Novartis' Q4 sales rise 8%, led by Cosentyx, Entresto, although profit hit by higher taxes

Headline results for the fourth quarter:

Innovative medicines sales

$9.9 billion

+10%

Sandoz sales

$2.5 billion

+1%

Overall revenue

$12.4 billion (forecasts of $12.3 billion)

+8%

Profit

$1.1 billion (forecasts of $2.4 billion)

-7%

Note: All changes are versus the prior-year period unless otherwise stated

What the company said:

CEO Vas Narasimhan noted that in 2019 "strong sales growth drove double-digit increases in core operating income and free cash flow," adding "significant margin expansion puts us on track to reach mid-to-high 30s core margin for innovative medicines in the mid-term."

Novartis said that quarterly profit was hit by higher taxes, including a one-time, non-cash deferred tax expense, partly offset by higher operating income. 

Other results:

  • Oncology product sales: $3.7 billion, up 7%, led by recent launches and double-digit performance for growth drivers
    • Tasigna: $491 million, up 3%
    • Promacta/Revolade: $380 million, up 15%, driven by increased use in chronic immune thrombocytopenia and further uptake as first-line treatment for severe aplastic anaemia in the US
    • Tafinlar/Mekinist: $356 million, up 14%, lifted by demand in metastatic and adjuvant melanoma as well as non-small-cell lung cancer, with ongoing uptake of the adjuvant melanoma indication in Europe
    • Gleevec/Glivec: $313 million, down 16%
    • Jakavi: $293 million, up 14%, with double-digit gains across all regions as a result of increased use in myelofibrosis and polycythemia vera
    • Kisqali: $155 million, up 158%, with US growth driven by use in metastatic breast cancer patients and "strong uptake" in Europe
    • Lutathera: $107 million, up 32%, with growth led by the US and ongoing launches in Europe
    • Kymriah: $96 million, versus $28 million in the prior year, led by ongoing uptake in the US and Europe
    • Piqray: $67 million
  • Cosentyx: $965 million, up 20%, driven by strong demand and broad access across indications and regions, with sales climbing 25% in the US
  • Gilenya: $803 million, down 4%, mainly due to increased competitive pressure
  • Entresto: $518 million, up 63%, benefiting from the PIONEER data on hospital initiation and higher demand in ambulatory settings
  • Lucentis: $517 million, down 1%
  • Zolgensma: $186 million, up from $160 million in the third quarter, but missing analyst forecasts of $196 million
  • Biopharmaceuticals: $425 million, up 9%, driven by continued strong double-digit growth in Europe
  • Emerging growth markets: $2.4 billion, up 11%, with sales in China growing 21% on a constant-currency basis to $544 million, bolstered by launches of Cosentyx and Entresto
  • Full-year revenue: $47.4 billion, up 6%
  • Full-year profit: $7.1 billion, down 44%

Looking ahead:

Novartis expects sales this year to grow in the mid- to high-single digits on a constant-currency basis, excluding Alcon and the Sandoz US oral solids and dermatology businesses, with core operating income forecast to increase in the high-single to low-double digits. The company noted that the guidance assumes that no generic versions of Gilenya and Sandostatin LAR enter the US in 2020. Analysts predict earnings of $5.66 per share on annual sales of around $49.8 billion.

Narasimhan said that the company is aiming to double sales in China, which currently stand at about $2 billion, by 2024. The executive indicated that Entrestso is now on course to achieve blockbuster status in the country.

Meanwhile, commenting on remarks he made last year indicating that Novartis would limit spending on mergers and acquisitions to about 5% of its market capitalisation, Narasimhan said that was "not a hard and fast rule and it is absolutely driven by the assets we identify." 

What analysts said:

Peter Welford of Jefferies suggested that the initial outlook for the year was "stronger than we expected: Current consensus is already towards the upper-end of management's targets, suggesting only minor tweaks to forecasts."

Pipeline updates:

Novartis disclosed that it decided this month to discontinue the generic Advair development programme in the US, following a recent review of data read-outs. In 2018, the FDA issued a complete response letter regarding Novartis' filing seeking approval of its generic version of GlaxoSmithKline's asthma and chronic obstructive pulmonary disease therapy, with the agency asking for additional data.

The Swiss drugmaker also disclosed that it is dropping the late-stage CLUSTER trial of Ilaris (canakinumab) in hereditary periodic fevers, while the Phase II ASC4MORE study of the BCR-ABL inhibitor asciminib is no longer intended to support a regulatory submission. The trial is investigating the drug, also known as ABL001, in combination with Gleevec/Glivec in patients with chronic myeloid leukaemia (CML) who have previously received treatment with Gleevec/Glivec and have not achieved a deep molecular response. Novartis said in a statement that it "is re-defining the development strategy of ABL001 in earlier lines of CML," adding that the Phase III ASCEMBL study in third-line CML has closed enrollment ahead of schedule, with a possible regulatory filing planned in 2021.

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