may be the case under certain
methods of presenting such reconciliation statements, we believe that the
specific presentation of our reconciliation of IFRS measures to core measures
does not give the core measures greater prominence over the IFRS measures.  Rather, we believe the IFRS measures are
given equal or greater prominence over the core measures, and therefore are in
compliance with Item 10 of Regulation S-K.

To begin with, on page 98 of our Form 20-F, we
describe the concept of our core results.
We define the measures, explain why they provide useful supplemental
information for investors, clarify that these core measures are not presented
as IFRS measures, and caution investors that they should not be viewed as a
substitute for IFRS measures as follows:

Despite the importance of these measures to
management in setting goals and measuring the Group’s performance, these are
non-IFRS measures that have no standardized meaning prescribed by IFRS. As a
result, they have limits in usefulness to investors. Because of their
non-standardized definitions, the core measures (unlike IFRS measures) may not
be comparable to the calculation of similar measures of other companies. These
core measures are presented solely to permit investors to more fully understand
how the Group’s management assesses underlying performance. These core measures
are not, and should not be viewed as, a substitute for IFRS measures.(1)

Following this introduction, we present two tables that
reconcile IFRS results to core results.
In a brief introduction to the tables, and in the headings of the
tables, the term “IFRS results” comes before the term “core results,” thus in
our view giving the “IFRS results” at least equal, if not greater prominence
over the “core results.”  Similarly, in
the tables themselves, the IFRS results and core results are clearly labeled,
and widely separated.  Reading left to
right, the IFRS results are presented first — on the left — again giving the
IFRS results at least equal prominence with the core results.  For this reason, in our view, our

(1) Even
though Novartis called these core measures non-IFRS measures, on reflection we
believe that under IFRS, these adjustments could be segregated in an IFRS
income statement under IAS 1.

2

presentation on pages 99-104 of our Form 20-F
is in compliance with Item 10 of Regulation S-K.

As a result of the above considerations we believe that
our present reconciliation format is consistent with the Commission’s rules and
guidance in this area, and enhances investors’ ability to understand our
presentation.

SEC Comment 2

Please expand your disclosure to include how the tax
effect on the adjustments between IFRS and core results was calculated. Please
refer to Question 102.11 of the Compliance and Disclosure Interpretations
related to non-GAAP Financial Measures.

Novartis
Response

We have reviewed your comment and are aware of the
interpretation contained in Question 102.11 of the Compliance and Disclosure
Interpretations related to non-GAAP Financial Measures.  In preparing our 2009 Form 20-F, we used
the alternate method, expressly permitted in the response to Question 102.11,
of presenting the tax effect in one line in the reconciliation.  As a result, we believe that the guidance
set forth in the response to question 102.11 is adequately addressed in our
current disclosure.  However, to improve
the existing disclosures, in response to the Staff’s comment, we plan to expand our disclosure on how the tax calculation
is performed in the respective footnote commencing with our filing of
our Form 20-F for 2010 as follows:

Taxes on the adjustments between IFRS and core results
take into account for each individual item included in the adjustment, the tax
rate that is applicable to the item in the jurisdiction where the adjustment
arises.

Item
18. Financial Statements

Notes to the consolidated financial statements

1. Accounting Policies

Equity-based
compensation, page F-16

SEC Comment 3

Please disclose the nature of your relationship with the
market maker that calculates the fair value of the options and include the
procedures you perform to validate the fair value information you receive.

Novartis response

Question
3 of your comment letter refers to our accounting policy paragraph on page F-16
of our Form 20-F entitled “Equity-based compensation.”  We have reviewed your question and the
disclosure on page F-16, as well as a related disclosure on page 119,
and it is our view after this further review that the disclosure on page F-16
unnecessarily focuses on the role of the market maker, rather than on our
accounting policy with respect to Equity-based compensation.  While it is correct that an independent
third-party market maker

3

initially
calculates the fair value of our options, we subsequently take a series of
steps to validate the market maker’s valuation.
As a result, the valuation which results should be viewed as our
own.  For these reasons, we will enhance
the clarity of our disclosure on page F-16 commencing with the filing of
our Form 20-F for 2010 by changing our disclosure as follows:

Equity-based compensation

The fair value of Novartis shares, Novartis American
Depositary Shares (ADSs) and related options granted to associates as
compensation are recognized as an expense over the related vesting or service
period, adjusted to reflect actual and expected vesting levels. The charge for
equity-based compensation is included in personnel expenses which are allocated
to our functional costs. Novartis shares and ADSs are valued using the market
value on grant date.  An option’s fair
value at grant date is calculated using the trinomial valuation method.
Accurately measuring the value of share options is difficult and requires an
estimate of factors used in the valuation model. These key factors involve
uncertain future events, expected share price volatility and expected dividend
yield.

Research & development, page F-17:

SEC Comment 4

Refer to your policy for accounting for “upfront and
milestone payments” in your other intangible assets accounting policy on page F-12
and your research and development accounting policy on page F-17. Please
revise your disclosure to clarify how you determine whether an upfront or
milestone payment represents a payment to a third party for research and/or
development services, a payment for research and development assets, or both.
For example, if the licensor to which you make an upfront or milestone payment
was also obligated to perform research and/or development services related to
the license (i.e. the research and development asset) you acquired, how under
your accounting policy would you determine to what each upfront and milestone
payment relates? If a payment, or a portion thereof, is for research and
development services, please ensure your revised disclosure clarifies how you
determine whether the payment is for services already received or for services
to be received in the future and your accounting treatment.

Novartis
response

Question
4 of your comment letter refers to the portion of our Research &
development accounting policy regarding “upfront and milestone payments.”  In response to your question we will enhance
the clarity of our disclosure commencing with the filing of our Form 20-F
for 2010 by expanding our disclosure as follows:

4

Page F-12

Other intangible assets

All identifiable intangible assets acquired in a
business combination are recognized at their fair value. Furthermore, all
acquired R&D assets, including upfront and milestone payments on licensed
or acquired compounds which are deemed to enhance the intellectual property of
Novartis, are capitalized as intangible assets, even if uncertainties exist as
to whether the R&D projects will ultimately be successful in producing a
commercial product.

Page F-17

Payments made to third parties in order to in-license or
acquire intellectual property rights, compounds and products (In-Process
Research & Development assets, “IPR&D”), including initial upfront
and subsequent milestone payments, are capitalized, as are payments for other
assets, such as core technologies to be used in R&D activities. If
additional payments are made to the originator company to continue to perform
R&D activities, an evaluation is made as to the nature of the payments.
Such additional payments will be expensed if such additional payments are
deemed to be compensation for subcontracted R&D services not resulting in
an additional transfer of intellectual property rights to Novartis.  By contrast, such additional payments will be
capitalized if these additional payments are deemed to be compensation for the
transfer to Novartis of additional intellectual property developed at the risk
of the originator company. Subsequent internal R&D costs in relation to
IPR&D and other assets are expensed, since the technical feasibility of the
internal R&D activity can only be demonstrated by the receipt of marketing
approval for a related product from a regulatory authority in a major market.
Costs for post-approval studies performed to support the continued or expanded
registration of a marketed product are recognized as marketing expenses.

SEC Comment
5

In your policy you state: “Costs of activities that are
required by regulatory authorities as a condition for approval are charged to
development expenses as they are incurred, unless the activities are conducted
beyond the sale period. In this case the total estimated post-approval costs
are expensed over the period in which related product sales are made.” As
drafted the policy suggests that “beyond the sale period” activities necessary
for approval may be capitalized and other activities necessary for approval are
expensed as incurred, but does not clarify why. It is also unclear what the
phrase “beyond the sale period” means, how it relates to the timing of “approval,”
and to what “approval” you are referring. Please revise your disclosure to
clearly articulate your policy. If your policy is to capitalize an “estimate”
of post-approval costs, please ensure your disclosure explains the triggering
event and criteria for capitalization and provide to us an accounting analysis
with specific citations to relevant authoritative literature that supports your
accounting policy.

5

Novartis response

In
response to Question 5 of your comment letter we will enhance the clarity of
our disclosure commencing with the filing of our Form 20-F for 2010 by
expanding our disclosure as follows:

Costs for activities that are required by regulatory authorities as a
condition for obtaining marketing approval are charged as development expenses
as they are incurred in cases where it is anticipated that the related product
will be sold over a longer period than the activities required to be performed
to obtain the marketing approval. In the rare cases where costs related to the
conditional approval need to be incurred over a period beyond that of the
anticipated product sales, then the expected costs of these activities will be
expensed over the shorter period of the anticipated product sales.

For
the avoidance of doubt, all activities necessary as a condition to maintain a
received approval, whether conditional or not, are expensed.

*       *       *

The Company acknowledges
that:

·                  the Company is
responsible for the adequacy and accuracy of the disclosure in the filing;

·                  staff comments
or changes to disclosure in response to staff comments do not foreclose the
Commission from taking any action with respect to the filing; and

·                  the Company may
not assert staff comments as a defense in any proceeding initiated by the
Commission or any person under the federal securities laws of the United
States.

6

We trust that this letter responds to the issues
raised in your comment letter.  If you
have additional questions, please do not hesitate to contact us.

  Respectfully submitted,

  Novartis AG

  /s/ JONATHAN SYMONDS

  /s/ THOMAS WERLEN

  Jonathan Symonds

  Thomas Werlen

  Chief Financial Officer

  General Counsel

  Novartis
  Group

  Novartis
  Group

7

Via Facsimile and U.S. Mail
Mail Stop 4720

         April 30, 2010

Raymond Breu
Chief Financial Officer
Novartis AG
Lichtstrasse 35
4056 Basel, Switzerland
 Re:   Novartis AG
 Form 20-F for the Fiscal Year Ended December 31, 2009
 Filed January 26, 2010
 File Number:  001-15024

Dear Mr. Breu:

We have reviewed your filing and have the following comments.  In our
comments, we ask you to provide us with  information to better understand your
disclosures.  Where a comment requests you to revise disclosure, the information you
provide should show us what the revised disc losure will look like and identify the filing
in which you intend to first include it.  If you do not believe that revised disclosure is
necessary, explain the reason in your response.  After reviewing the information
provided, we may raise additional comments and/or request that you amend your filing.

Please understand that the purpose of our re view process is to assist you in your
compliance with the applicable disclosure requirements and to enhance the overall
disclosure in your filing.  We look forward to  working with you in these respects.  We
welcome any questions you may have about our  comments or on any other aspect of our
review.  Feel free to call us at the telephone numbers listed at the end of this letter.

Item 5. Operating and Financial Review and Prospects

Item 5.A Operating Results
CORE RESULTS AS DEFINED BY NOVARTIS, page 98
 1. We do not believe it is appropriate to  present an entire non-IFRS income
statement in an attempt to reconcile non -IFRS measures to IFRS measures since
this gives undue prominence to the non-IF RS information. Therefore please revise
your disclosure to reconcile each non-IFRS  measure separately. Please refer to
Question 102.10 of the Compliance and Disc losure Interpretations related to non-
GAAP Financial Measures.

Raymond Breu
Novartis AG
April 30, 2010
Page 2  2. Please expand your disclosure to include how the tax effect on the adjustments
between IFRS and core results was calcu lated. Please refer to Question 102.11 of
the Compliance and Disclosure Interpre tations related to non-GAAP Financial
Measures.
 Item 18. Financial Statements

Notes to the consolidated financial statements
1. Accounting Policies
Equity-based compensation, page F-16
 3. Please disclose the nature of your relationship with the market maker that
calculates the fair va lue of the options and include the procedures you perform to
validate the fair value information you receive.
 Research & development, Page F-17

 4. Refer to your policy for accounting for “upf ront and milestone payments” in your
other intangible assets accounting poli cy on page F-12 and your research and
development accounting policy on page F-17.  Please revise your disclosure to
clarify how you determine whether an upfr ont or milestone payment represents a
payment to a third party for research and/or development services, a payment for research and development assets, or both.  For example, if the licensor to which
you make an upfront or milestone payment was also obligated to perform research
and/or development services related to  the license (i.e. the research and
development asset) you acquired, how under your accounting policy would you determine to what each upfront and milestone  payment relates?  If a payment, or a
portion thereof, is for research and deve lopment services, please ensure your
revised disclosure clarifies how you de termine whether the payment is for
services already received or for services to be received in the future and your
accounting treatment.
 5. In your policy you state: “Costs of ac tivities that are required by regulatory
authorities as a condition for approval ar e charged to development expenses as
they are incurred, unless the activities ar e conducted beyond the sale period.  In
this case the total estimated post-approva l costs are expensed over the period in
which related product sales are made.”  As drafted the policy suggests that
“beyond the sale period” activ ities necessary for approval may be capitalized and
other activities necessary for approval are expensed as incurred, but does not clarify why.  It is also unclear what the phrase “be yond the sale period” means,
how it relates to the tim ing of “approval,” and to  what “approval” you are
referring.  Please revise your  disclosure to clearly arti culate your policy.  If your
policy is to capitalize an “estimate” of  post-approval costs, please ensure your
disclosure explains the triggering event and criteria for capita lization and provide

Raymond Breu
Novartis AG
April 30, 2010
Page 3
to us an accounting analysis with specific citations to relevant authoritative literature that supports your accounting policy.
* * * *

 Please provide us the information requested  within 10 business days or tell us when
you will provide us with a response.  Please fu rnish a cover letter with your response that
keys your response to our comments.  Detailed cover letters greatly fa cilitate our review.
Please furnish your letter on EDGAR unde r the form type label CORRESP.

 We urge all persons who are responsible  for the accuracy and adequacy of the
disclosure in the filing to be certain that the filing includes all in formation required under
the Securities Exchange Act of 1934 and th at they have provided all information
investors require for an informed invest ment decision.  Since the company and its
management are in possession of all facts re lating to a company’s disclosure, they are
responsible for the accuracy and adequacy of the disclosures they have made.

 In connection with responding to our co mments, please provide, in your letter, a
statement from the company acknowledging that:
• the company is responsible for the adequacy and accuracy of the disclosure in
the filing;
• staff comments or changes to disclosure  in response to staff comments do not
foreclose the Commission from taking a ny action with respect to the filing;
and
• the company may not assert staff comme nts as a defense in any proceeding
initiated by the Commission or any pers on under the federal s ecurities laws of
the United States.

 In addition, please be advi sed that the Division of En forcement has access to all
information you provide to the staff of the Divi sion of Corporation Fi nance in our review
of your filing or in response to our comments on your filing.

You may contact Vanessa Robe rtson, Staff Accountant, at (202) 551-3649 or Lisa
Vanjoske, Assistant Chief Accountant, at  (202) 551-3614 if you have any questions
regarding these comments.  In this regard, do not hesitate to cont act me, at (202) 551-
3679.

        S i n c e r e l y ,

        J i m  B .  R o s e n b e r g
Senior Assistant Chief
Accountant

Via Facsimile and U.S. Mail Mail Stop 4720                                                                                                    September 1, 2009   Dr. Daniel Vasella, M.D. Chairman and Chief Executive Officer Novartis, Inc. Lichtstrasse 35 4056 Basel, Switzerland
Re: Novartis, Inc.
 Form 20-F for the Fiscal Year Ended December 31, 2008
File No. 001-15024
 Dear Dr. Vasella:
We have completed our review of your Fo rm 20-F and related filings and have no
further comments at this time.
 Sincerely,

Carlton E. Tartar Accounting Branch Chief

CORRESP
1
filename1.htm

  Novartis
  AG

  Postfach

  4002
  Basel

  Switzerland

June 26,
2009

BY
FACSIMILE AND REGULAR MAIL

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, 2008

Filed
January 28, 2009

File
No. 001-15024

Dear
Mr. Rosenberg:

This
is in response to your letter to Dr. Daniel Vasella dated June 11,
2009 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
5.  Operating and Financial Review and
Prospects

5.C  Research & Development, Patents and
Licenses, page 140

SEC
Comment 1:

You
disclose the expiration of patents protecting a number of the top 20 products
in your Pharmaceuticals Division, expected “at risk” launches of generic
products and ongoing competition from approved generic products, which will
lead to significant decreases in your net sales.  Also, you disclose substantive compound
development activities in your Pharmaceuticals Division that appear to indicate
likely future product launches.  Please
revise your disclosure to identify those compounds in development that are
reasonably likely to result in future product launches and quantify the related
market opportunities that you expect to exploit.  In addition for each of these compounds in
development, disclose the anticipated completion dates and estimated costs to
complete development and the period in which resulting net cash inflows are
expected to commence.  To the extent that
you are unable to provide this information, disclose those facts and
circumstances indicating the uncertainties that preclude you from making a
reasonable estimate.

Novartis
Response:

Your
comment refers to our disclosures under Item 5.C of our Form 20-F.  Item 5. C requires companies to:

Provide
a description of the company’s research and development policies for the last
three years, where it is significant, including the amount spent during each of
the last three financial years on company-sponsored research and development
activities.

In
our response to Item 5.C, we did provide a description of the Company’s
research and development policies (by cross reference to Item 4.B), and we did
provide the amount spent on Company-sponsored research and development
activities.

With
respect to the additional information requested by the Staff’s letter, while
not strictly required by Item 5.C, we did supply extensive disclosure regarding
our research and development activities in other portions of our Form 20-F.  In particular, Item 4.B contains an extensive
listing of our compounds in development.
For our Pharmaceuticals Division, we have disclosed more than 60
compounds in development in tabular form, including the date that we plan to
file the compound/indication with health authorities for marketing
approval.  Of these, we have selected 20 “key”
compounds for which we have supplemented the tabular disclosure with a paragraph
of text.  We have also listed a number of
previously-disclosed compounds for which development activities have
terminated.  See
pages 34-41.  We have also provided
text and tabular disclosure of development projects for our Vaccines and
Diagnostics Division (see pages 52,
55-56), and textual disclosure for significant development projects from our
Sandoz and Consumer Health Divisions (see pages 60,
67).

Beyond
this, the Staff’s letter seeks a variety of information regarding compounds in
development “that are reasonably likely to result in future product launches,”
including (i) a quantification of “the related market opportunities”; (ii) “anticipated
completion dates”; (iii) “estimated costs to complete development”; and (iv) “the
period in which resulting net cash inflows are expected to commence.”  But as set forth in the Risk Factors section
of our Form 20-F, the likelihood that any of our development compounds
will be launched as a product in any particular market at any particular time is
subject to significant risks and uncertainties — both scientific and
regulatory.  The compound must first be
proven to work through multiple clinical trials, which may require treatment in
thousands of patients and could take years to complete.  The compound must next be accepted by the FDA
and similar agencies around the world, each of which may have differing
requirements.  As stated in our Risk
Factors,

During
each stage, there is a substantial risk that we will encounter serious
obstacles which will further delay us, or that we will not achieve our goals
and, accordingly, may abandon a product in which we have invested substantial
amounts of time and money.

See Item 3.D Risk
Factors—Our research and development efforts may not succeed in bringing
high-potential products to market (page 9).  See also Item
4.B Business Overview—Pharmaceuticals—Research and Development and —Regulation
(pages 44-47).

2

As
a result, any prediction by the Company that a particular compound is “reasonably
likely” to launch, or that the compound would be likely to launch at a
particular time, or with respect to the other information sought would be
unreasonably speculative, and therefore misleading to investors.

Therefore,
based upon the Staff’s comments, the Company will modify its response to Item
5.C commencing with the filing
of the Form 20-F for 2009 by including a clear
cross-reference to the disclosures in Item 4.B of its Compounds in Development,
and by including the following disclosure:

As
described in the “Risk Factors” section and elsewhere in this Form 20-F,
our drug development efforts are subject to the risks and uncertainties
inherent in any new drug development program.
Due to the risks and uncertainties involved in progressing through
pre-clinical development and clinical trials, and the time and cost involved in
obtaining regulatory approvals, among other factors, we cannot reasonably
estimate the timing, completion dates, and costs, or range of costs, of our
drug development program, or of the development of any particular development
compound.

Item
18.  The Novartis Group Consolidated Financial
Statements

Notes
to the Novartis Group Consolidated Financial Statements

1.
Accounting policies

Research &
development, page F-17

Questions 2 to 4 of your comment letter refer
to our accounting policy note on Research & Development.  Having reflected on your questions we will
enhance the clarity of our disclosure commencing with the filing of the Form 20-F
for 2009 by changing our disclosure as follows:

Internal Research & Development
costs are fully charged to the income statement in the period in which they are
incurred. The Group considers that regulatory and other uncertainties inherent
in the development of new products preclude the capitalization of these
expenses until
marketing approval from a regulatory authority is obtained in a major market.

Payments made to third parties such as contract
research and development organizations are expensed as internal Research &
Development expenses in the period in which they are incurred, unless the
criteria for recognition of an internally generated intangible asset are met,
usually when marketing approval has been achieved from a regulatory authority
in a major market.

Payments made to third parties in order to
in-license or acquire intellectual property rights, compounds and products
(In-Process Research & Development assets, “IPR&D”), as well as
other assets, such as core research and development

3

technologies to be used in Research &
Development activities, including initial upfront and subsequent milestone
payments, are capitalized. Subsequent internal Research & Development
costs in relation to IPR&D and other assets are expensed until marketing approval has been achieved from a
regulatory authority in a major market.  IPR&D assets are amortized
once the related project has been successfully developed and regulatory
approval for a product launch obtained.

Assets used in internal Research & Development
activities are amortized over the Research & Development activity
period. Laboratory buildings and equipment included in property, plant &
equipment are depreciated in the income statement over their estimated useful
lives. Also, acquired core development technologies included in intangible
assets are amortized in the income statement over their estimated useful lives.

With the new disclosure on Research & Development
we have enhanced overall clarity and addressed your three specific questions as
discussed in more detail below.

SEC
Comment 2:

Please provide us with an analysis that
demonstrates how your policy for capitalizing initial upfront payments and
subsequent milestone payments, once the required criteria are met, complies
with paragraph 57 of IAS 38.  Revise your
disclosure to describe “required criteria” and how the criteria are applied
(i.e. on a payment-by-payment basis).

Novartis
Response:

IAS 38 Intangible Assets,
paragraph 21 states that an intangible asset shall be recognised if (a) it
is probable that the expected future economic benefits that are attributable to
the asset will flow to the entity, and (b) if the cost of the asset can be
reliably measured. In line with industry practice we believe that regulatory
and other uncertainties inherent in the development of new products preclude
the capitalization of internally incurred Research & Development
expenses for a product prior to our obtaining regulatory approval for the
product.

IAS 38 Intangible Assets,
paragraph 25 states that “the probability criterion in paragraph 21(a) is
always considered to be satisfied for separately acquired intangible assets.”  IAS 38 Intangible Assets, paragraph 26 states
that “…the cost of a separately acquired intangible asset can usually be
measured reliably.”  Hence, we capitalize
payments to third parties for the acquisition of intellectual
property rights, compounds and products (In-Process Research &
Development assets, “IPR&D”) as well as other assets, such as core research
and development technologies to be used in R&D activities.

4

In response to the Staff’s comment this has
been more clearly reflected in the new disclosure of our accounting policy for
Research & Development we intend to present commencing with the filing
of the Form 20-F for 2009 as indicated above.

SEC
Comment 3:

Revise
your disclosure to describe the factors that you consider in determining the
R&D activity has produced a “salable product.”

Novartis
Response:

In the context of the Company’s principal Research &
Development activities, a saleable product normally results when marketing
approval is obtained from the relevant regulators in major markets.  In those circumstances the related intangible
asset is amortized through cost of goods sold over the period the product is
expected to generate economic benefits.

In response to the Staff’s comment this has
been more clearly reflected in the new disclosure of our accounting policy for
Research & Development we intend to present commencing with the filing
of the Form 20-F for 2009 as indicated above.

SEC
Comment 4:

Please
explain to us how your recognition of non-qualifying R&D expenses on a
percentage-of-completion basis complies with IAS 38. Revise your disclosure to
explain how this policy is applied.

Novartis
Response:

Internal research costs are expensed as
incurred in accordance with IAS 38 Intangible Assets
paragraph 54. For internal development costs the capitalisation criteria in IAS
38 Intangible Assets paragraph 57 are
considered. The Group considers the technical feasibility is not met until
marketing approval from a regulatory authority is obtained in a major market.

The treatment is identical where the Group
conducts research and development activities on an outsourced basis,.

In response to the Staff’s comment this has
been more clearly reflected in the new disclosure of our accounting policy for Research &
Development we intend to present commencing with the filing of the Form 20-F
for 2009 as indicated above.

5

11.  Deferred tax assets and liabilities, page F-41

SEC
Comment 5:

Based
on your history of profits, please revise your disclosure to clarify why you
believe that it is not probable that future taxable profits will be available
to utilize the losses not capitalized.
In particular, ensure that your revised disclosure addresses the
guidance in paragraphs 24 and 44 of IAS 12.

Novartis
Response:

The Group has disclosed on page F-43
of its 2008 Form 20-F that: “tax-loss carryforwards are capitalized if it
is probable that future taxable profits will be available to utilize the losses.”
 Although the Group has a history of
consolidated profits there are certain legal entities which are loss bearing
and where utilization of tax-loss carryforwards cannot be expected. In
particular the related disclosure on page F-43 of the Group’s 2008 Form 20-F
states: “In 2008 $6 million of unused tax-loss carryforwards expired (2007: $58
million; 2006: $12 million).”

The Group’s accounting
policies further state that:

·                  “Deferred taxes are
determined using the comprehensive liability method and are calculated on the
temporary differences that arise between the tax base of an asset or liability
and its carrying value in the subsidiary’s balance sheet prepared for
consolidation purposes, except for those temporary differences related to
investments in subsidiaries and associated companies, where the timing of their
reversal can be controlled and it is probable that the difference will not
reverse in the foreseeable future.”;

·                  “Deferred tax assets on an entity’s taxable
loss are recognized to the extent future taxable profits will probably be
available against which they can be utilized.”

Consequently, we believe that
the guidance in paragraphs 24 and 44 of IAS 12, Income Taxes,
is adequately addressed in the current accounting policies. However, to improve
the existing disclosures, in response to the Staff’s comment, we plan to
provide the following enhancement in our filing of the Form 20-F for 2009:

Deferred
tax assets related to taxable losses of relevant entities within the Group will
be recognised to the extent it is considered probable that future taxable
profits will be available against which such losses can be utilized in the
foreseeable future.

*       *       *

6

The
Company acknowledges that:

·                  the Company is
responsible for the adequacy and accuracy of the disclosure in the filing;

·                  staff comments
or changes to disclosure in response to staff comments do not foreclose the
Commission from taking any action with respect to the filing; and

·                  the Company may
not assert staff comments as a defense in any proceeding initiated by the
Commission or any person under the federal securities laws of the United
States.

We trust that this letter
responds to the issues raised in your comment letter.  If you have additional questions, please do
not hesitate to contact us.

  Respectfully
  submitted,

  Novartis
  AG

  /s/
  RAYMUND BREU

  /s/
  THOMAS WERLEN

  Raymund
  Breu

  Thomas
  Werlen

  Chief
  Financial Officer

  General
  Counsel

  Novartis
  Group

  Novartis
  Group

cc:                                 Don Abbott, Senior Staff
Accountant, US Securities and Exchange Commission

Frank Wyman, Staff Accountant, US Securities and Exchange Commission

7

Via Facsimile and U.S. Mail Mail Stop 4720                                                                                                    June 11, 2009   Dr. Daniel Vasella, M.D. Chairman and Chief Executive Officer Novartis, Inc. Lichtstrasse 35 4056 Basel, Switzerland
Re: Novartis, Inc.
 Form 20-F for the Fiscal Year Ended December 31, 2008
Filed January 28, 2009 File No. 001-15024
 Dear Dr. Vasella:
We have reviewed your filing and have the following comments. We have limited
our review to your financial statements a nd related disclosures and do not intend to
expand our review to other portions of your document. In our comments, we ask you to
provide us with information to better unde rstand your disclosure.  Where a comment
requests you to revise disclosure, the information you provide should show us what the revised disclosure will look like and identify the annual or quarterly filing, as applicable, in which you intend to first include it. If you do not believe that revised disclosure is
necessary, explain the reason in  your response. After reviewing the information provided,
we may raise additional comments and/or  request that you amend your filing.
  Please understand that the purpose of our re view process is to assist you in your
compliance with the applicable disclosure  requirements and to  enhance the overall
disclosure in your filing.  We look forward to  working with you in these respects.  We
welcome any questions you may have about our comments or on any other aspect of our review.  Feel free to call us at the telephone numbers listed at the end of this letter.

Item 5.  Operating and Financial Review and Prospects

5.C Research & Development, Patents and Licenses, page 140
1. You disclose the expiration of patents protecting a number of the top 20 products
in your Pharmaceuticals Division, expected “at risk” launches of generic products

Dr. Daniel Vasella, M.D.
Novartis, Inc.
June 11, 2009 Page 2
and ongoing competition from approved ge neric products, which will lead to
significant decreases in y our net sales. Also, you disclose substantive compound
development activities in your Pharmaceuti cals Division that a ppear to indicate
likely future product launches. Please revi se your disclosure to identify those
compounds in development that are reasonabl y likely to result in future product
launches and quantify the related market oppor tunities that you e xpect to exploit.
In addition for each of these compounds in  development, disclose the anticipated
completion dates and estimated costs to complete development and the period in
which resulting net cash inflows are expect ed to commence. To the extent that
you are unable to provide this information, disclose those facts and circumstances
indicating the uncertain ties that preclude you from making a reasonable estimate.

Item 18. The Novartis Group Consolidated Financial Statements

 Notes to the Novartis Group Cons olidated Financial Statements

 1. Accounting policies

 Research & development, page F-17

2. Please provide us with an analysis that demonstrates how your policy for capitalizing initial upfront payments and subsequent milestone payments, once the
required criteria are met, complies with  paragraph 57 of IAS 38. Revise your
disclosure to describe “re quired criteria” and how the cr iteria are applied (i.e. on a
payment-by-payment basis).
 3. Revise your disclosure to describe the factors that you consider in determining
that R&D activity has produced a “saleable product.”
 4. Please explain to us how your recognition of non-qualifying R&D expenses on a percentage-of-completion basis complies w ith IAS 38. Revise your disclosure to
explain how this policy is applied.
 11. Deferred tax assets a nd liabilities, page F-41

 5. Based on your history of profits, please re vise your disclosure  to clarify why you
believe that it is not probable that future taxable profits will be  available to utilize
the losses not capitalized. In particular , ensure that your revised disclosure
addresses the guidance in para graphs 24 and 44 of IAS 12.

*    *    *    *

Dr. Daniel Vasella, M.D.
Novartis, Inc.  June 11, 2009 Page 3
 Please respond to these comments within  10 business days or tell us when you
will provide us with a response. Your letter should key your responses to our comments.
Detailed letters greatly facilitate our revi ew. Please furnish your letter on EDGAR under
the form type label CORRESP.   We urge all persons who are responsible for the accuracy and adequacy of the
disclosure in the filing to be certain that the filing includes all in formation required under
the Securities Exchange Act of 1934 and th at they have provided all information
investors require for an informed invest ment decision.  Since the company and its
management are in possession of all facts re lating to a company’s disclosure, they are
responsible for the accuracy and adequacy of the disclosures they have made.
  In connection with responding to our co mments, please provide, in your letter, a
statement from the company acknowledging that:
• the company is responsible for the adequacy  and accuracy of the disclosure in the
filing;
• staff comments or changes to disclosure  in response to staff comments do not
foreclose the Commission from taking any action with respect to the filing; and
• the company may not assert staff comme nts as a defense in any proceeding
initiated by the Commission or any person under the federal secu rities laws of the
United States.

In addition, please be advise d that the Division of Enfo rcement has access to all
information you provide to the staff of the Divi sion of Corporation Fi nance in our review
of your filing or in response to our comment on your filing.
Please contact Frank Wyman, Staff A ccountant, at (202) 551-3660 or Don
Abbott, Senior Staff Accountant, at (202) 551-3608, if you have any questions regarding
these comments. In this regard, do not he sitate to contact me, at (202) 551-3679.

Sincerely,

 Jim B. Rosenberg Senior Assistant Chief Accountant

Via Facsimile and U.S. Mail Mail Stop 6010                                                                                         June 15, 2006
 Raymund Breu Chief Financial Officer Novartis AG Lichtstrasse 35 4056 Basel, Switzerland
Re: Novartis AG
  Form 20-F for Fiscal Year Ended December 31, 2005   Filed January 30, 2006
  File No. 001-15024
Dear Mr. Breu:
  We have completed our review of your Form 20-F and have no further comments
at this time.
        S i n c e r e l y ,

Kevin Woody
        B r a n c h  C h i e f

Via Facsimile and U.S. Mail Mail Stop 6010                                                                                         May 11, 2006
 Raymund Breu Chief Financial Officer Novartis AG Lichtstrasse 35 4056 Basel, Switzerland
Re: Novartis AG
  Form 20-F for Fiscal Year Ended December 31, 2005   Filed January 30, 2006
  File No. 001-15024
Dear Mr. Breu:

We have reviewed your filing and have th e following comments.  Other than as it
relates to comments 1 and 2 below, we have  limited our review to only your financial
statements and related disclosures and do not  intend to expand our review to other
portions of your documents. In our comments, we ask you to provide us with information
so we may better understand your disclosure.  After reviewing this information, we may
raise additional comments.

 Please understand that the purpose of our re view process is to assist you in your
compliance with the applicable disclosure  requirements and to  enhance the overall
disclosure in your filing.  We look forward to  working with you in these respects.  We
welcome any questions you may have about our  comments or any other aspect of our
review.  Feel free to call us at the telephone numbers listed at the end of this letter.
 General

1. We note from your corporate website that your eye-care unit, CIBA Vision, provides
marketing, distribution, and eye care professi onal support in Iran and Syria.  We note
also that a September 7, 2005 press release i ssued by the office of the New York City
Comptroller indicates that  you have business ties to Sudan.  Finally, we note a
November 17, 2005, published report indicati ng that you are helping North Korea
rebuild its medical factories.
Iran, Sudan, Syria, and North Korea are iden tified as state sponsors of terrorism by
the State Department and are subject to  economic sanctions administered by the

Raymund Breu
Novartis AG May 9, 2006 Page 2
 Treasury Department’s Office of Foreign Assets Control (OFAC) and export controls
administered by the Commerce Department’s Bu reau of Industry and Security (BIS).
Your Form 20-F does not contain any info rmation regarding your operations in or
contacts with these countries.  Please describe  to us in reasonable detail your current,
historical, and anticipated operations in  and contacts with each named country,
whether through subsidiaries, affiliates, or other direct or indirect arrangements.
Discuss specifically the extent to which you sell or distribute into these countries
products other than medicines, such as medical or other equipment or machinery,
technology or services.  Desc ribe the nature of the ma rketing, distribution, and
professional support you provide in Iran and Syria, and the nature of the facilities you
intend to develop in North Korea.  Describe  the extent to whic h your dealings have
been with the governments of Iran, Sudan, Sy ria and North Korea, or entities owned
or controlled by their governments.  A dvise us whether, to the best of your
knowledge, understanding and belief, any of the products and services you provide,
have provided or will provide to the gove rnments of these countries have military
applications; whether any of those gove rnments has employed or will employ the
products or services in any m ilitary application; and, if s o, the nature of the military
application(s) in which the products or se rvices have been or will be employed.

2. Please discuss the materiality of the operati ons or other contacts described in response
to the foregoing comment, and whether thos e operations or cont acts, individually or
in the aggregate, constitute a material invest ment risk for your security holders.  You
should address materiality in quantitative terms for each country, including the dollar amounts of any associated assets and liab ilities, and the dollar amount of revenues
derived from business activities in or contac ts with each country.  Please also address
materiality in terms of qualitative factor s that a reasonable in vestor would deem
important in making an investment decisi on, including the potential impact of your
corporate activities upon your re putation and share value.  In  this regard, we note, for
example, that Arizona and Louisiana have  adopted legislation requiring their state
retirement systems to prepare reports regard ing state pension fund assets invested in,
and/or permitting divestment  of state pension fund assets from, companies that
conduct business with countries identified as state sponsors of terrorism.  Illinois,
New Jersey, and Oregon have adopted, and ot her states are cons idering, legislation
prohibiting the investment of cer tain state assets in, and/or requiring the divestment of
certain state assets from, companies th at conduct business with Sudan.  Brown
University, Harvard University, Stanford Un iversity, the Universi ty of California and
other educational institutions have adopted policies prohibiti ng investment in, and/or
requiring divestment from, companies that  conduct business w ith Sudan.  Your
materiality analysis should address the pot ential impact of the investor sentiment
evidenced by these actions directed toward companies operating in Iran, Sudan, Syria, and North Korea.

Raymund Breu
Novartis AG May 9, 2006 Page 3
 Item 18. Financial Statements

 Notes to the Novartis Group Cons olidated Financial Statements

 2.  Business combinations and other significant transactions

 Acquisitions 2005, page F-17

3. Paragraph 70 requires you to disclose the profit or loss for the period as though the
acquisition date for all acquisitions had been  as of the beginning of the period unless
it is impracticable to do so.  It is not clear  to us why differences in accounting policies
for the businesses acquired cannot be qua ntified to determine the information
required by paragraph 70.  Please tell us  why it is impractic able, as opposed to
“impractical” as stated in your disclosure , to provide this information for the 2005
acquisitions of the Sandoz and Consumer Health Divisions.
4. Please provide to us in disclosure-type fo rmat the disclosures required by paragraph
67(f) and 67(h) of IFRS 3 for your 2005 acquisi tions of Hexal AG and Eon Labs, Inc.

*    *    *    *
 Please respond to these comments within  10 business days or tell us when you
will provide us with a response.   Please furnish a letter that keys your response to our
comments and provides requested information.  Detailed letters grea tly facilitate our
review.  Please file your letter on E DGAR under the form type label CORRESP.

 We urge all persons who are responsible  for the accuracy and adequacy of the
disclosure in the filings to be certain th at the filing includes all information required
under the Securities and Exchange Act of  1934 and that they have provided all
information investors require for an inform ed investment decision.  Since the company
and its management are in possession of all f acts relating to a company’s disclosure, they
are responsible for the accuracy and adequacy  of the disclosures they have made.
  In connection with responding to our comment, please provide , in your letter, a
statement from the company acknowledging that
• the company is responsible for the adequacy and accuracy of the disclosure in
the filings;
• staff comments or changes to disclosure  in response to staff comments do not
foreclose the Commission from taking a ny action with respect to the filing;
and
• the company may not assert staff comme nts as a defense in any proceeding
initiated by the Commission or any pers on under the federal s ecurities laws of
the United States.

Raymund Breu
Novartis AG May 9, 2006 Page 4

 In addition, please be advi sed that the Division of En forcement has access to all
information you provide to the staff of the Divi sion of Corporation Fi nance in our review
of your filing or in response to our comments on your filing.
 You may contact Todd Sherman, St aff Accountant, at 202-551-3665  or Kevin
Woody, Branch Chief, at 202-551-3629 if you have questions regarding the comments.  In this regard, do not hesitate to contact me, at (202) 551-3679.

        S i n c e r e l y ,             J i m  B .  R o s e n b e r g
Senior Assistant Chief Accountant

CORRESP
1
filename1.htm

  Novartis AG

  Lichtstrasse 35

  4056 Basel

  Switzerland

June 2, 2006

BY FACSIMILE AND COURIER

Mr. Jim B. Rosenberg

Senior Assistant Chief Accountant

US Securities and Exchange Commission

450 Fifth Street, N.W.

Washington, DC  20548

Re:          Novartis AG

Form 20-F for Fiscal Year Ended December 31, 2005

Filed January 30, 2006

File No. 001-15024

Dear Mr. Rosenberg:

This is in response to your letter to me dated May 11, 2006 setting
forth comments regarding our filing, and seeking certain information. For ease
of reference, we set forth your comments below, followed by our responses.

General

SEC Comment 1:

We note from your corporate website that your eye-care unit, CIBA
Vision, provides marketing, distribution, and eye care professional support in
Iran and Syria. We note also that a September 7, 2005 press release issued by
the office of the New York City Comptroller indicates that you have business
ties to Sudan. Finally, we note a November 17, 2005, published report
indicating that you are helping North Korea rebuild its medical factories.

Iran, Sudan, Syria and North Korea are identified as state sponsors of
terrorism by the State Department and are subject to economic sanctions
administered by the Treasury Department’s Office of Foreign Assets Control
(OFAC) and export controls administered by the Commerce Department’s Bureau of
Industry and Security (BIS). Your Form 20-F does not contain any information
regarding your operations in or contacts with these countries. Please describe
to us in reasonable detail your current, historical and anticipated operations
in and contacts with each named country, whether through subsidiaries,
affiliates, or other direct or indirect arrangements. Discuss specifically the
extent to which you sell or distribute into these countries products other than
medicines, such as medical equipment or machinery, technology or services. Describe
the nature of the marketing, distribution, and professional support you provide
in Iran and Syria, and the nature of the facilities you intend to develop in
North Korea. Describe the extent to which your dealings have been with the
governments of

Iran, Sudan, Syria and North
Korea, or entities owned or controlled by their governments. Advise us whether,
to the best of your knowledge, understanding, and belief, any of the products
and services you provide, have provided or will provide to the governments of these
countries have military applications; whether any of those governments has
employed or will employ the products or services in any military application;
and if so, the nature of the military application(s) in which the products or
services have been or will be employed.

Novartis Response:

At Novartis, it is our mission to discover, develop and market
innovative medicines to cure diseases, to ease suffering, and to enhance the
quality of life of patients. This is not a mission that is motivated by or
sensitive to politics. In some instances the suffering may be located in
countries that may not espouse the same political ideals as are taken for
granted in the United States and other Western nations. We do not support
repressive regimes – it would be a violation of our Policies on Corporate
Citizenship and Compliance with Law to do so – but we do support access to
health care for all persons. We believe that this is a concept that is
generally accepted in the United States, and, indeed, most trade embargoes that
are motivated by politics or social consciousness generally contain exceptions
for goods intended to alleviate human suffering.

With this premise, we respond to your questions as follows. As the
questions relate to our Form 20-F filed on January 30, 2006, we respond with
respect to the three-year period covered by that filing, and make use of the
defined terms and accounting policies used in that filing. Our response here is
based on the information we have been able to derive to date.

In the three-year period to which our filing relates, we have not sold
any products to North Korea, directly or indirectly. We have, however, directly
or indirectly sold products to customers in Sudan, Iran and Syria, with the
following Divisions and Business Units having directly or indirectly sold
products to customers in the following countries:

  Sudan

  Iran

  Syria

  Pharmaceuticals

  Yes

  Yes

  Yes

  Sandoz

  Yes

  Yes

  Yes

  Consumer Health

  OTC

  Yes

  Yes

  Yes

  Animal Health

  No

  Yes

  Yes

  Medical Nutrition

  No

  No

  No

  Gerber

  No

  No

  No

  CIBA Vision

  No

  Yes

  Yes

We expect such sales to continue in 2006. We sell only healthcare
products in those countries, including medicines and medical devices of the
same types that we sell in other countries. See Form 20-F Item 4. Information
on the Company – 4.B Business Overview,

2

for a description of our products. We do not sell medical or other
equipment, or machinery, technology or services in those countries.

Iran. Our
Pharmaceuticals Division maintains a small number of employees in Iran
responsible for sales. In addition, all of our Divisions and Business Units
which sell products to customers in Iran do so through local agents and/or
distributors. It is our understanding that some of those local agents and/or
distributors are owned by the Iranian government. With the exception of a small
amount of Pharmaceutical Division products purchased directly from us by the
Iranian Embassy in Bern, Switzerland, to the best of our knowledge, we do not
otherwise sell products to the Iranian government. Neither, to the best of our
knowledge, do we have any dealings with the Iranian military. To the best of
our knowledge, our products are not being put to military use.

In response to your specific question regarding CIBA Vision’s
activities with respect to Iran, CIBA Vision sells its products to customers in
Iran through a local distributor. CIBA Vision has no employees in Iran, and
conducts no marketing, distribution or eye care professional support activities
in that country. Any such activities which might be undertaken in that country
would be done by the local distributor.

Sudan. Our
Pharmaceuticals Division maintains a small number of employees in Sudan
responsible for sales. In addition, all of our Divisions and Business Units
which sell products to customers in Sudan do so through local agents and/or
distributors. It is our understanding that one of those local agents and/or
distributors is owned by the Sudanese government. To the best of our knowledge,
we do not sell products directly to the Sudanese government. Neither, to the
best of our knowledge, do we have any dealings with the Sudanese military. To
the best of our knowledge, our products are not being put to military use.

Syria. Our
Pharmaceuticals Division maintains a small number of employees in Syria
responsible for sales. In addition, all of our Divisions and Business Units
which sell products to customers in Syria do so through local agents and/or
distributors. To the best of our knowledge, none of those local agents and/or
distributors are owned by the Syrian government. To the best of our knowledge,
we do not sell products directly to the Syrian government. Neither, to the best
of our knowledge, do we have any dealings with the Syrian military. To the best
of our knowledge, our products are not being put to military use.

In response to your specific question regarding CIBA Vision’s
activities with respect to Syria, CIBA Vision sells its products to customers
in Syria through a local distributor. CIBA Vision has no employees in Syria,
and conducts no marketing, distribution or eye care professional support
activities that country. Any such activities which might be undertaken in that
country would be done by the local distributor.

North Korea. We have
not sold any products to North Korea. We do not expect to sell any products to North
Korea during 2006. However, during 2005 and to date in 2006, as

3

humanitarian support under our
Corporate Citizenship program, we have donated approximately $1.25 million
worth of products to North Korea. The donated products included antibiotics,
OTC cold medicines and baby food.

In addition, as further humanitarian aid, Novartis technicians have
inspected North Korean pharmaceutical production facilities, and have provided
training to North Korean pharmaceutical production technicians with respect to
the manufacturing of medicines. The purpose of these inspections and training
is to assist North Korea in their efforts to rebuild their pharmaceutical
production facilities.

In order to organize this humanitarian aid, we have had contact with
representatives of North Korea’s government. To the best of our knowledge, we
have not had any dealings with the North Korean military. Neither, to the best
of our knowledge, are our products being put to military use.

SEC Comment 2:

Please discuss the materiality of the operations or other contacts
described in response to the foregoing comment, and whether those operations or
contacts, individually or in the aggregate, constitute a material investment
risk for your security holders. You should address materiality in quantitative
terms for each country, including the dollar amounts of any associated assets
and liabilities, and the dollar amount of revenues derived from business
activities in or contacts with each country. Please also address materiality in
terms of qualitative factors that a reasonable investor would deem important in
making an investment decision, including the potential impact of your corporate
activities upon your reputation and share value. In this regard, we note, for
example, that Arizona and Louisiana have adopted legislation requiring their
state retirement systems to prepare reports regarding state pension fund assets
invested in, and/or permitting divestment of state pension fund assets from,
companies that conduct business with countries identified as state sponsors of
terrorism. Illinois, New Jersey, and Oregon have adopted, and other states are
considering, legislation prohibiting the investment of certain state assets in,
and/or requiring the divestment of certain state assets from, companies that
conduct business with Sudan. Brown University, Harvard University, Stanford
University, the University of California and other educational institutions
have adopted policies prohibiting investment in, and/or requiring divestment
from, companies that conduct business with Sudan. Your materiality analysis
should address the potential impact of the investor sentiment evidenced by
these actions directed toward companies operating in Iran, Sudan, Syria and
North Korea.

Novartis Response:

In our view, our activities in these countries are not material by any
standard.

From a quantitative point of view, we do not believe that our dealings
with these countries are material because our revenues derived from these
countries are quite small. In

4

2005, our combined revenues
from the three countries (there were no sales to North Korea) amounted to less
than 0.4% of our total Net Sales for that year.

The following are our unaudited total sales in the three countries (in
thousands of dollars):

  Sudan

  Iran

  Syria

  Total

  2003

  $

  2,274

  $

  79,898

  $

  14,070

  $

  96,242

  2004

  $

  4,471

  $

  74,208

  $

  15,094

  $

  93,773

  2005

  $

  4,155

  $

  81,119

  $

  19,257

  $

  104,531

For comparison purposes, our Net Sales were $32.2 billion in 2005;
$28.2 billion in 2004 and $24.8 billion in 2003. We do not have any significant
assets or liabilities in Sudan, Iran, Syria or North Korea.

From a qualitative point of view, we do not believe that our dealings
with these countries are material because the various divestment statutes and
policies referred to in your comments generally provide exceptions for
companies, such as ours, which sell “humanitarian” goods, such as our medicines
and other healthcare products, or otherwise expressly or impliedly permit
decision makers discretion to take such factors into account when making
investment decisions. As a result, we believe that few, if any, of these
statutes or policies would require a pension or other fund to divest itself of
Novartis shares. To the extent that we have received inquiries in this regard
from any state or other entity we have responded to them, and explained to them
the humanitarian nature of the goods that we sell. Currently, we are in
communication with one state on this subject.

In addition, we believe that the same exception for humanitarian goods
generally fits with investor sentiment. As a provider of lifesaving medicines,
it would be unconscionable of us to deny our medicines to patients because we
dislike the governments they live under, and we believe that reasonable
investors would not expect us to do so.

For these reasons, we believe that reasonable investors would fully
expect that we would sell our products to countries such as Sudan, Iran and
Syria, and that we would donate products and provide limited training to
countries such as North Korea, which could not otherwise afford to purchase our
products. We further believe that, for these same reasons, our dealings with
these countries are not material to investors in Novartis AG shares.

5

Item 18. Financial Statements

Notes to the Novartis Group Consolidated Financial Statements

2. Business combinations and other significant transactions

Acquisitions 2005, page F-17

SEC Comment 3:

Paragraph 70 requires you to disclose the profit or loss for the period
as though the acquisition date for all acquisitions had been as of the
beginning of the period unless it is impracticable to do so. It is not clear to
us why differences in accounting policies for the businesses acquired cannot be
quantified to determine the information required by paragraph 70. Please tell
us why it is impracticable, as opposed to “impractical” as stated in your
disclosure, to provide this information for the 2005 acquisitions of the Sandoz
and Consumer Health Divisions.

Novartis Response:

Based on the post-acquisition operating results discussed below, we
believe that had we determined a pro forma 2005 profit measure it would not
have been material for the Novartis Group. This conclusion is based on the
additional information in Note 2 to our Consolidated Financial Statements which
discloses that our post-acquisition operating results of all our 2005
acquisitions was an operating loss of $16 million. Our 20-F at Item 5.
Operating and Financial Review and Prospects, on page 101 provides further
details of this amount split into the impact on the operating results of our
Sandoz and Consumer Health Divisional results.

In further response, we used the term “impractical” as a synonym to “impracticable”
but we shall use the IFRS 3 term “impracticable” in this context in the future.

The impracticability related to financial information for Hexal, which was
our largest acquisition in 2005. Hexal represented 60% of the $8.8 billion of
total purchase consideration we paid for acquisitions in 2005, and about 75% of
our disclosed 2005 pro forma sales of $2.7 billion relating to our
acquisitions. Hexal’s major activities are in Germany; however, it also
includes activities in 40 other countries including a number of non-western
European countries, such as Turkey, Poland, Brazil, China and Indonesia.

Although Novartis disclosed pro forma 2005 sales of the acquired
businesses, rounded to the nearest $0.1 billion, achieving an acceptable pro
forma 2005 profit measure was considered to be impracticable without
unreasonable cost compared to the benefits of the incremental additional
information given the means employed or at our command due to the fact that
Hexal was a family-owned non-quoted organization with the following
characteristics:

6

1.     Hexal
was headquartered in Ger