Novartis share turns negative: Novartis with profit boost in the first quarter | 04/28/20

The Novartis quarterly report is almost untouched by Corona.

Rather, the pharmaceutical company exceeded its own goals in the first quarter of 2020 and continued to grow. The outlook is confirmed “for the time being”.

The new growth drivers, in particular, once again contributed to the good performance, as Novartis announced on Tuesday. But 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 is an increase of 11 percent compared to the same period last year. At constant exchange rates (cc), there was an increase of 13 percent, Novartis said.

As usual, the pharmaceutical division Innovative Medicines 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 for Cosentyx and Entresto. But newer products such as Kisqali or Kymriah would also have supported growth.

The Generics division Sandoz generated 2.5 billion in the first three months. That is 9 percent more (+ 11% cc) than in the first quarter of 2019. Here, too, inventory purchases would have had a positive impact, the report says.

The bottom line was core operating income of $ 4.2 billion (+ 28% / + 34% cc). Core 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.

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No corona virus restrictions

As with all other companies, the corona virus also plays an important role in the pharmaceutical company. In this regard, Novartis states in the announcement that no effects in the supply chains have been felt to date. “We currently do not expect the supply chain to be interrupted for the majority of our portfolio, as there are effective countermeasures and inventory levels.”

Clinical studies are ongoing and digital tools are being used more and more.

For the time being, Novartis has confirmed the forecast for 2020 despite the strong quarter. For the rest of the business, the Group is forecasting sales growth (in the medium to high single-digit percentage range) at constant exchange rates. Novartis is targeting an increase in the (high single-digit to low double-digit percentage range) for core operating profit.

The outlook now includes the orally administered solid dosage form portfolio originally intended for sale and Sandoz’s dermatology business in the United States. Including these businesses, Novartis expects sales and core operating income growth from continuing operations to be approximately 1% below the previous forecast.

This also confirms the sales forecasts for the two divisions Innovative Medicines (growth in the medium to high single-digit percentage range) and Sandoz (growth in the low single-digit percentage range).

This is how the Novartis share reacts

Novartis shares initially showed a plus in SWL trading, but then came under pressure. At the end of trading, the papers lost 1.45 percent to CHF 86.75.

The analysts are happy with the results in their first comments. Goldman Sachs, for example, speaks of a “strong” result, Vontobel even of a “very strong” result.

The figures shown are well above the consensus estimates at all levels and consistently exceed even the optimistic forecasts. However, Novartis benefited greatly from inventory purchases in both sales and earnings – the effect is estimated at around 400 million.

According to Goldman Sachs, the main focus is on the drugs Gleevec, Tasigna and Gilenya. However, even excluding the stock purchases, the result was still above the consensus, but at around 3 percent not as strong, various analysts put it into perspective. However, the ZKB notes that the operational business has also been very strong.

Novartis also believes that the stock purchase effect will reverse in the further course of the year, which will then have a negative impact on growth. In return, the prescription and consumption dynamics should normalize again in the second quarter. In addition, there is the negative growth effect from the now retained parts of Sandoz’s US business. In this respect, the analysts are not surprised that Novartis is currently confirming the outlook.

Among the key drugs, the analysts are particularly impressed by the Entresto, Kisqali and Tasigna. UBS also praised the performance of the new eye drug Beovu. By contrast, Cosentyx and Zolgensma sales were lower than expected and lagged the fourth quarter.

hr / gave

Basel (awp)


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