Novartis unveils another $15B share buyback plan despite Entresto legal setback

On the heels of wrapping up a $15 billion share buyback program, Novartis has unveiled another stock repurchase plan of the same size.

Last time, Novartis launched its repurchase plan after selling $20.7 billion worth of Roche stock late 2021. This time, the new plan coincides with an expected spinoff of Novartis’ generics unit Sandoz. Meanwhile, the heart drug Entresto, the company’s top-selling product, faces an uncertain future after a Delaware federal court invalidated a combination patent.

Responding to a question about the potential outcomes of the Entresto litigation during the company’s second-quarter earnings call, Novartis CEO Vas Narasimhan, M.D., said the new $15 billion program is independent of various business scenarios.

“It’s based on a long-term view that we have adequate capital to pursue our internal investments as well as our external M&A and [business development and licensing],” Narasimhan said.

“We believe it’s prudent to buy back our shares over this period of time in returning capital to shareholders, as we fundamentally believe we’re undervalued versus our potential,” Narasimhan added.

Novartis is currently in a strong cash position, having generated nearly $6 billion in free cash flow in the first six months of 2023, compared with $4.9 billion during the same time last year, Chief Financial Officer Harry Kirsch noted on a separate call with reporters. Revenue and profit margin growth for the remaining innovative medicines business, after the separation of Sandoz, will continue to increase cash flow for Novartis, he added.

Novartis will repurchase the $15 billion in shares in two and a half years, so the program still leaves the company room to strike deals, Kirsch noted.

As for the Entresto patent litigation, Novartis plans to appeal the unfavorable decision, and Narasimhan said the company is confident that no generics maker will launch without first settling. Novartis has also sent two citizen petitions to the FDA asking the agency to hold any generics up to certain high standards. The company therefore expects no U.S. Entresto generic entry until at least mid-2025.

With $1.5 billion sales in the second quarter, Entresto stands as the top-selling drug in Novartis’ portfolio. The drug’s haul marked a 37% year-over-year gain at constant currencies and came 7% above analysts’ expectations.

Besides Entresto, two cancer meds—Kisqali and Pluvicto—are expected to help Novartis grow revenue. Kisqali grew sales by 66% year-over-year at constant currencies to reach $493 million in the second quarter, while Pluvicto sales climbed 14% sequentially to $240 million. Both numbers beat Wall Street’s consensus estimates.

The phase 3 NATALEE trial recently showed that Kisqali works as an adjuvant therapy in early HR-positive, HER-negative breast cancer. Novartis expects an updated analysis for invasive disease-free survival and overall survival later this year from the study.

Novartis plans to pursue a broad indication covering stage 2 and 3 diseases in Europe in the third quarter and in the U.S. the fourth. The U.S. submission will come later because the FDA would like to see “a greater information fraction” on the overall survival analysis, Narasimhan told investors on the call.

Meanwhile, an additional overall survival analysis is delaying Novartis’ bid for a potential expansion of Pluvicto. A phase 3 trial of the radioligand therapy hit its disease progression goal in late 2022 in PSMA-positive metastatic castration-resistant prostate cancer patients who had not previously received chemotherapy. Novartis is currently waiting for more overall survival data, aiming to file for an approval by the end of this year because the FDA is requiring companies to have mature enough data to show at least no detriment to patients’ life expectancy, Narasimhan said.

Pluvicto is likely on track to become a blockbuster drug in 2023, with sales having already reached $451 million in the first half of the year. Novartis encountered a shortage of Pluvicto earlier this year but is resolving the bottleneck with the FDA go-ahead for a manufacturing site in Millburn, New Jersey, and a European green light for a facility in Zaragoza, Spain.

The onboarding of new production lines has allowed Novartis to reopen patient starts, and the company is now planning to add more than 100 new treatment centers over the coming months, Narasimhan said.

Driven by those drugs, Novartis’ innovative medicines sales came in at $11.2 billion in the second quarter, up 9% at unchanged exchange rates. Sandoz, with its spin-off now planned for early in the fourth quarter, also saw sales increase 8% to $2.4 billion.

Based on the strong performance, Novartis dialed up its full-year revenue guidance. The company now expects revenues for both its innovative medicines business and Sandoz to grow at high single-digit percentages from the previous mid-single-digit percentage forecast.