Novartis delivered sales growth across all divisions (constant currency) as growth drivers, including Cosentyx and Entresto, more than offset generic erosion; innovation momentum continued.
“Novartis delivered another solid performance in the first quarter,” according to CEO Joseph Jimenez. “Growth drivers, including Cosentyx and Entresto, more than offset generic erosion, mainly due to Glivec. The innovation momentum continued in the quarter, led by the launch of Kisqali, and the FDA Priority Review for CTL019 in the U.S. This reinforces our confidence in our next growth phase, which we expect to start in 2018.”
First Quarter Group Financials
Net sales were $11.5 billion (-1%, +2% constant currencies) in the first quarter, as volume growth of 7 percentage points was partially offset by the negative impact of generic competition (-3 percentage points) and pricing (-2 percentage points). All divisions reported growth in constant currencies.
Operating income was $1.9 billion (-22%, -19% cc). Core adjustments amounted to $1.1 billion (2016: $0.8 billion), including a net charge of $0.2 billion related to the discontinuation of RLX030 development.
Core operating income was $3.0 billion (-8%, -5% cc). Core operating income margin in constant currencies decreased 1.8 percentage points, mainly due to generic erosion of Gleevec/Glivec and investments behind new launches and the Alcon growth plan. Currency had a negative impact of 0.2 percentage points, resulting in a net decrease of 2.0 percentage points in U.S. dollar terms to 26.1% of net sales.
Net income was $1.7 billion (-17%, -15% cc), declining less than operating income due to higher income from associated companies.
EPS was $0.70 (-18%, -15% cc), broadly in line with net income.
Core net income was $2.7 billion (-4%, -1% cc), declining less than core operating income due to higher income from associated companies.
Core EPS was $1.13 (-3%, -1% cc), broadly in line with core net income.
Free cash flow was $1.7 billion ($+0.3 billion), mainly driven by higher cash flows from operating activities.
Innovative Medicines net sales were $7.7 billion (0%, +2% cc) in the first quarter, with volume growth of 7 percentage points driven by Cosentyx, Entresto, Promacta/Revolade, Jakavi, Tafinlar + Mekinist and Gilenya. Generic competition had a negative impact of 4 percentage points and pricing had a negative impact of 1 percentage point, both largely due to Gleevec/Glivec genericization in the U.S. and Europe.
Operating income was $1.7 billion (-21%, -17% cc) due to generic erosion of Gleevec/Glivec, launch investments and the net charge of $0.2 billion related to the discontinuation of RLX030 development. Core operating income was $2.4 billion (-7%, -3% cc). Core operating income margin in constant currencies decreased by 1.7 percentage points due mainly to generic erosion and launch investments for Entresto, Cosentyx and Kisqali. Currency had a negative impact of 0.5 percentage points, resulting in a net decrease of 2.2 percentage points to 31.5% of net sales.
Sandoz net sales were $2.4 billion (-1%, +1% cc) in the first quarter, as volume growth of 9 percentage points was offset by 8 percentage points of price erosion. Global sales of Biopharmaceuticals (including biosimilars, biopharmaceutical contract manufacturing and Glatopa) grew +30% (cc) to $274 million, driven by strong performance of Zarxio (filgrastim) and Glatopa 20mg in the U.S.
Operating income was $343 million (-1%, -2% cc). Core operating income was $460 million (-5%, -6% cc). Core operating income margin in constant currencies decreased by 1.3 percentage points, mainly due to higher M&S investment, including biosimilars, and higher Other Expense.
Currency had a positive impact of 0.4 percentage points, resulting in a net decrease of 0.9 percentage points to 18.9% of net sales.
Alcon net sales were $1.4 billion (-1%, +1% cc) in the first quarter. Vision Care sales (+4% cc) continued to grow, driven by strong performance of the daily contact lens portfolio, including continued double-digit growth of Dailies Total. Surgical sales (-1% cc) were down, mainly due to continued competitive pressures in IOLs.
Operating loss was $43 million, compared to an income of $31 million in the prior year quarter. Core operating income was $187 million (-23%, -18% cc). Core operating income margin decreased by 3.1 percentage points in constant currencies, mainly impacted by higher M&S investment. Currency had a negative impact of 0.7 percentage points, resulting in a net margin decrease of 3.8 percentage points to 13.2% of net sales.
Key Growth Drivers
Underpinning the financial results in the first quarter is a continued focus on key growth drivers, including Cosentyx, Entresto, Promacta/Revolade, Jakavi, Tafinlar + Mekinist, Tasigna and Gilenya, as well as Biopharmaceuticals and Emerging Growth Markets.
Growth Drivers
- Cosentyx ($410 million, +136% cc), continued to show strong launch trajectory in the first quarter of 2017 across its three approved indications. Cosentyx has been used to treat more than 80,000 patients since launch.
- Entresto ($84 million, $+67 million), had a solid first quarter, benefitting from the continued access improvements, effects of increased investment in the U.S., as well as additional launches in Europe.
- Promacta/Revolade ($175 million, +35% cc) grew strongly, driven by continued worldwide uptake as well as growth of the thrombopoietin class for chronic immune thrombocytopenic purpura.
- Jakavi ($162 million, +34% cc) growth was driven by increased patients treated for myelofibrosis and the launch of the polycythemia vera indication in key markets.
- Tafinlar + Mekinist ($187 million, +27% cc) continued to show strong growth, particularly in Europe.
- Tasigna ($411 million, +9% cc) showed solid growth in the first quarter, particularly in the U.S., despite multiple generic versions of Gleevec/Glivec.
- Gilenya ($722 million, +5% cc), exhibited continued volume growth.
- Biopharmaceuticals ($274 million, +30% cc) grew mainly driven by Zarxio and Glatopa 20mg in the U.S.
Emerging Growth Markets
- Net sales in Emerging Growth Markets — which comprise all markets except the U.S., Canada, Western Europe, Japan, Australia and New Zealand — grew 1% USD, 6% cc.
(Source: Novartis Pharmaceuticals Corp.)
Filed Under: Drug Discovery
