Novartis announced Thursday that first-quarter net income reached $2 billion, down from $13 billion in the year-ago period when the company recorded a gain of $12.8 billion on the sale of businesses to GlaxoSmithKline and Eli Lilly. Sales in the three-month period declined 3 percent to $11.6 billion, mainly as a result of generic competition to Gleevec in the US, missing analyst expectations of around $11.8 billion.
Still, CEO Joseph Jimenez said he was "pleased we were able to show sales growth in constant currencies despite the entry of a generic version of Gleevec in the US." The executive added that "as expected, our results reflect additional investments behind our new launches and Alcon."
Quarterly sales of prescription drugs slipped 3 percent year-over-year to $7.7 billion, with revenue from Gleevec dropping 22 percent to $834 million. To offset the sales decline for Gleevec, Novartis has been trying to boost revenue from new medicines, including Cosentyx and Entresto. Quarterly sales of Cosentyx reached $176 million, topping analyst estimates of around $137 million.
However, Entresto recorded revenue of $17 million, below consensus estimates of between $20 million and $30 million, with Berenberg analysts noting "the slow launch…continues." Novartis, which now predicts 2016 sales of about $200 million for the heart failure treatment, said it plans to expand its US field force of sales representatives for Entresto this month and launch a direct-to-consumer advertising campaign for the drug (for related analysis, see ViewPoints: Novartis looks to Entresto, Cosentyx as Gleevec patent expiry hits).
Commenting on the launch of new drugs in the US, Jimenez said "it's going to be a fact of life that we have to accept a slower uptake." According to the CEO, "we are just not going to see the hockey-stick shape we had in the 1990s and 2000s with thousands of sales representatives in the US," adding that "the model has changed and it will take longer to get up and running." In contrast, Jimenez noted the single-payer, government-funded health systems of Europe had been quicker to identify the potential for Entresto to cut overall health spending by reducing hospitalisations for heart failure. "In Europe we are going to have a stronger uptake, but we are still expecting the US to eventually gain momentum," he said.
In other financial results, Novartis said its Sandoz unit posted flat sales in the first quarter at $2.4 billion, while revenue in the Alcon division slumped 7 percent to $1.4 billion. Deutsche Bank analyst Tim Race noted that Alcon's 17-percent operating margin was worse than consensus forecasts of 20 percent. Meanwhile, the company said it still expects overall sales and core operating income in 2016 to be broadly in line with last year on a constant currency basis.
Berenberg analyst Alistair Campbell commented that Novartis' first-quarter results were mixed, with earnings coming in slightly above market expectations, while sales came in below. Campbell also highlighted the fact that the company reiterated its full-year guidance, despite fears that the issues with Alcon and Entresto might have forced a reduction.
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