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Hello! I am really needing help with where and how to start for all of the questions listed - #1, #2, and #6. They all have to do with Exhibit 1. I also really need calculations to be shown in excel with the formulas used - if any - to justify the answers to these questions.

Thank you for your help! I know there is a fair amount of information to analyze. Your assistance is greatly appreciated!

No. of Countries In which Brand is Sold Growth % pa. proj. 99-09 for Novartis Variable Costs in Million CH Flxed Costs in Million CHF To Trim Or Not To Trim: That Is The Question Sales 1999 Growth % Milion CHF from 98-99 The issue had come up again and again in various management meetings and company semi nars. Novartis had too many products and needed to reduce the praduct proliferation that had occurred. Thomas Ebeling, Chief Operating Officer, Novartis Pharmaceuticals, wondered what Brands 4.8 Sow-K/KCL-Retard he shoukd do. Pamelor (L:Lilly The merger of Ciba-Geigy and Sandoz to form Novartis on December 20, 1996 had resulted in a significant increase in the pharmaceutical product portfolio of Novartis's Pharma Sector. Combining the pharmaceutical product lines of Ciba-Geigy and Sandoz had given Novartis a leadership position in several therapeutic areas, including immunology and inflammatory dis- eases, as well as strong positions in central nervous system disorders, cardiovascular diseases, oncology, dermatology, and asthma. Novartis now had approximately 250 product brands (such as Sandimmun, Vcltaren, Larnisil, and Foradil). The sales volumes of each of the different brands, however, were very different. In 1999, the top 20 brands accounted for 79% of pharmaceutical Trasicor/+Comb. Restoril L.WyethwAm.Ho.Pr.) Lentaron L; A. Brodie) 5.9 TA revenues while the remaining brands yielded 21% of revenues. Novartis Exhibit 1 presents sales, anticipated sales growth rates, cost and other data for the 50 smallest global base business brands that account for CHF 422 million in sales (or approximately 2.7% of pharmaceutical product sales) in 1998. In addition to the base business brands listed in Novartis Exhibit 1, 15 other product brands contributed an additional CHF 2.4 million in revenues. Although these products generated very small revenues, they satisfied some important medical needs. For example, Visken had sales of CHF 114,000 in South Africa but it was unique among betablockers regarding the effect on serotonin 1a receptors for the onset of Calcitronat-(+ Vit B1 Locasalen Logamel antidepressant action. Bellergalf+ Retard NitroglycerivTriniplas Novartis Exhibit 1 subdivides costs into variable costs and fixed costs. A variable cost changes in total in proportion to changes in the related level of total activity or volume. An example of a variable cost is direct materials used to make the product. If sales are small, variable costs are small. As sales increase, variable costs increase proportionately as well. A fixed cost remains unchanged in total for a given time period despite wide changes in the related level of total activity or volume. Examples of fixed costs are costs of operating the plant and costs of drug regulatory affairs to maintain registration of products. In the long run, however, fixed costs can sometimes be adjusted to match the levels needed to support future activity levels or production volumes. Commenting on the fixed costs reported in Novartis Exhibit 1, Andre Khairallah, Head of Controling, commented: Dropping a few products out of the 50 products shown in Appendix 1 will not result in savings in fixed costs even in the long run. We already have idle capacity in our plants so dropping a few of these products will only result in even more idle capacity. If we drop all 50 products, sone of the fixed costs in technical operations, production scheduling, drug registration, warehousing and inventory management, and distribution will be saved. If we dropped all 50 products, we can reduce the headcount and space used to support these products, something we cannot do if we drop only two or three products, l estimate that we can save 50% of the total fixed costs if we dropped all Vuricalv Calmteene Leptlan (L:Welding) Estulic Cortison-Ciba

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