#29. Novartis

Market value in U.S. dollars: $203.0 billion

Novartis, a giant of pharmaceutical industry, is based in Basel, Switzerland though it serves customers all over the world. Novartis’s subsidiaries include eye care company Alcon which it currently plans to spin it off, possibly for $20 billion.

Unlike the first quarter of 2021, Novartis, which has facilities in King of Prussia and Reading, showed positive results in the second quarter and first half of 2021 compared to the same periods last year.

In the face of a stock market sell-off this week, Novartis stock was down just slightly (0.20%) in mid-morning trading, a sign Wall Street approves of the results, officials say.

The company said the COVID-19 situation continues to evolve and is taking differing courses across the multitude of geographies in which Novartis operates. While demand is starting to return to pre-COVID-19 levels in most geographies and therapeutic areas, the company still sees a slight impact on parts of its business, for example in oncology, generics and certain geographies.

Novartis is assuming further easing of COVID-19 restrictions in the second half of the year with a positive impact on business dynamics. The company said it has not experienced liquidity or cash flow disruptions during the second quarter of 2021 due to the COVID-19 pandemic.

Commenting on the quarter, Vas Narasimhan, CEO of Novartis, said: “Novartis delivered a strong second quarter, driven by the momentum of our key growth brands, including Cosentyx, Entresto, Zolgensma, our Oncology portfolio and the launch of Kesimpta which continues to accelerate. Our pipeline of novel medicines continues to progress with key positive readouts in diseases with high unmet need, including iptacopan in a range of immune mediated diseases, 177Lu-PSMA-617 in prostate cancer and Zolgensma in spinal muscular atrophy.”

Second quarter results showed that net sales were $13.0 billion, an increase of 9% in constant currency (cc) in the second quarter. Volume contributed 13 percentage points to sales growth, driven by Entresto, Cosentyx, Zolgensma and Lucentis. Volume growth was partly offset by price erosion of 2 percentage points and negative impact from generic competition of 2 percentage points.

Operating income was $3.5 billion with core operating income of $4.3 billion in the second quarter. Core operating income margin was 33.5% of net sales, increasing by 1.2 % from 2020.

Net income was $2.9 billion an increase of 49% cc. Core net income was $3.7 billion, an increase of 14%.

Earnings Per Share (EPS) was $1.29, up 52% cc from the prior year, growing faster than net income as a result of a lower weighted average number of shares outstanding. Core EPS was $1.66.

Second quarter business unit results showed that Innovative Medicines net sales were $10.6 billion, up 10%. Volume contributed 13 percentage points to sales growth.

Pharmaceuticals Business Unit sales grew 12%, with continued strong growth from Entresto, Cosentyx and Zolgensma as stated in the second quarter business unit results. Lucentis benefited from a low prior year comparison due to COVID-19 related disruptions.

Oncology Business Unit sales grew 7%, driven by strong performance from Promacta/Revolade, Jakavi, Kisqali, Tafinlar + Mekinist, Tasigna and Kymriah. Generic competition had a negative impact of 3 percentage points, mainly due to Ciprodex, Diovan, Exjade, Afinitor and Glivec. Net pricing had a negligible impact on sales growth.

Sandoz net sales were $2.4 billion, an increase of 5%, as the company claims the business is starting to stabilize. Volume increased by 13 %, and pricing had a negative impact of 8 %. Sales in Europe grew 6%, while sales in the US declined 10% due to the Retail Generics business, especially oral solids. Global sales of Biopharmaceuticals grew 5%.

In research and development updates, specifically new approvals, Cosentyx received FDA approval for treatment of moderate to severe plaque psoriasis in pediatric patients six years and older.

Entresto was approved by the Chinese National Medical Products Administration (NMPA) as new indication for the treatment of patients with essential hypertension, officials say.

Regulatory highlights include: Asciminib (ABL001) has been submitted to the FDA for treatment of adult patients with Philadelphia chromosome-positive chronic myeloid leukemia in chronic phase (Ph+ CML-CP), previously treated with two or more tyrosine-kinase inhibitors (TKIs) and patients with Ph+ CML-CP harboring the T315I mutation.

Also, 7Lu-PSMA-617 was granted Breakthrough Therapy designation (BTD) by the FDA for the treatment of metastatic castration-resistant prostate cancer (mCRPC).

In addition, Sabatolimab (MBG 453) was granted Fast Track designation (FTD) by the FDA for the treatment of adult patients with myelodysplastic syndromes (MDS) defined with an IPSS-R risk category of high or very high risk in combination with hypomethylating agents.

Narasimhan noted that, “Looking ahead, we reconfirm our full-year guidance and our commitment to drive long-term accretive growth,” when talking about his 2021 outlook.

Barring unforeseen events, Novartis expects net sales to grow low to mid-single digits. From a divisional perspective, the company expects net sales performance (cc) in 2021 to be as follows: Innovative Medicines are expected to grow mid-single digits and Sandoz is expected to decline low to mid-single digits.

Core operating results are expected to grow mid-single digits, ahead of sales. Novartis expects Innovative Medicines core operating income to grow mid to high single digits, ahead of sales, while Sandoz core operating income is expected to decline low to mid-teens.

Novartis guidance assumes that the market sees a continuation of the return to normal global healthcare systems including prescription dynamics, particularly oncology.

If mid-July exchange rates prevail for the remainder of 2021, the company expects the foreign exchange impact for the year would be positive 2 percentage points on net sales and positive 2 to 3 percentage points on core operating income.

Novartis (NYSE: NVS) is a global medicines company that consistently ranks among the world’s top companies investing in research and development. Novartis products reach nearly 1 billion people globally and they are finding ways to expand access to their latest treatments. About 125,000 people of more than 140 nationalities work at Novartis around the world.