- Fourth quarter sales rose 5% while core[1] operating income grew 17% in constant currencies (cc); full year sales up 12% cc and core operating income up 16% cc
- Net sales increased 4% (+5% cc) to USD 14.8 billion; full year up 16% (+12% cc) to USD 58.6 billion
- Core operating income grew 12% (+17% cc) to USD 3.6 billion in the fourth quarter; full year up 14% (+16% cc) to USD 15.9 billion; core margin of 24.0% up 2.7 percentage points in cc; full year core margin of 27.2% up 1.1 percentage points in cc
- Core EPS advanced 8% to USD 1.23 (+13% cc) from USD 1.14 in the previous-year quarter; full year core EPS up by 8% (+11% cc) to USD 5.57
- Operating income declined 47% (-38% cc) in the quarter and 5% (+1% cc) for the full year, driven by fourth quarter net exceptional charges totaling USD 1.5 billion; EPS declined 48% (-40% cc) in the quarter and 11% (-5% cc) for the full year
- Free cash flow of USD 3.9 billion; full year free cash flow of USD 12.5 billion
- Dividend of CHF 2.25 per share proposed for 2011; 15th consecutive increase
- Diversified healthcare portfolio and industry-leading pipeline expected to enhance our ability to sustain growth through patent expirations
- Alcon, world leader in eye care, fully integrated as second largest division in Novartis Group portfolio
- Portfolio rejuvenation continues to gain momentum with Group recently launched products growing 38% and contributing 25% (USD 14.4 billion) of 2011 net sales
- Strong Pharmaceuticals pipeline results with 15 approvals in the US, EU and Japan in 2011; worldwide filings underway for Afinitor in breast cancer
- Outlook 2012: Novartis expects sales to be in line with 2011 despite Diovan patent expiry and Tekturna/Rasilez decline; core operating income margin (cc) expected to be slightly below 2011
Key figures
Basel, January 25, 2012 - Commenting on the results, Joseph Jimenez, CEO of Novartis, said:
"Novartis achieved solid sales growth and strong operating leverage in the fourth quarter and for the year as a whole. We maintained our innovation momentum this year, achieving 15 key approvals and expanding our already robust pipeline. We also improved core margins through targeted productivity initiatives. However, we experienced some disappointments in the fourth quarter, with Tekturna/Rasilez and with the need to improve our quality standards at some manufacturing sites. We are committed to ensuring one single high quality standard across Novartis and will invest the necessary resources to achieve this goal in all divisions. Novartis is well positioned as we face the expected patent expirations and will continue discovering new treatments to improve the health of patients across the globe."
GROUP REVIEW
Fourth quarter
Strong net sales growth driven by recently launched products
Net sales rose 4% (+5% cc) to USD 14.8 billion in the fourth quarter. The strengthening of the US dollar against most major currencies negatively impacted sales by 1 percentage point.
Our portfolio rejuvenation continued to drive overall growth for the Group, as recently launched products sales grew 30% (USD) over the previous-year quarter to USD 3.7 billion. These products contributed 25% (USD) of Group net sales, up from 20% in the year-ago period.
Pharmaceuticals net sales grew 4% (+5% cc) to USD 8.3 billion, driven by 10 percentage points of volume growth, partly offset by generic entries and product divestments, which had a negative impact of 5 percentage points. Alcon net sales of USD 2.4 billion rose 6% (+7% cc) on a pro forma basis, while Sandoz net sales declined 5% (-4% cc) to USD 2.3 billion due to additional competition to enoxaparin. Vaccines and Diagnostics net sales expanded 86% (+86% cc) to USD 671 million. Consumer Health - which comprises OTC and Animal Health - was down 7% (-6% cc) at USD 1.1 billion due to OTC product return provisions, following the temporary suspension of production at one of the US Consumer Health sites.
Operating income was down 47% (-38% cc) to USD 1.3 billion. Exceptional income and expense in the fourth quarter amounted to a net USD 1.5 billion expense compared to USD 397 million expense in the prior year. The strengthening of the US dollar, combined with the already strong Swiss franc, resulted in a negative currency impact of 9 percentage points.
The net exceptional charge of USD 1.5 billion (2010 USD 397 million) comprised charges of USD 1.7 billion (2010 USD 789 million) offset by exceptional income of USD 186 million (2010 USD 392 million mainly related to the Enablex® divestment). Exceptional charges included: USD 903 million for Tekturna/Rasilez, USD 163 million related to the discontinuation of the PRT128 (elinogrel) and SMC021 (oral calcitonin) development programs, a charge of USD 115 million related to the temporary suspension of production at one of our US Consumer Health sites, Alcon integration charges of USD 61 million, and restructuring costs of USD 288 million. Exceptional income includes a USD 106 million reduction of a contingent consideration obligation in Sandoz. Amortization of intangible assets amounted to USD 742 million compared to USD 302 million in 2010 mainly as a result of the Alcon acquisition.
Core operating income grew strongly ahead of sales
Core operating income, which excludes the exceptional items identified above together with amortization of intangible assets, increased by 12% (+17% cc) to USD 3.6 billion. Core operating income margin in constant currencies increased by 2.7 percentage points. However, this improvement was offset by a negative currency impact of 1.0 percentage point, resulting in a net increase in core operating income margin of 1.7 percentage points to 24.0% of net sales.
Net income decreased 47% (-37% cc), in line with the decline in operating income. EPS declined 48% (-40% cc) at a slightly higher rate than net income as a result of the increase in issued shares following the Alcon merger, partially offset by a lower impact from non-controlling interests.
Core net income grew 7% (+12% cc) below the rate of growth of core operating income as a result of a higher core tax charge (15% compared to 10% in the prior year). Core EPS was up by 8% (+13% cc).
Free cash flow of USD 3.9 billion was 6% lower than in the previous-year quarter mainly as a result of the Enablex® divestment proceeds of USD 392 million in the fourth quarter of 2010.
Full year
Double-digit net sales growth
Net sales rose 16% (+12% cc) to USD 58.6 billion, with a positive currency impact of 4% arising from the weakness of the US dollar against most major currencies during much of 2011.
Recently launched products sales grew 38% over 2010 (in USD, excluding the A(H1N1) pandemic flu vaccine and including Alcon on a pro forma basis for 2010) to USD 14.4 billion. These products contributed 25% of Group net sales, up from 19% in 2010.
Pharmaceuticals net sales grew 7% (+4% cc) to USD 32.5 billion, and Alcon net sales of USD 10.0 billion rose 10% (+7% cc) on a pro forma basis. Sandoz net sales also grew 10% (+7% cc) to USD 9.5 billion. Vaccines and Diagnostics net sales were down 32% (-34% cc) to USD 2.0 billion, mainly due to USD 1.3 billion of A(H1N1) pandemic flu vaccine sales in 2010. Net sales of the two Consumer Health businesses together grew 6% (+3% cc) to USD 4.6 billion.
Operating income was down 5% (+1% cc) to USD 11.0 billion. Exceptional income and expense in 2011 amounted to a net USD 1.9 billion expense compared to USD 1.3 billion expense in the prior year. The weakness of the US dollar, combined with the strong Swiss franc, resulted in a negative currency impact of 6 percentage points.
The net exceptional charge of USD 1.9 billion (2010 USD 1.3 billion) comprised charges of USD 2.9 billion (2010 USD 2.1 billion) offset by exceptional income of USD 1.0 billion (2010 USD 732 million). Exceptional charges included: charges for Tekturna/Rasilez (USD 903 million), USD 348 million related to the discontinuation of the PRT128 (elinogrel), SMC021 (oral calcitonin), AGO178 (agomelatine), and PTK796 development programs, a charge of USD 115 million related to the temporary suspension of production at one of our US Consumer Health sites, other intangible asset impairment charges of USD 71 million principally relating to development projects, financial asset impairment charges of USD 192 million, integration charges of USD 250 million (mainly for Alcon), and restructuring and related costs of USD 492 million. Exceptional income includes divestment proceeds (USD 480 million) and a USD 106 million reduction of a contingent consideration obligation in Sandoz. For the full year, amortization of intangible assets amounted to USD 3.0 billion compared to USD 1.1 billion in 2010 as a result of a full year of incorporating Alcon.
Constant currency core margin up 1.1 percentage points
As a result, core operating income, which excludes the exceptional items identified above together with amortization of intangible assets, increased 14% (+16% cc) to USD 15.9 billion. Core operating income margin in constant currencies increased by 1.1 percentage points. However, this improvement was offset by a negative currency impact of 1.6 percentage points, resulting in a net decrease in core operating income margin of 0.5 percentage points to 27.2% of net sales.
Net income decreased 7% (-2% cc) to USD 9.2 billion, more than the decline in operating income as a result of lower associated company income, higher financing costs following the Alcon acquisition, partly offset by a lower tax rate (14.2% compared to 14.8%). EPS declined 11% (-5% cc), more than the decline in net income, mainly as a result of the increase in issued shares following the Alcon merger, partially offset by a lower impact from non-controlling interests.
Core net income grew 12% (+15% cc) to USD 13.5 billion broadly in line with core operating income. Core EPS was up by 8% (+11% cc): a lower rate than net income as a result of a higher number of outstanding shares in 2011.
Free cash flow reached USD 12.5 billion (2010 USD 12.3 billion), an increase of 1% over the previous year. Free cash flow in 2010 included substantial cash flows from sales of A(H1N1) amounting to USD 1.8 billion.
Delivering against strategic priorities of innovation, growth and productivity
The Novartis strategy for sustained, long-term growth is based on advancing science to meet global patient needs across the healthcare spectrum and is underpinned by a consistent focus on three key priorities: innovation, growth and productivity. On all of these fronts, Novartis made significant progress in 2011, and the key developments in the fourth quarter are listed below.
Innovation: Bringing new innovative medicines to patients
Scientific innovation is at the heart of the Novartis strategy. We plan to maintain our industry-leading commitment to R&D, which we expect will allow us to discover and develop new targeted therapies for patients worldwide. Our track record of innovation excellence, which has produced one of the most productive pipelines in the global pharmaceutical industry, is expected to help us maintain growth momentum despite the anticipated loss of revenues from patent expirations.
Regulatory filings underway for Afinitor in breast cancer
In the fourth quarter, we filed applications worldwide for approval of Afinitor (everolimus) in advanced ER+/HER2- breast cancer, potentially representing the first major breakthrough in the treatment of this disease in 15 years. The filing was based on updated data from a Phase III trial (BOLERO-2) of everolimus in combination with exemestane for postmenopausal women with advanced breast cancer that recurred or progressed despite treatment with hormonal therapies. If approved, this indication for everolimus - which is already approved for the treatment of advanced kidney cancer, advanced pancreatic neuroendocrine tumors and subependymal giant cell astrocytomas associated with tuberous sclerosis complex, as well as other non-oncology indications - would further validate the Novartis research strategy, which is based on understanding the molecular pathways of diseases.
A separate Phase III study (GRANITE-1) of everolimus in patients with advanced gastric cancer did not meet its primary endpoint, with everolimus plus best supportive care (BSC) failing to show a statistically significant difference over placebo plus BSC in overall survival.
ACZ885 Phase III study showed promise for treatment of childhood arthritis
A study of ACZ885 showed that 45% of children with active systemic juvenile idiopathic arthritis (SJIA) were able to substantially reduce their use of steroids within 28 weeks of commencing treatment with ACZ885. The study also showed SJIA patients treated with ACZ885 were nearly three times less likely to suffer a new flare versus placebo. A subtype of the more common juvenile idiopathic arthritis, SJIA is the most serious form of childhood arthritis, and the positive results of this study represent another success in the Novartis commitment to finding new treatments wherever there is patient need.
Two Phase III studies continued to show superiority of Tasigna over Glivec
Data from two studies (ENESTcmr and ENESTnd) contributed to the growing body of evidence indicating that adult patients with Philadelphia chromosome-positive chronic myeloid leukemia (Ph+ CML) who are treated with Tasigna have a better response at the molecular level than those treated with Glivec, the long-time standard of care.
Updated positive Phase III results of INC424 in myelofibrosis
Two pivotal Phase III trials (COMFORT-I and -II) demonstrated the significant potential of Janus kinase inhibitor INC424 in treating patients with myelofibrosis, a life-threatening blood cancer. COMFORT-II data showed that INC424 provided improvements in symptoms at each evaluation versus the best available therapy, underlining the dramatic benefits that INC424 can have on quality of life for patients suffering from this debilitating disease. In addition, in the COMFORT-I survival analysis, INC424 demonstrated an early overall survival advantage over placebo.
Gilenya continued to demonstrate efficacy in large-scale clinical trials; FDA and EMA review of benefits and risks
Now supported by more than 25,000 patients on drug, Gilenya, our breakthrough oral multiple sclerosis (MS) treatment, continues to demonstrate efficacy in Phase III studies. In the fourth quarter, new data from the FREEDOMS II trial showed patients with relapsing-remitting multiple sclerosis treated with Gilenya experienced a 48% reduction in relapse rates compared to placebo. These results, which are consistent with two previous studies, underscore the potential that Gilenya holds for patients and the MS community.
Novartis is working with the European Medicine's Agency (EMA) and the US Food and Drug Administration (FDA) on their reviews of the benefits and risks of Gilenya that were initiated following the report of a patient death that occurred within 24 hours after receiving the first dose of Gilenya in November 2011. The FDA has stated that, at this time, it cannot conclude whether the drug resulted in the November 2011 patient death. According to the EMA, the cause of that patient death is still unexplained. In addition, the EMA described 10 other deaths as being of potential interest but noted that the role of Gilenya in these deaths has not been established. These other events preceded the November 2011 death, and were reported to the health authorities per regulations.
During the EMA review process and following the recent consultation with the Committee for Medicinal Products for Human Use (CHMP), Novartis is in the process of notifying physicians of new interim recommendations regarding the initiation of treatment with Gilenya in the European Union to be effective immediately. This includes the addition of continuous electrocardiogram (ECG) monitoring during the six-hour observation period following the first dose. First dose monitoring is already recommended in the Gilenya label. In patients who meet certain specified criteria, monitoring should be extended.
Positive Phase II results for DEB025 in hepatitis C
A study of first-in-class DEB025 showed that it may produce early viral clearance in previously untreated patients infected with the hepatitis C virus (HCV) genotypes 2 and 3. Instead of targeting the virus directly, DEB025 targets host proteins essential for the replication of all types of HCV. DEB025 has the potential to be an effective treatment option across HCV genotypes with favorable tolerability and a high barrier to resistance, a promising development for the more than 170 million people worldwide who are infected with HCV.
ALTITUDE trial with Tekturna/Rasilez stopped
In late December, following the seventh interim review of data from the ALTITUDE study with Tekturna/Rasilez, Novartis announced that the trial was halted on the recommendation of the independent Data Monitoring Committee (DMC) overseeing the study. The DMC concluded that patients were unlikely to benefit from treatment on top of standard anti-hypertensive medicines, and identified higher adverse events in patients receiving Tekturna/Rasilez in addition to standard of care as part of the trial. Following discussions with health authorities, Novartis has written to healthcare professionals worldwide recommending that hypertensive patients with diabetes should not be treated with Tekturna/Rasilez, or combination products containing aliskiren, if they are also receiving an angiotensin-converting enzyme (ACE) inhibitor or angiotensin receptor blocker (ARB). As an additional precautionary measure, Novartis has ceased promotion of Tekturna/Rasilez-based products for use in combination with an ACE inhibitor or ARB.
Alcon devices approved in Japan
The EX-PRESS Glaucoma Filtration Device (P50PL and P200PL) and the WaveLight Allegretto Wave Eye-Q Refractive Laser gained approval in Japan in the fourth quarter. The EX-PRESS Glaucoma Filtration Device is the first glaucoma filtration device in Japan and complements Alcon's pharmaceutical eye drops, such as Travatan Z and DuoTrav, in physicians' treatment of glaucoma patients. The filtration device provides an easier path for the physician to drain aqueous fluid from the anterior chamber of the eye, compared to the current trabeculectomy procedure, providing a more consistent surgical procedure and more predictable patient outcomes. The Eye-Q excimer laser has enhanced pulse frequency of 400 Hz while providing innovative and reliable eye tracking and improved ergonomics for the physician and patient.
Positive CHMP opinion for Nepafenac
The EMA's Committee for Medicinal Products for Human Use adopted a positive opinion in the fourth quarter for expanding the label claim for Nepafenac, an ophthalmic suspension that treats eye pain and inflammation resulting from cataract surgery, adding an indication for the reduction in the risk of postoperative macular edema associated with cataract surgery in diabetic patients. Macular edema is an important complication that can lead to permanent loss of vision in patients with diabetes who undergo cataract surgery.
Alcon's refractive offering expanded through US approval
The WaveLight EX500 Excimer Laser gained approval in the US in the fourth quarter. The WaveLight EX500 system improves refractive outcomes while offering additional precision and safety in laser eye surgery procedures. This approval follows the earlier certification of the WaveLight FS200 Femtosecond Laser in 2010, which allows Alcon to offer physicians an integrated Refractive Suite where the two lasers communicate - saving time and improving refractive outcomes.
Two additional Phase III studies underline Sandoz leadership in biosimilars
In January, Sandoz announced two Phase III clinical trials for daily filgrastim (generic Neupogen®) and once-per-cycle pegfilgrastim (generic Neulasta®) in breast cancer patients eligible for myelosuppressive chemotherapy treatment. Filgrastim, a granulocyte-colony stimulating factor (G-CSF) analog, is used to prevent or treat neutropenia, a common side effect of chemotherapy characterized by low white blood cell count. Sandoz's filgrastim biosimilar is already marketed under the brand name Zarzio in more than 30 countries outside the US, and this study is expected to support extension of commercialization to the US. The pegfilgrastim study represents the next major step in the Sandoz global biosimilar development program, which aims to create the number one overall G-CSF franchise worldwide.
Growth: Meeting healthcare needs worldwide
Recently launched products fueled growth
Benefitting from our investment in innovation, Novartis has a strong platform for growth, with several potential blockbuster products in our Pharmaceuticals portfolio, including Gilenya, Tasigna, Lucentis, Galvus, Afinitor, Xolair and Onbrez Breezhaler. Products launched since 2007 continued to fuel growth, contributing USD 3.7 billion or 25% of net sales in the fourth quarter and USD 14.4 billion (25% of net sales) for the full year.
Following its launch in the US in October 2010 and in parts of the EU in March 2011, Gilenya, the first oral treatment for multiple sclerosis, continued its strong growth trajectory with sales of USD 203 million in the fourth quarter (USD 494 million for the full year). This once daily treatment represents a major advance in the treatment of MS, a chronic and debilitating disease, as evidenced by the more than 25,000 patients currently being treated with Gilenya globally.
Tasigna (USD 207 million, +65% cc), a next-generation therapy for chronic myeloid leukemia (CML), also achieved strong growth, as studies continue to show its superiority even to Glivec in treating patients with this life-threatening blood cancer. Tasigna now represents more than 19% of our total CML franchise and achieved sales of USD 716 million for the full year (+74% cc).
Additionally, Lucentis (USD 550 million, +39% cc), a medicine that significantly improves vision in patients with wet age-related macular degeneration, made a very important contribution to Pharmaceuticals growth. In the first half of 2011, Lucentis was also approved in the EU and Switzerland for the treatment of visual impairment due to diabetic macular edema and macular edema secondary to retinal vein occlusion, which further contributed to growth. Sales for the full year totaled USD 2.0 billion (+26% cc).
Accelerated growth in emerging markets
Our long-term growth is supported by our established presence in emerging markets. Sales in our top six emerging markets - Brazil, China, India, Russia, South Korea and Turkey - grew 15% in cc in the fourth quarter resulting in USD 1.5 billion or 10% of Group net sales. The strong performance was particularly driven by Russia and China. For the full year, sales from the top six emerging markets aggregated USD 5.8 billion (10% of Group sales).
Solid performance across divisions
Strong underlying growth in the fourth quarter was driven by Pharmaceuticals, Alcon and Vaccines and Diagnostics. Despite headwinds from loss of exclusivity and pricing pressures, Pharmaceuticals continued to perform strongly, with net sales of USD 8.3 billion expanding 4% (+5% cc) over the same period last year, underpinned by 38% (in cc) growth in recently launched products.
Alcon, which represents a new growth platform for Novartis, contributed USD 2.4 billion in net sales for the quarter, growing 6% (+7% cc) over the same period last year on a pro forma basis with particularly strong performances by the Surgical and Ophthalmic Pharmaceuticals franchises.
Sandoz net sales of USD 2.3 billion were down 5% (-4% cc) in the fourth quarter, impacted by additional competition to enoxaparin. Enoxaparin, our first generic blockbuster, achieved sales of USD 1.0 billion in 2011 (USD 225 million in the fourth quarter).
Vaccines and Diagnostics grew 86% (+86% cc) with net sales of USD 671 million for the fourth quarter, underpinned by advances in the meningococcal disease franchise, particularly Menveo, which achieved full year net sales of USD 142 million, and the resolution of shipment delays experienced in prior quarters.
The two Consumer Health businesses, OTC and Animal Health, declined 7% (-6% cc) in the fourth quarter, with net sales of USD 1.1 billion, impacted by a temporary suspension of production at one of our US Consumer Health sites in December.
Productivity: Improving efficiency and optimizing performance
To free up resources for reinvestment in growth and greater shareholder returns, Novartis is focused on improving efficiency and reducing costs across all of our operations. For the full year, net sales grew 12% (cc) while core operating income increased by 16% (cc). This performance resulted in an improvement in core operating income margin in constant currencies of 1.1 percentage points, however currency had a negative impact of 1.6 percentage points, leading to a net decline in core operating income margin of 0.5 percentage points to 27.2% of net sales. This achievement was significantly ahead of the expectations we set at the beginning of the year to "aim to improve core operating income margin in constant currencies." The improved performance was generated from both a stronger operating performance as well as a higher delivery of productivity benefits, which created resources equivalent to over 4 percentage points of sales.
For the quarter, net sales grew 5% (cc) while core operating income increased by 17% (cc). This performance resulted in an improvement in core operating income margin in constant currencies of 2.7 percentage points, however currency had a negative impact of 1.0 percentage points, leading to a net increase in core operating income margin of 1.7 percentage points to 24.0% of net sales.
Within manufacturing, we have two core aims: to create Manufacturing Centers of Excellence that can support the global operations of all six Novartis businesses; and to optimize the cost structure across divisions and enhance utilization rates at strategic sites to an industry-leading 80% of capacity. We announced the exit or partial exit from ten sites in 2011, totaling fourteen site exits since the program began. This enabled us to reduce excess capacity and shift strategic production to technology competence centers.
We recorded charges related to exits, impairment charges and inventory write-offs of USD 92 million in
the fourth quarter, USD 269 million in full year 2011, and USD 332 million cumulatively since the program began in the fourth quarter of 2010.
Additional efficiency gains are expected by further optimizing our Marketing & Sales spend. This is part of a broader effort within Novartis to continue to reallocate resources geographically while simplifying processes across the organization. Marketing & Sales spend decreased as a percentage of net sales from 26.3% in 2010 to 25.7% in 2011.
Procurement is a major source of savings. By leveraging our scale, implementing global category management and creating country Centers of Excellence in key markets, we generated annual savings of USD 1.3 billion.
With regard to General & Administration expenses, the streamlining of core processes across Novartis and the implementation of core service centers for functions such as Human Resources and Finance is expected to further provide operating leverage.
Alcon, now fully integrated as the second largest division in the Novartis Group portfolio, has realized merger-related cost synergies in line with expectations. In the quarter, Alcon delivered USD 41 million of post-integration synergies, and in the full year, realized synergies amounting to USD 75 million.
Free cash flow
The sustainability of our strategy lies with the generation of cash flow that provides the resources for reinvestment and returns to shareholders. Cash flow is driven by a continued focus on the cash conversion cycle and operational cash flow improvements. Free cash flow was USD 3.9 billion for the fourth quarter, declining 6% from the previous year mainly as a result of the divestment of Enablex® in the fourth quarter of 2010 (USD 392 million). For full year 2011, free cash flow was USD 12.5 billion, an increase of 1% over the previous year. Free cash flow in 2010 included substantial cash flows from sales of A(H1N1) amounting to USD 1.8 billion.
Capital structure and net debt
Strong cash flows and a sound capital structure have allowed Novartis to invest in the future of its business through R&D and acquisitions even in turbulent times while keeping its double-A rating as a reflection of financial strength. Retaining a good balance between attractive shareholder returns, investment in the business and a sound capital structure will remain a priority in the future.
Free cash flow of USD 12.5 billion was deployed for dividend payments of USD 5.4 billion and share repurchases of USD 5.9 billion (including USD 2.4 billion repurchased indirectly via Alcon, Inc. to reduce the dilutive impact of the subsequent merger of Alcon, Inc. into Novartis AG). In total, dividends and share repurchases utilized 90% of the Group's 2011 free cash flow.
In the fourth quarter, Novartis purchased 12.2 million of own shares totaling USD 0.6 billion on the first trading line. These shares will be kept as treasury shares, mostly to cover future employee participation programs. For the full year 2011, Novartis repurchased 59.8 million shares totaling USD 3.5 billion. Of this, USD 2.4 billion was used to repurchase 39.4 million shares on the second line to reduce the dilutive impact of the share issue related to the Alcon merger, and USD 1.1 billion was used to buy 20.4 million shares on the first line to mostly cover future employee participation programs. The company will continue to acquire shares opportunistically for this purpose, such that together with the dividend a majority of free cash flow is expected to be returned to shareholders.
As of December 31, 2011, net debt stood at USD 15.2 billion. This represents a net increase of USD 0.3 billion since December 31, 2010. The peak Novartis net debt amount of USD 22.7 billion was reached at the beginning of the second quarter of 2011. This has been repaid to the extent of USD 7.5 billion by the year end. The long-term credit rating for the company continues to be double-A (Moody's Aa2; Standard & Poor's AA-; Fitch AA).
