Novartis continues success story with next forecast increase
Published: Thursday, Jul 18th 2024, 11:40
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Exceeding expectations and raising its forecast - the pharmaceutical company Novartis remains true to its pattern. After a strong second quarter, the Basel-based company has once again raised its profit forecast.
In fact, Novartis has raised its guidance in every quarter since 2023. So this is the second increase this year. After the first quarter, Vas Narasimhan's management raised its guidance for sales and core operating profit; this time, the Group is "only" raising its profit estimates.
According to the press release issued on Thursday, the Group continues to expect sales to grow in the high single-digit to low double-digit percentage range at constant exchange rates in 2024. Meanwhile, the Basel-based company now expects an increase in core operating profit in the mid to high teens.
On course for medium-term targets
With this guidance and the performance in the second quarter, CEO Narasimhan believes that the Group is also on track to achieve its medium-term sales growth and profit margin targets. Novartis is aiming for average annual sales growth of 5 percent from 2023 to 2028. The profit margin should be more than 40 percent by 2027.
In fact, the pharmaceutical company continued to grow strongly between April and June. The transformation into a focused pharmaceutical company is increasingly paying off, as the 9 percent increase in sales to 12.5 billion US dollars in the second quarter shows. At constant exchange rates, growth amounted to 11 percent.
Strong blockbusters
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).
With sales of more than one and a half billion US dollars each, the two established bestsellers Cosentyx and Entresto made a significant contribution to the good performance. The approval of Cosentyx in new indications, especially in the USA, had a positive effect on the development. In contrast, analysts were somewhat disappointed with Entresto despite an increase of around 28 percent.
On the profit side, Novartis increased both operating and bottom-line profits by 43 percent to USD 4.0 billion and USD 3.2 billion respectively. Novartis attributes this growth 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 (+17%), this was better than the AWP consensus. The core operating profit margin rose by 2.5 percentage points to 39.6% of net sales, just below the medium-term mark of 40%.
Overall, the reactions to the interim report are good. The fact that the shares are nevertheless falling is explained by profit-taking after a recent strong run and a "few niggles" that can be found in the report. For example, some analysts had expected Novartis to raise its guidance for both key figures again this time.
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