4. Novartis

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Novartis is one of four companies in the top 15 that saw revenues fall in 2016.

4. Novartis
Headquarters: Basel, Switzerland
2016 revenue: $48.52 billion
2015 revenue: $49.41 billion

Novartis is one of four companies in the top 15 that saw revenues fall for the year. It wasn’t supposed to be that way. After completing its big asset swap with GlaxoSmithKline in 2015, things were supposed to be on an upward trend, but life has not been easy for the Swiss drugmaker, which has said that 2017 will look a lot like last year.

In that $25 billion asset swap and sale, Novartis unloaded its animal health business to Eli Lilly and its vaccine unit and control of consumer health operations to GSK in exchange for some of the U.K. drugmaker's oncology assets. It was done so the Swiss company could focus, particularly, on oncology meds.

But while GSK has done well by the trade, things have been a bit slow for Novartis, which has done plenty of cancer deals but is playing catch-up in rapidly evolving area of immuno-oncology. It is focused on the next wave of drugs in that burgeoning area and has a pipeline of potential products but last year re-integrated its CAR-T program into the oncology unit. That move surprised many, given its early efforts there. Whatever the payoffs are, or aren’t, from that move, they will come down the road.

Meanwhile, sales from newer meds have not been enough to overcome the battering the company has taken on the revenue side as No. 1 selling med, Gleevec, lost patent protection. Sales of the blood cancer drug fell 28% to $3.3 billion from about $4.7 billion the year before.

Sales overall fell about 2% and core EPS was also down 2% to $4.75.

Adding to the pain was one of the units it held onto, its Alcon eye products division, which continues to struggle. The unit reported a $120 million operating loss, compared with nearly $30 million in income a year ago. Operating profit was off 38%. That is one reason that Novartis CEO Joe Jimenez says the company is looking at its options for the unit, “ranging from retaining the business to separation via a capital markets transaction” like an IPO or a spinoff. A decision is expected by the end of this year.

Novartis has made moves to ensure its future. Last year it split its pharmaceuticals unit, which accounts for about two-thirds of its revenues, into two new divisions, including one focused on oncology. It cut about 175 R&D jobs in a rejiggering aimed at consolidating control over its drug discovery programs and cost containment.

In the fall it snagged the FDA’s priority review tag for LEE011, also known as ribociclib, which will challenge Pfizer's hot-selling Ibrance in the CDK 4/6 field. EvaluatePharma sees it as a big launch for the year and is projecting 2022 sales of about $1.6 billion, but that would still put it significantly behind Ibrance, which has momentum behind it and is forecast to have more than $6 billion in sales by 2022.  

Jimenez also says biosimilars will be a key driver for the company, and in August it won an FDA approval for its second, a copy of Amgen’s anti-TNF blockbuster Enbrel. With legal action pending it could be some time before that copy actually starts drawing sales for Novartis. It has plans to submit applications for biosimilars of AbbVie’s Humira, Biogen’s Rituxan and Johnson & Johnson’s Remicade in the U.S., EU or both this year.

But Novartis has had setbacks as well in the new biosimilar world. Last summer, the FDA rebuffed Sandoz's biosim version of Amgen's blockbuster Neulasta, saying it needed to see more data. Novartis was characteristically quiet about the situation, but buried in an SEC filing in January, the drugmaker said it will be 2018 before additional data is submitted to the FDA.

The CEO also expects more good things from newer products like psoriasis drug Cosentyx. It reached blockbuster status in 2016 with $1.1 billion in sales, with its revenue rising in all three of its indications despite new competition from Eli Lilly's Taltz.

Its new heart failure drug Entresto had 2016 sales of just $170 million, short of the company’s expectation of $200 million, but Jimenez expects it to pick up momentum this year.

As for M&A, Jimenez continues to play it safe. He has repeatedly said the company is only interested in doing bolt-on deals of up to $5 billion.

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4. Novartis