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Novartis’ quarterly report has hardly been touched by Corona.
Rather, the pharmaceutical company exceeded its own targets in the first quarter of 2020 and continued to grow. The picture is confirmed “for the moment”.
New engines of growth, in particular, once again contributed to good performance, as announced by Novartis on Tuesday. But the stock purchases related to the corona virus have also contributed to the significant improvement.
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According to the announcement, net sales for the first three months of 2020 are CHF 12.3 billion. That’s an 11 percent increase compared to the same period last year. At constant exchange rates (cc), there was an increase of 13 percent, Novartis said.
As usual, the Innovative Medicines pharmaceutical division made the largest contribution to sales. It increased its first quarter revenue by 11 percent (+ 13% cc) to $ 9.8 billion. The division benefited from continued good demand from Cosentyx and Entresto. But newer products like Kisqali or Kymriah would also have supported growth.
The Sandoz generic division generated 2.5 billion in the first three months. That’s 9 percent more (+ 11% cc) than in the first quarter of 2019. Here, too, inventory purchases would have had a positive impact, according to the report.
The end result was a basic operating income of $ 4.2 billion (+ 28% / + 34% cc). The basic net profit improved by 26 percent (+ 31% cc) to 3.5 billion.
Net income was $ 2.2 billion, compared to $ 1.9 billion in the same period last year. This included higher provisions for legal cases and higher taxes, according to Novartis.
No corona virus restrictions
As with all other companies, the coronavirus also plays an important role in the pharmaceutical company. In this sense, Novartis states in the announcement that to date there have been no effects on supply chains. “For most of our portfolio, we currently do not expect supply chains to be disrupted as there are effective countermeasures and inventory levels.”
Clinical studies are ongoing and digital tools are increasingly being used.
For the moment, Novartis has confirmed the forecast for 2020 despite the strong quarter. For the rest of the business, the Group forecasts sales growth (in the middle to high single-digit percentage range) at constant exchange rates. Novartis is aiming for an increase in the (high single-digit percentage range to low double-digit percentage) to obtain main operating profit.
Prospects now include Sandoz’s portfolio of orally administered solid dosage forms originally intended for sale and the dermatology business in the United States. Including these businesses, Novartis expects core operating revenue sales and growth from continuing operations to be approximately 1% lower than the previous forecast.
This also confirms sales forecasts for the two Innovative Medicines divisions (growth in the mid to high single-digit percentage range) and Sandoz (growth in the low single-digit percentage range).
This is how the stock reacts
Novartis shares are currently 0.18 percent higher at CHF 88.19. Meanwhile, the overall market as measured by the SMI is up 1.6 percent.
Analysts are happy with the results in their first comments. Goldman Sachs, for example, speaks of a “strong” result, Vontobel even a “very strong” result.
The figures shown are well above consensus estimates at all levels and consistently exceed even optimistic forecasts. However, Novartis benefited greatly from inventory purchases in both sales and profits – the effect is estimated to be around $ 400 million.
According to Goldman Sachs, the main focus is on the drugs Gleevec, Tasigna and Gilenya. However, even excluding equity purchases, the result was still above consensus, but with around 3 percent not as strong, several analysts put it in perspective. However, the ZKB notes that the operating business has also been very strong.
Novartis also believes that the share purchase effect will reverse over the course of the year, which will have a negative impact on growth. In exchange, the dynamics of prescription and consumption should normalize again in the second quarter. In addition, there is the negative growth effect of the now retained parts of Sandoz’s US business. In this regard, analysts are not surprised that Novartis is confirming the outlook.
Among the key drugs, analysts are particularly impressed by Entresto, Kisqali, and Tasigna. UBS also praised the performance of the new Beovu eye medication. In contrast, Cosentyx and Zolgensma sales were lower than expected and delayed in the fourth quarter.
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