Novartis headquarters


Kannan D

Novartis (NYSE:NVS) Q2 results beat analysts’ estimates and the company reconfirmed its FY22 outlook while noting that the Sandoz strategic review was on track and an update would be provided by year end.

Q2 Core EPS grew +2% (USD basis %) Y/Y to $1.56, excluding Roche income impact.

Net sales declined -1% Y/Y to $12.78B.

“Our six key in-market growth drivers with multi-billion sales potential (Cosentyx, Entresto, Zolgensma, Kisqali, Kesimpta, Leqvio) each grew at least double digits,” said Novartis CEO Vas Narasimhan.

Net sales from the Innovative Medicines segment declined -1% Y/Y to 10.46B. The company said generic competition had a negative impact of 4 percentage points, mainly due to Afinitor/Votubia, Gilenya (ex-US), Gleevec/Glivec, Exjade, and Sandostatin. Meanwhile, pricing too had a negative impact of 4 percentage points. Sales in the U.S. were $3.9B and in the rest of the world were $6.5B.

Heart failure drug Entresto’s sales grew +27% Y/Y to ~$1.13B. Gene therapy Zolgensma sales increased +20% Y/Y to $379.

Psoriasis drug Cosentyx sales grew +9% Y/Y to $1.28B, while multiple sclerosis therapy Gilenya sales declined -23% Y/Y to $555M. Leukemia drug Tasigna saw a -5% decline Y/Y to $498M.

Another Multiple sclerosis therapy, Kesimpta’s sales grew +262% to $239M. While, Myelofibrosis drug Jakavi sales were flat at $398.

Outlook for Innovative Medicines: The company expects Sales expected to grow mid single digit Core operating income expected to grow mid to high single digit, ahead of sales

Q2 Sandoz net sales declined -3% Y/Y to $2.32B. Novartis said sales benefiting from a return towards normal business dynamics, with growth across all business franchises. Volume contributed 11 percentage points to growth but pricing had a negative impact of 6 percentage points. Global sales of Biopharmaceuticals grew +1% to $528M.

Sandoz Outlook: The company revised Sandoz guidance upwards with sales expected to grow low single digit (previously broadly in line) and core operating income to be broadly in line with prior year (previously expected to decline low to mid single digit).

The company’s core operating income declined -2% Y/Y to $4.27B (Excluding Roche investment impacts). Net income fell -36% Y/Y to ~$1.7B.

The company said free cash flow declined -22% Y/Y to ~$3.30B, mainly due to lower divestment proceeds and unfavorable changes in working capital.

Restructuring: Novartis now expects to deliver SG&A savings of ~$1.5B, to be fully embedded by 2024. In April, Novartis announced a restructuring of its pharmaceuticals and oncology business units and had initially targeted saving of at least $1B by 2024.

Buyback: The company said its previously announced up to $15B share buyback is ongoing, with $9.4B still to be executed.

Outlook 2022:

“The mid-stage pipeline remains on-track for 20+ potential significant pipeline assets with approval by 2026,” said Narasimhan.

The company reaffirmed Group’s FY22 outlook expects sales to grow mid single digit, Core operating income expected to grow mid single digit. Consensus Revenue Estimate for 2022 is $52.48B (+1.65% Y/Y).


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