Novartis’ worst may be behind it—at least, it seemed so to some analysts following Tuesday’s first-quarter earnings announcement.
Bernstein’s Tim Anderson, for one, pointed to “decent growth,” even for eye unit Alcon, which expanded (by 1% in constant currencies) for the first time since 2015’s second quarter. Generics unit Sandoz managed to eek out 1% growth, too, despite the price erosion plaguing the sector.
With those units under control, it was up to Novartis’ new pharma products to deliver—and they did, helping the Swiss drugmaker meet quarterly sales expectations with a haul of $11.54 billion. Next-gen psoriasis-fighter Cosentyx managed to climb quarter-over-quarter despite the increased rebates Novartis needed to defend its formulary position, CEO Joe Jimenez told investors on the quarterly conference call, with new competitors such as Eli Lilly’s Taltz actually helping to expand the overall market.
And heart failure med Entresto “(for once) was in-line,” Anderson noted, pulling in sales of $84 million. Two-thirds of those sales came from the U.S., Jimenez noted, pointing out that “we’re starting to see a bit of an acceleration in new-to-brand scripts” that should “translate to increasing total scripts as we move throughout the year.” Recent reimbursement agreements with Italy, Canada and Germany should boost the med down the line, too, and Novartis expects to ink more similar pacts in the near future.
It didn’t hurt that Gleevec generics—in the first quarter taking a toll on both sides of the pond for the first time—didn’t bite sales as badly as expected. All in all, Novartis was able to put up a slight core EPS beat, checking in at $1.13 to the Street’s $1.11.
That’s not to say all was rosy for Basel-based giant. Alcon’s surgical business is still in “turnaround mode,” Jimenez acknowledged, which could mean the unit fetching a lower prices if Novartis pursues a sale. “We think it is highly likely Alcon will be divested, but in what form exactly remains unclear,” Anderson noted.
The company also revised its Sandoz predictions downward thanks to a manufacturing-related delay on the 40-mg version of Glatopa, its copy of Teva MS star Copaxone; it now expects sales to come in “broadly in line” with last year’s.
And on the M&A front, things have been tough, Jimenez admitted. Novartis is “having a hard time finding value-generating acquisitions” even in the $2 billion to $5 billion range “just because prices have moved up quite a bit,” he said. Instead, the company has moved “upstream a bit,” going after earlier-stage assets to supplement its pipeline.
All things considered, though, Novartis expects to see group net sales match last year’s despite the Gleevec blow, with its pharma products potentially even posting a sales increase.
Novartis “is moving out from the shadow of Gleevec genericization,” Anderson wrote.