Novartis is launching a new initiative in a dynamically changing healthcare industry environment that will enhance productivity by streamlining the organization and redesigning the way it operates. This will enable Novartis to more rapidly meet the needs of patients and customers by focusing resources on priority activities that include the research and development of new medicines.

This initiative, called "Forward," is expected to simplify working processes and decision making by eliminating layers, concentrating on core activities and systematically capturing growth opportunities, particularly in emerging markets.

Forward will further enable Novartis to prepare for a new growth cycle in Pharmaceuticals expected to emerge in the second half of 2008. These actions will also generate significant cost savings and realign resources to better address the changing needs of customers.

"Novartis has experienced strong growth over the last decade and strategically focused activities in healthcare, building a portfolio that is focused yet diversified," said Dr Daniel Vasella, chairman and CEO of Novartis. "Our portfolio and excellent pipeline of innovative drugs and vaccines provide us with a unique position, both as a platform for growth and to balance risks. We have taken the opportunity given the short-term down-cycle in our pharmaceuticals business to initiate this project. This will simplify our organization and redesign the way we operate. Forward will increase speed and productivity in anticipation of accelerating growth in the second half of 2008".

Novartis benefits from a positive outlook for its strategic portfolio that includes innovative pharmaceuticals, generics, vaccines and diagnostics, and consumer brands. Key growth drivers include the ongoing launches of new medicines following the industry-leading 14 positive regulatory approvals during 2007 in the United States and Europe as well as strong expansion in other businesses, particularly in Vaccines and Diagnostics and Sandoz, the generics division of Novartis.

At the same time, the increasingly challenging industry conditions including continuous price pressures on drugs, increasing R&D costs, a risk-averse regulatory environment and more aggressive generic competitors created an impetus for change that led to Forward.

The Novartis Institutes for BioMedical Research will focus on disease areas with significant new opportunities and review its research activities globally to take advantage of synergies among disease areas and locations to increase efficiency. Initiatives are underway to capture savings from the creation of group-wide shared functions, including procurement and information ]technology that will provide greater economies of scale and leverage opportunities in low-cost countries.

Novartis will form a new cross-divisional operation to accelerate growth in small emerging markets, expanding the presence of all Novartis products in regions that include Northern and Sub-Saharan Africa, Central Asia and parts of Southeast Asia.

Implemented in 2008 and 2009, these initiatives are expected to generate a pre-tax annual cost savings of US $1.6 billion and maximize resources available to support growth and customer-oriented activities. A pre-tax restructuring charge of approximately US $450 million will be taken in the fourth quarter of 2007.