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Swiss pharma giant Novartis AG (NVS - Free Report) reported strong second-quarter 2023 results and shares are trading up courtesy of the same. Core earnings (excluding one-time charges) of $1.83 per share beat the Zacks Consensus Estimate of $1.68. The figure was also up from $1.56 reported in the year-ago quarter.
Revenues of $13.6 billion beat the Zacks Consensus Estimate of $13.2 billion. Sales were also up 7% from the year-ago quarter. On a constant currency basis, sales were up 9%, driven by momentum in Entresto, Kesimpta, Kisqali and the strong uptake of radioligand therapy, Pluvicto.
Shares of Novartis have gained 19.7% in the year so far compared with the industry’s growth of 7.1%.
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 $11.2 billion, up 9% year over year, driven by the continued strong performances of Entresto, Pluvicto, Kesimpta and Kisqali but partly offset by generic competition mainly for Gilenya. Sales beat the Zacks Consensus Estimate of $10.8 billion and our estimate of $10.5 billion. Sales in the United States came in at $4.5 billion while the rest of the world contributed $6.7 billion.
Entresto’s sales surged 37% from the year-ago quarter to $1.5 billion due to sustained, robust demand-led growth boosted by adopting guideline-directed medical therapy across regions. Entresto’s sales beat the Zacks Consensus Estimate of $1.48 billion but missed our estimate of $1.6 billion.
Cosentyx’s sales increased by 1% to $1.3 billion as sales stabilized a bit but continued to be impacted by revenue deduction adjustments in the United States. Sales beat the Zacks Consensus Estimate of $1.9 billion and our estimate of $1.2 billion.
Kesimpta sales came in at $489 million, surging 105% on increased demand and strong access.
Kisqali’s stellar performance continued, with sales soaring 66% to $493 million, beating the Zacks Consensus Estimate of $454 million, driven by solid demand across all regions based on increasing recognition of consistent overall survival and quality of life benefits. Kisqali sales also beat our estimate of $458 million.
Strong performances by Jakavi (up 11% to $435 million), Promacta/Revolade (up 11% to $583 million) and Tafinlar + Mekinist (up 13% to $496 million) also boosted the top line.
Pluvicto raked in sales of $240 million on the back of a solid launch in the United States. Novartis received approval for Pluvicto's expanded manufacturing capacity in the second quarter at Millburn, NJ.
However, generic competition affected sales, mainly for Gleevec/Glivec (down 27% to $142 million) and Gilenya (down 52% to $269 million). Lucentis’ sales were also down 21% to $395 million.
Sales in the Sandoz division were $2.4 billion, up 8%, driven by Europe, which benefited from solid volume growth on continued momentum from prior-year launches, a strong cough and cold season and the biosimilars business. Sales of biosimilars grew 13% to $531 million. Sandoz sales were in-line with the Zacks Consensus Estimate and beat our estimate of $2.36 billion.
Sandoz Update
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.
The planned spin-off of the Sandoz unit remains on track and is expected to be completed early in the fourth quarter. Shareholders of Novartis will be invited to vote on the proposed spin-off and a related reduction of the share capital of the company at an Extraordinary General Meeting, scheduled for September.
Sandoz will be listed on the SIX Swiss Exchange with an American Depositary Receipt (ADR) program in the United States.
2023 Guidance Upped
Based on momentum in the first half, Novartis upped guidance again.
Novartis now expects net sales for 2023 to grow in the high-single digit (previous guidance: mid-single digit).
Sales of Innovative Medicines are projected to grow in the high-single digit (previous guidance: mid-single digit) and Sandoz sales are also expected to grow in high-single digit (previous guidance: mid-single digit).
Novartis initiated a share buyback program of up to $15 billion to be completed by year-end 2025, following the completion of a previously announced share buyback in June 2023.
Core operating income is now projected to grow in low double digits (previous guidance: high single digit).
Key Updates
Novartis will appeal to the U.S. Court of Appeals for the Federal Circuit to uphold the validity of its patent covering Entresto and combinations of sacubitril and valsartan, following a negative decision from the U.S. District Court for the District of Delaware.
The drug was approved by the European Commission (EC) for pediatric heart failure, which supports the extension of regulatory data protection in Europe to November 2026.
The EC also approved Cosentyx for use in adults with active moderate-to-severe hidradenitis suppurativa (HS) and an inadequate response to conventional systemic HS therapy based on positive readouts from two late-stage trials.
Our Take
Novartis’ performance in the second quarter was better than expected, as both earnings and sales beat estimates. The company raised its annual guidance for the second consecutive quarter.
With the planned spin-off of Sandoz, Novartis is looking to become a pure-play pharmaceutical company. Drugs like Entresto, Kesimpta, Zolgensma, Kisqali and Leqvio should continue to fuel growth and offset the impact of generic competition. Pluvicto and Scemblix saw very strong launches and the Leqvio launch continues to progress.
Zacks Rank and Stocks to Consider
Novartis currently carries a Zacks Rank #3 (Hold).
A couple of better-ranked stocks in the healthcare sector are Alkermes (ALKS - Free Report) and Anixa Biosciences (ANIX - Free Report) , each sporting a Zacks Rank #1 (Strong Buy).
Alkermes’ 2023 earnings estimates have increased from 20 cents to $1.02 in the past 60 days. Earnings estimates for 2024 have also increased from $1.73 to $2.08 in the past 60 days. ALKS beat estimates in three of the last four quarters and met the mark on one occasion, the average surprise being 90.83%.
In the past 90 days, Anixa Biosciences’ 2023 loss per share has narrowed from 43 cents to 39 cents. During the same period, the estimate for 2024 loss per share narrowed from 46 cents to 38 cents. ANIX beat estimates in each of the trailing four quarters, delivering an average earnings surprise of 31.21%.
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Novartis (NVS) Q2 Earnings & Revenues Top, Guidance Raised
Swiss pharma giant Novartis AG (NVS - Free Report) reported strong second-quarter 2023 results and shares are trading up courtesy of the same. Core earnings (excluding one-time charges) of $1.83 per share beat the Zacks Consensus Estimate of $1.68. The figure was also up from $1.56 reported in the year-ago quarter.
Revenues of $13.6 billion beat the Zacks Consensus Estimate of $13.2 billion. Sales were also up 7% from the year-ago quarter. On a constant currency basis, sales were up 9%, driven by momentum in Entresto, Kesimpta, Kisqali and the strong uptake of radioligand therapy, Pluvicto.
Shares of Novartis have gained 19.7% in the year so far compared with the industry’s growth of 7.1%.
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 $11.2 billion, up 9% year over year, driven by the continued strong performances of Entresto, Pluvicto, Kesimpta and Kisqali but partly offset by generic competition mainly for Gilenya. Sales beat the Zacks Consensus Estimate of $10.8 billion and our estimate of $10.5 billion. Sales in the United States came in at $4.5 billion while the rest of the world contributed $6.7 billion.
Entresto’s sales surged 37% from the year-ago quarter to $1.5 billion due to sustained, robust demand-led growth boosted by adopting guideline-directed medical therapy across regions. Entresto’s sales beat the Zacks Consensus Estimate of $1.48 billion but missed our estimate of $1.6 billion.
Cosentyx’s sales increased by 1% to $1.3 billion as sales stabilized a bit but continued to be impacted by revenue deduction adjustments in the United States. Sales beat the Zacks Consensus Estimate of $1.9 billion and our estimate of $1.2 billion.
Kesimpta sales came in at $489 million, surging 105% on increased demand and strong access.
Kisqali’s stellar performance continued, with sales soaring 66% to $493 million, beating the Zacks Consensus Estimate of $454 million, driven by solid demand across all regions based on increasing recognition of consistent overall survival and quality of life benefits. Kisqali sales also beat our estimate of $458 million.
Strong performances by Jakavi (up 11% to $435 million), Promacta/Revolade (up 11% to $583 million) and Tafinlar + Mekinist (up 13% to $496 million) also boosted the top line.
Pluvicto raked in sales of $240 million on the back of a solid launch in the United States. Novartis received approval for Pluvicto's expanded manufacturing capacity in the second quarter at Millburn, NJ.
However, generic competition affected sales, mainly for Gleevec/Glivec (down 27% to $142 million) and Gilenya (down 52% to $269 million). Lucentis’ sales were also down 21% to $395 million.
Sales in the Sandoz division were $2.4 billion, up 8%, driven by Europe, which benefited from solid volume growth on continued momentum from prior-year launches, a strong cough and cold season and the biosimilars business. Sales of biosimilars grew 13% to $531 million. Sandoz sales were in-line with the Zacks Consensus Estimate and beat our estimate of $2.36 billion.
Sandoz Update
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.
The planned spin-off of the Sandoz unit remains on track and is expected to be completed early in the fourth quarter. Shareholders of Novartis will be invited to vote on the proposed spin-off and a related reduction of the share capital of the company at an Extraordinary General Meeting, scheduled for September.
Sandoz will be listed on the SIX Swiss Exchange with an American Depositary Receipt (ADR) program in the United States.
2023 Guidance Upped
Based on momentum in the first half, Novartis upped guidance again.
Novartis now expects net sales for 2023 to grow in the high-single digit (previous guidance: mid-single digit).
Sales of Innovative Medicines are projected to grow in the high-single digit (previous guidance: mid-single digit) and Sandoz sales are also expected to grow in high-single digit (previous guidance: mid-single digit).
Novartis initiated a share buyback program of up to $15 billion to be completed by year-end 2025, following the completion of a previously announced share buyback in June 2023.
Core operating income is now projected to grow in low double digits (previous guidance: high single digit).
Key Updates
Novartis will appeal to the U.S. Court of Appeals for the Federal Circuit to uphold the validity of its patent covering Entresto and combinations of sacubitril and valsartan, following a negative decision from the U.S. District Court for the District of Delaware.
The drug was approved by the European Commission (EC) for pediatric heart failure, which supports the extension of regulatory data protection in Europe to November 2026.
The EC also approved Cosentyx for use in adults with active moderate-to-severe hidradenitis suppurativa (HS) and an inadequate response to conventional systemic HS therapy based on positive readouts from two late-stage trials.
Our Take
Novartis’ performance in the second quarter was better than expected, as both earnings and sales beat estimates. The company raised its annual guidance for the second consecutive quarter.
Novartis AG Price, Consensus and EPS Surprise
Novartis AG price-consensus-eps-surprise-chart | Novartis AG Quote
With the planned spin-off of Sandoz, Novartis is looking to become a pure-play pharmaceutical company. Drugs like Entresto, Kesimpta, Zolgensma, Kisqali and Leqvio should continue to fuel growth and offset the impact of generic competition. Pluvicto and Scemblix saw very strong launches and the Leqvio launch continues to progress.
Zacks Rank and Stocks to Consider
Novartis currently carries a Zacks Rank #3 (Hold).
A couple of better-ranked stocks in the healthcare sector are Alkermes (ALKS - Free Report) and Anixa Biosciences (ANIX - Free Report) , each sporting a Zacks Rank #1 (Strong Buy).
You can see the complete list of today’s Zacks #1 Rank stocks here.
Alkermes’ 2023 earnings estimates have increased from 20 cents to $1.02 in the past 60 days. Earnings estimates for 2024 have also increased from $1.73 to $2.08 in the past 60 days. ALKS beat estimates in three of the last four quarters and met the mark on one occasion, the average surprise being 90.83%.
In the past 90 days, Anixa Biosciences’ 2023 loss per share has narrowed from 43 cents to 39 cents. During the same period, the estimate for 2024 loss per share narrowed from 46 cents to 38 cents. ANIX beat estimates in each of the trailing four quarters, delivering an average earnings surprise of 31.21%.