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Novartis (NVS) Q3 Earnings Top, Revenues Miss Estimates
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Novartis AG (NVS - Free Report) reported mixed third-quarter results for 2022 and revised its guidance for the generic unit, Sandoz. Core earnings (excluding one-time charges) of $1.58 per share beat the Zacks Consensus Estimate by a penny but were down from $1.71 reported in the year-ago quarter. Earnings matched our estimate.
However, revenues of $12.5 billion missed the Zacks Consensus Estimate of $12.9 billion. Sales were also down 4% from the year-ago quarter. On a constant currency basis, sales were up 4%, driven by momentum in Entresto, Kesimpta, Kisqali, Cosentyx, and the launch of radioligand therapy, Pluvicto.
Shares of Novartis have lost 11.2% so far this year against the industry’s growth of 0.1%.
Image Source: Zacks Investment Research
All growth rates mentioned below are on a year-over-year basis and at constant exchange rates.
Quarter in Detail
Swiss pharma giant Novartis operates under two segments — Innovative Medicines and Sandoz (generics).
The Innovative Medicines division recorded sales of $10.3 billion, up 4% year over year, driven by the continued strong performance of Entresto, Kesimpta, Cosentyx, and Kisqali. However, sales missed the Zacks Consensus Estimate of $10.6 billion and our estimate of $10.8 billion.
Cosentyx’s sales increased 7% to $1.3 billion from the prior-year quarter, led by continued volume growth in China, Europe and the United States but missed the Zacks Consensus Estimate and our estimate of $1.4 billion. Entresto’s sales surged 31% from the year-ago quarter to $1.1 billion due to sustained robust demand-led growth in the United States, Europe and Japan, with increased patient share across all geographies. Entresto’s sales missed the Zacks Consensus Estimate and our estimate of $1.2 billion.
Kesimpta’s sales came in at $289 million on the back of strong sales growth, driven mainly by the U.S. launch momentum. Xolair’s sales totaled $322 million, up 1%. Strong performances by Kisqali (up 49% to $327 million), Jakavi (up 4% to $386 million), Promacta/Revolade (up 7% to $523 million) and Tafinlar + Mekinist (up 16% to $450 million) also boosted the top line.
The uptake of Pluvicto is encouraging, with sales of $80 million.
However, generic competition, mainly for Afinitor/Votubia (down 44% to $125 million), Gleevec/Glivec (down 25% to $178 million), Gilenya (down 24% to $507 million) and Sandostatin (down 12% to $295 million), affected sales.
Sales in the Sandoz division were $2.2 billion, up 4% year over year but missed the Zacks Consensus Estimate of $2.3 billion and our estimate of $2.4 billion. Sales in Europe grew 1% as the impact of the pandemic eased out. This was, however, partially offset by a 1% decline in the United States. Global sales of Biopharmaceuticals grew 14%.
2022 Guidance
Novartis expects net sales for 2022 to grow in the mid-single digits. While revenues of Innovative Medicines are projected to grow in the mid-single digits, revenues from Sandoz are now expected to rise in the low to mid-single digit range (revised upward from low single-digit growth).
Key Updates
In June 2022, an appeals court held the Gilenya dosing regimen patent in the United States invalid. Novartis will file a petition seeking further review with the U.S. Supreme Court, which denied a motion to stay the issuance of the formal appeal mandate while a further review is ongoing.
The generics of the drug, approved by the FDA, are now available in the United States.
Scemblix was approved in the EU for adult patients with Philadelphia chromosome-positive CML in the chronic phase, previously treated with two or more tyrosine kinase inhibitors.
Other Updates
Novartis recently announced plans to spin off Sandoz into a new publicly traded standalone company following a strategic review. Due to industry-wide price competition among generic pharmaceutical companies and consolidation of buyers, Sandoz experienced significant declines in sales and profits, particularly in the United States.
Novartis’ performance in the third quarter was pretty ho-hum as earnings beat by a penny but revenues lagged due to generic competition. With the planned spin of Sandoz, Novartis is looking to become a pure-play pharmaceutical company. Drugs like Cosentyx, Entresto, Kesimpta, Zolgensma, Kisqali and Leqvio should continue to fuel growth and offset the impact of generic competition.
In 2021, Novartis sold its 33% stake in Roche (RHHBY - Free Report) for $20.7 billion. The company has been a shareholder of RHHBY since May 2001. NVS initiated a share buyback of up to $15 billion, of which $7.6 billion remains to be executed. During the first nine months of 2022, Novartis repurchased a total of 94.2 million shares for $8.1 billion. The buyback is funded through the proceeds from the recent sale of 53.3 million shares of Roche.
Puma’s loss estimates have narrowed to 6 cents from 16 cents over the past 60 days. Puma surpassed estimates in three of the trailing four quarters and missed in the other one, the average being 201.37%.
Dynavax’s earnings estimates have increased to $1.74 from $1.15 for 2022 over the past 90 days. Earnings of Dynavax surpassed estimates in two of the trailing four quarters.
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Novartis (NVS) Q3 Earnings Top, Revenues Miss Estimates
Novartis AG (NVS - Free Report) reported mixed third-quarter results for 2022 and revised its guidance for the generic unit, Sandoz. Core earnings (excluding one-time charges) of $1.58 per share beat the Zacks Consensus Estimate by a penny but were down from $1.71 reported in the year-ago quarter. Earnings matched our estimate.
However, revenues of $12.5 billion missed the Zacks Consensus Estimate of $12.9 billion. Sales were also down 4% from the year-ago quarter. On a constant currency basis, sales were up 4%, driven by momentum in Entresto, Kesimpta, Kisqali, Cosentyx, and the launch of radioligand therapy, Pluvicto.
Shares of Novartis have lost 11.2% so far this year against the industry’s growth of 0.1%.
Image Source: Zacks Investment Research
All growth rates mentioned below are on a year-over-year basis and at constant exchange rates.
Quarter in Detail
Swiss pharma giant Novartis operates under two segments — Innovative Medicines and Sandoz (generics).
The Innovative Medicines division recorded sales of $10.3 billion, up 4% year over year, driven by the continued strong performance of Entresto, Kesimpta, Cosentyx, and Kisqali. However, sales missed the Zacks Consensus Estimate of $10.6 billion and our estimate of $10.8 billion.
Cosentyx’s sales increased 7% to $1.3 billion from the prior-year quarter, led by continued volume growth in China, Europe and the United States but missed the Zacks Consensus Estimate and our estimate of $1.4 billion. Entresto’s sales surged 31% from the year-ago quarter to $1.1 billion due to sustained robust demand-led growth in the United States, Europe and Japan, with increased patient share across all geographies. Entresto’s sales missed the Zacks Consensus Estimate and our estimate of $1.2 billion.
Kesimpta’s sales came in at $289 million on the back of strong sales growth, driven mainly by the U.S. launch momentum. Xolair’s sales totaled $322 million, up 1%. Strong performances by Kisqali (up 49% to $327 million), Jakavi (up 4% to $386 million), Promacta/Revolade (up 7% to $523 million) and Tafinlar + Mekinist (up 16% to $450 million) also boosted the top line.
The uptake of Pluvicto is encouraging, with sales of $80 million.
However, generic competition, mainly for Afinitor/Votubia (down 44% to $125 million), Gleevec/Glivec (down 25% to $178 million), Gilenya (down 24% to $507 million) and Sandostatin (down 12% to $295 million), affected sales.
Sales in the Sandoz division were $2.2 billion, up 4% year over year but missed the Zacks Consensus Estimate of $2.3 billion and our estimate of $2.4 billion. Sales in Europe grew 1% as the impact of the pandemic eased out. This was, however, partially offset by a 1% decline in the United States. Global sales of Biopharmaceuticals grew 14%.
2022 Guidance
Novartis expects net sales for 2022 to grow in the mid-single digits. While revenues of Innovative Medicines are projected to grow in the mid-single digits, revenues from Sandoz are now expected to rise in the low to mid-single digit range (revised upward from low single-digit growth).
Key Updates
In June 2022, an appeals court held the Gilenya dosing regimen patent in the United States invalid. Novartis will file a petition seeking further review with the U.S. Supreme Court, which denied a motion to stay the issuance of the formal appeal mandate while a further review is ongoing.
The generics of the drug, approved by the FDA, are now available in the United States.
Scemblix was approved in the EU for adult patients with Philadelphia chromosome-positive CML in the chronic phase, previously treated with two or more tyrosine kinase inhibitors.
Other Updates
Novartis recently announced plans to spin off Sandoz into a new publicly traded standalone company following a strategic review. Due to industry-wide price competition among generic pharmaceutical companies and consolidation of buyers, Sandoz experienced significant declines in sales and profits, particularly in the United States.
Novartis AG Price, Consensus and EPS Surprise
Novartis AG price-consensus-eps-surprise-chart | Novartis AG Quote
Our Take
Novartis’ performance in the third quarter was pretty ho-hum as earnings beat by a penny but revenues lagged due to generic competition. With the planned spin of Sandoz, Novartis is looking to become a pure-play pharmaceutical company. Drugs like Cosentyx, Entresto, Kesimpta, Zolgensma, Kisqali and Leqvio should continue to fuel growth and offset the impact of generic competition.
In 2021, Novartis sold its 33% stake in Roche (RHHBY - Free Report) for $20.7 billion. The company has been a shareholder of RHHBY since May 2001. NVS initiated a share buyback of up to $15 billion, of which $7.6 billion remains to be executed. During the first nine months of 2022, Novartis repurchased a total of 94.2 million shares for $8.1 billion. The buyback is funded through the proceeds from the recent sale of 53.3 million shares of Roche.
Novartis currently carries a Zacks Rank #3 (Hold). A couple of better-ranked stocks in the healthcare sector are Puma Biotechnology (PBYI - Free Report) and Dynavax (DVAX - Free Report) . Both the stocks carry a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Puma’s loss estimates have narrowed to 6 cents from 16 cents over the past 60 days. Puma surpassed estimates in three of the trailing four quarters and missed in the other one, the average being 201.37%.
Dynavax’s earnings estimates have increased to $1.74 from $1.15 for 2022 over the past 90 days. Earnings of Dynavax surpassed estimates in two of the trailing four quarters.