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Novartis (NVS) to Report Q2 Earnings: Is a Beat in Store?
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Swiss pharma giant Novartis AG (NVS - Free Report) is scheduled to report second-quarter 2023 results on Jul 18.
The company has an impressive track record, beating earnings expectations in all the trailing four quarters. It delivered a four-quarter average earnings surprise of 5.15%. In the last reported quarter, the company beat expectations by 10.32%.
Let's see how things are shaping up for this announcement.
Novartis operates under two segments — Innovative Medicines and Sandoz (generics).
Sales have most likely been boosted in the Innovative Medicines division on the back of Entresto, Pluvicto, Kesimpta and Kisqali’s continued strong performance in the second quarter. The Zacks Consensus Estimate for the Innovative Medicine unit is $10.84 billion and our estimate for the same is $10.5 billion.
A solid surge in Entresto sales boosted by sustained, robust demand-led growth and increased patient share across all geographies led to 32% growth in sales in the first quarter and the momentum has likely continued in the second quarter. The Zacks Consensus Estimate for Entresto and our model estimate are $1.5 billion and $1.6 billion, respectively.
Other growth drivers like Zolgensma (gene therapy for spinal muscular atrophy), Kesimpta and Kisqali are also most likely to have maintained momentum for Novartis. Breast cancer drug Kisqali sales surged in the first quarter and has the stellar performance has most likely prevailed in the second quarter. Novartis stated that the drug has achieved its multibillion-dollar potential in the metastatic setting.
However, generic competition for Gleevec and Gilenya is most likely to have hurt the top line, as in the previous quarter. Sales of Cosentyx, too, have most likely been under pressure due to revenue deduction adjustments. On the first quarter earnings call, Novartis stated that it expects to experience a high single-digit decline in Cosentyx performance in the United States and that full-year global sales will be broadly in line with the prior year. The Zacks Consensus Estimate and our model estimate for Cosentyx is $1.2 billion.
The Sandoz division has revived in the last few quarters after a lull and the trend is likely to have continued in the second quarter. The Zacks Consensus Estimate and our model estimate for the Sandoz unit is $2.4 billion.
The planned spin-off of the Sandoz unit remains on track for the second half of 2023. The transaction is expected to be tax-neutral for Novartis. Novartis had earlier announced that it 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 the consolidation of buyers, Sandoz experienced significant declines in sales and profits, particularly in the United States.
Recent Events
Novartis recently received an unfavorable ruling from the U.S. District Court for the District of Delaware regarding the validity of a patent covering Entresto.
This patent, which includes the combination of sacubitril and valsartan, is set to expire in 2025 with its pediatric exclusivity. Despite the unfavorable ruling, Novartis firmly believes in the validity of the combination patent and intends to appeal the decision to the U.S. Court of Appeals for the Federal Circuit in the hopes of overturning the ruling. The U.S. District Court for the District of Delaware issued a negative decision regarding the validity of U.S. Patent No. 8,101,659, one of the patents listed in the Orange Book for Entresto.
Novartis announced that it will acquire Seattle-based clinical-stage biopharmaceutical company Chinook Therapeutics for $3.5 billion to strengthen its renal pipeline. The acquisition will add Chinook’s pipeline, which includes two late-stage candidates, atrasentan and zigakibart (BION-1301), for immunoglobulin A nephropathy (IgAN), to Novartis’ pipeline.
Updates on adjustments, if any, to the annual guidance in light of these events are expected in the second quarter conference call.
Share Price Performance
The stock has gained 8.4% in the year so far against the industry's decline of 2.3%.
Image Source: Zacks Investment Research
What Our Model Predicts
Our proven model predicts an earnings beat for Novartis this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.
Earnings ESP: Earnings ESP for NVS is +0.12%. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
Zacks Rank: The company currently carries a Zacks Rank #3.
Here are some drug stocks that have the right combination of elements to beat on earnings this time around:
Biogen (BIIB - Free Report) has an Earnings ESP of +1.05% and a Zacks Rank #3. BIIB beat earnings estimates in each of the last four quarters, the average earnings surprise being 15.97%.
Bristol Myers (BMY - Free Report) has an Earnings ESP of +1.18% and a Zacks Rank #3.
Bristol Myers topped earnings estimates in all the last four quarters. BMY has a four-quarter earnings surprise of 6.63%, on average.
AstraZeneca (AZN - Free Report) has an Earnings ESP of +1.88% and a Zacks Rank #3. AstraZeneca topped earnings estimates in the last four quarters and has a four-quarter earnings surprise of 8.11%, on average.
Image: Bigstock
Novartis (NVS) to Report Q2 Earnings: Is a Beat in Store?
Swiss pharma giant Novartis AG (NVS - Free Report) is scheduled to report second-quarter 2023 results on Jul 18.
The company has an impressive track record, beating earnings expectations in all the trailing four quarters. It delivered a four-quarter average earnings surprise of 5.15%. In the last reported quarter, the company beat expectations by 10.32%.
Let's see how things are shaping up for this announcement.
Novartis AG Price, Consensus and EPS Surprise
Novartis AG price-consensus-eps-surprise-chart | Novartis AG Quote
Factors Driving Growth
Novartis operates under two segments — Innovative Medicines and Sandoz (generics).
Sales have most likely been boosted in the Innovative Medicines division on the back of Entresto, Pluvicto, Kesimpta and Kisqali’s continued strong performance in the second quarter. The Zacks Consensus Estimate for the Innovative Medicine unit is $10.84 billion and our estimate for the same is $10.5 billion.
A solid surge in Entresto sales boosted by sustained, robust demand-led growth and increased patient share across all geographies led to 32% growth in sales in the first quarter and the momentum has likely continued in the second quarter. The Zacks Consensus Estimate for Entresto and our model estimate are $1.5 billion and $1.6 billion, respectively.
Other growth drivers like Zolgensma (gene therapy for spinal muscular atrophy), Kesimpta and Kisqali are also most likely to have maintained momentum for Novartis. Breast cancer drug Kisqali sales surged in the first quarter and has the stellar performance has most likely prevailed in the second quarter. Novartis stated that the drug has achieved its multibillion-dollar potential in the metastatic setting.
However, generic competition for Gleevec and Gilenya is most likely to have hurt the top line, as in the previous quarter. Sales of Cosentyx, too, have most likely been under pressure due to revenue deduction adjustments. On the first quarter earnings call, Novartis stated that it expects to experience a high single-digit decline in Cosentyx performance in the United States and that full-year global sales will be broadly in line with the prior year. The Zacks Consensus Estimate and our model estimate for Cosentyx is $1.2 billion.
The Sandoz division has revived in the last few quarters after a lull and the trend is likely to have continued in the second quarter. The Zacks Consensus Estimate and our model estimate for the Sandoz unit is $2.4 billion.
The planned spin-off of the Sandoz unit remains on track for the second half of 2023. The transaction is expected to be tax-neutral for Novartis. Novartis had earlier announced that it 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 the consolidation of buyers, Sandoz experienced significant declines in sales and profits, particularly in the United States.
Recent Events
Novartis recently received an unfavorable ruling from the U.S. District Court for the District of Delaware regarding the validity of a patent covering Entresto.
This patent, which includes the combination of sacubitril and valsartan, is set to expire in 2025 with its pediatric exclusivity. Despite the unfavorable ruling, Novartis firmly believes in the validity of the combination patent and intends to appeal the decision to the U.S. Court of Appeals for the Federal Circuit in the hopes of overturning the ruling. The U.S. District Court for the District of Delaware issued a negative decision regarding the validity of U.S. Patent No. 8,101,659, one of the patents listed in the Orange Book for Entresto.
Novartis announced that it will acquire Seattle-based clinical-stage biopharmaceutical company Chinook Therapeutics for $3.5 billion to strengthen its renal pipeline. The acquisition will add Chinook’s pipeline, which includes two late-stage candidates, atrasentan and zigakibart (BION-1301), for immunoglobulin A nephropathy (IgAN), to Novartis’ pipeline.
Updates on adjustments, if any, to the annual guidance in light of these events are expected in the second quarter conference call.
Share Price Performance
The stock has gained 8.4% in the year so far against the industry's decline of 2.3%.
Image Source: Zacks Investment Research
What Our Model Predicts
Our proven model predicts an earnings beat for Novartis this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.
Earnings ESP: Earnings ESP for NVS is +0.12%. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
Zacks Rank: The company currently carries a Zacks Rank #3.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Stocks to Consider
Here are some drug stocks that have the right combination of elements to beat on earnings this time around:
Biogen (BIIB - Free Report) has an Earnings ESP of +1.05% and a Zacks Rank #3.
BIIB beat earnings estimates in each of the last four quarters, the average earnings surprise being 15.97%.
Bristol Myers (BMY - Free Report) has an Earnings ESP of +1.18% and a Zacks Rank #3.
Bristol Myers topped earnings estimates in all the last four quarters. BMY has a four-quarter earnings surprise of 6.63%, on average.
AstraZeneca (AZN - Free Report) has an Earnings ESP of +1.88% and a Zacks Rank #3.
AstraZeneca topped earnings estimates in the last four quarters and has a four-quarter earnings surprise of 8.11%, on average.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.