Novartis raises the bar again after a strong Q3
Published: Tuesday, Oct 29th 2024, 12:30
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The pharmaceutical company Novartis has now raised its own forecast for seven quarters in a row. The transformation into a focused pharmaceutical company is paying off.
Between July and September, the Basel-based company generated sales of 12.8 billion US dollars. This is an increase of 9 percent compared to the same period last year. At constant exchange rates (CER), growth amounted to 10 percent.
As CEO Vas Narasimhan said in an interview with AWP, the transformation into a focused pharmaceutical company took a little longer than originally expected. "But if you look at our really strong performance, this process has paid off." At the same time, however, the manager emphasized the importance of continuing these trends in the future.
Broad-based growth
Growth in the third quarter was driven both by the somewhat newer drugs, such as the breast cancer drug Kisqali or the radioligand therapy Pluvicto, and by the more established drugs Entresto (heart disease) and Cosentyx (psoriasis).
On the profit side, Novartis doubled its operating profit in the third quarter to USD 3.6 billion. Novartis attributes this to lower impairment charges and higher net sales. The bottom line was a net profit of 3.2 billion after 1.5 billion in the same period last year.
However, analysts are primarily looking at the core operating profit adjusted for various factors. At 5.1 billion, this was better than analysts had forecast in advance.
Thanks to another strong quarter, Novartis management has once again revised its own targets for the year as a whole upwards. Sales at constant exchange rates are now expected to grow in the low double-digit percentage range (previously high single-digit to low double-digit percentage range). Core operating profit is now expected to increase in the high teens. Previously, management was aiming for an increase in the mid to high teens.
Medium-term targets confirmed
CEO Narasimhan also reaffirmed the Group's medium-term targets. He remains confident that he will be able to achieve them.
The medium-term targets include a core operating profit margin above the 40 percent mark. In the third quarter, Novartis reported a figure in line with this target for the first time at 40.1%. In terms of sales, the Basel-based company is aiming for annual growth of around 5 percent in the medium term.
No need to worry about the patent cliff
As the Novartis CEO said in a video interview with AWP, he wants to achieve these goals despite the looming patent cliff. Three Novartis medicines will lose their patent protection next year. "While some companies have to contend with falling sales in such cases, we expect to be able to achieve further sales and profit growth in 2025 and beyond." This is likely to be achieved primarily with some of the newer drugs such as Kisqali (breast cancer) or Kesimpta (multiple sclerosis).
The belief in its own strength is so great that Novartis has not yet jumped on the fat-lowering bandwagon. As Narasimhan said in an interview with journalists this morning, Novartis does not need this market in order to continue to grow. Nevertheless, the company has a few very early lipid-lowering programs in the pipeline.
Despite the good results, Novartis shares fell by a good 3 percent on the stock market around midday on Tuesday. Traders are talking about profit-taking in view of the lack of positive surprises. An increase in the targets is no longer such a surprise, but is now expected by management.
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