Novartis raises profit outlook again after strong quarter
Published: Thursday, Jul 18th 2024, 07:50
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The pharmaceutical group Novartis is on a good run. For the second time this year, the Basel-based company has raised its forecast for annual profits following good quarterly figures. And the Group also sees itself on course in the medium term.
The transformation into a focused pharmaceutical company is increasingly paying off, as shown by the 9 percent increase in sales to USD 12.5 billion in the second quarter. At constant exchange rates (CER), growth amounted to 11 percent, as Novartis announced on Thursday.
The increase in sales was due to the continued strong demand for drugs such as Entresto (heart), Kesimpta (multiple sclerosis), Cosentyx (psoriasis), Kisqali (cancer), Leqvio (cholesterol) and Pluvicto (radioligand therapy).
On the profit side, Novartis earned an operating profit of USD 4.0 billion (+43%) in the second quarter. Net income amounted to USD 3.2 billion after USD 2.3 billion in the prior-year period. Novartis attributes the increase primarily to higher net sales and lower impairments.
Profit margin on track
For analysts, however, the core operating profit adjusted for various factors is more important. At just under 5 billion, this was better than the AWP consensus. The core operating profit margin rose by 2.5 percentage points to 39.6% of net sales. In the medium term, the Group is aiming for a figure above the 40 percent mark.
Thanks to another strong quarter, Novartis management has once again raised its profit forecast. It had already raised the bar after the first quarter. While sales are expected to continue to grow in the high single-digit to low double-digit percentage range at constant exchange rates, Novartis now expects core operating profit to increase in the mid to high teens (previously: increase in the low double-digit percentage range to mid teens).
CEO Vas Narasimhan is also confident about the medium-term targets: "We are still on track to achieve our medium-term sales growth and profit margin forecasts." Novartis is aiming for average annual sales growth of 5 percent from 2023 to 2028. The profit margin is expected to exceed 40 percent by 2027.
Elizabeth M. McNally proposed for VR
At the same time, Novartis is announcing changes to the Board of Directors. Elizabeth M. McNally is to be elected as a new member of the Board. She is Director of the Center for Genetic Medicine at Northwestern University, Feinberg School of Medicine. As a practising cardiologist and renowned research leader, she specializes in the genetics of cardiovascular and neuromuscular diseases, writes Novartis. Charles L. Sawyers and William T. Winters will not be standing for re-election in 2025 due to the 12-year term limit.
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