Novartis maintains growth momentum and confirms FY’22 Group guidance
Ad hoc announcement pursuant to Art. 53 LR
- Q3 sales grew +4% cc1 (-4% USD)
- Innovative Medicines (IM) sales grew +4% cc (-3% USD), driven by key growth brands including: Entresto (+31% cc), Kesimpta (+172% cc), Kisqali (+49% cc), Cosentyx (+7% cc) and Pluvicto (reaching USD 80 million)
- Sandoz sales grew +4% cc (-7% USD) driven by continued growth in biopharmaceuticals
- Q3 core1 operating income grew +5% cc (-4% USD), mainly driven by higher sales, with IM core margin increasing to 38.1% (+ 100 bps cc)
- Q3 operating income declined -23% cc (-33% USD), mainly due to higher impairments and higher restructuring costs. Net income declined -33% cc (-43% USD), or -27% (cc) excluding the impact of Roche income2. Free cash flow was USD 4.2 billion (-6% USD)
- Q3 core EPS was USD 1.58 +1% cc (-8% USD); excluding Roche core income impact, core EPS grew +10% (cc)
- Strong nine months performance with sales growing +5% cc (-1% USD) and core operating income growing +6% cc (-1% USD):
- Innovative Medicines sales grew +5% cc (-1% USD) and core operating income +6% cc (-1% USD)
- Sandoz sales grew +6% cc (-3% USD) and core operating income +5% cc (-2% USD)
- Previously announced up to USD 15 billion share buyback ongoing; USD 7.6 billion still to be executed
- Intention to separate Sandoz to create a standalone Gx/Biosimilars company by way of a 100% spin-off; with this, Novartis will become a fully focused “pure-play” Innovative Medicines business
- Q3 key innovation milestones:
- Scemblix approved in the EU for adults with Ph+ chronic myeloid leukemia
- Iptacopan demonstrates clinically meaningful superiority vs anti-C5 treatment in Ph3 PNH study (Oct)
- Cosentyx positive results from pivotal Ph3 trials (SUNSHINE and SUNRISE) in hidradenitis suppurativa
- 2022 Group guidance confirmed at mid single digit sales and core operating income growth. Sandoz guidance revised upwards, with sales expected to grow low to mid single digit (from low single digit) and core operating income expected to grow low single digit (from broadly in line)3
Basel, October 25, 2022 - commenting on the quarter, Vas Narasimhan MD, CEO of Novartis, said:
“Novartis delivered a solid third quarter, with strong YTD operational performance. Our six in-market growth drivers with multi-billion sales potential (Cosentyx, Entresto, Zolgensma, Kisqali, Kesimpta, Leqvio) grew 23% in the quarter and now represent 33% of total IM sales. Pluvicto and Scemblix launches are progressing well and we are awaiting data in earlier lines of therapy. We announced the planned separation of Sandoz by way of a 100% spin-off, creating the #1 European generics company and a global leader in biosimilars. Looking ahead, we are confident in delivering growth and margin expansion through our new focused “pure-play” Innovative Medicines strategy, underpinned by our five core TAs, technology platforms, priority geographies and a deep, value-oriented pipeline.”
Key figures1
Q3 2022 | Q3 2021 | % change | 9M 2022 | 9M 2021 | % change | ||||
USD m | USD m | USD | cc | USD m | USD m | USD | cc | ||
Net sales | 12 543 | 13 030 | -4 | 4 | 37 855 | 38 397 | -1 | 5 | |
Operating income | 2 168 | 3 233 | -33 | -23 | 7 248 | 9 127 | -21 | -13 | |
Net income | 1 575 | 2 758 | -43 | -33 | 5 489 | 7 712 | -29 | -20 | |
EPS (USD) | 0.73 | 1.23 | -41 | -31 | 2.50 | 3.44 | -27 | -19 | |
Free cash flow | 4 169 | 4 423 | -6 | 8 393 | 10 255 | -18 | |||
Core operating income | 4 282 | 4 467 | -4 | 5 | 12 635 | 12 769 | -1 | 6 | |
Core net income | 3 419 | 3 830 | -11 | -2 | 10 101 | 10 959 | -8 | -1 | |
Core EPS (USD) | 1.58 | 1.71 | -8 | 1 | 4.60 | 4.88 | -6 | 2 |
Strategy Update
Our focus
Novartis unveiled a new focused strategy with our transformation into a “pure-play” Innovative Medicines business. We have a clear focus on five core therapeutic areas (cardiovascular, immunology, neuroscience, solid tumors and hematology), with multiple significant in-market and pipeline assets in each of these areas, that address high disease burden and have substantial growth potential. In addition to two established technology platforms (chemistry and biotherapeutics), three emerging platforms (gene & cell therapy, radioligand therapy, and xRNA) are being prioritized for continued investment into new R&D capabilities and manufacturing scale. Geographically, we are focused on growing in our priority geographies - the US, China, Germany and Japan.
Our priorities
- Accelerate growth: Renewed attention to deliver high-value medicines (NMEs) and focus on launch excellence, with a rich pipeline across our core therapeutic areas.
- Deliver returns: Continuing to embed operational excellence and deliver improved financials. Novartis remains disciplined and shareholder-focused in our approach to capital allocation, with substantial cash generation and a strong capital structure supporting continued flexibility.
- Strengthening foundations: Unleashing the power of our people, scaling data science and technology and continuing to build trust with society.
Sandoz strategic review
Novartis concluded the strategic review of Sandoz, announcing a proposed 100% spin-off of Sandoz, its generics and biosimilars division into a new publicly traded standalone company. We believe that the 100% spin-off is in the best interest of shareholders and consistent with the Novartis strategy of focusing as a leading medicines company. The planned spin-off allows Sandoz to leverage its strong brand and sustain its leading global position by continuing to invest in the key strategic areas of Biosimilars, Antibiotics and Generic Medicines. Completion of the transaction is subject to certain conditions, including consultation with works councils and employee representatives (as required), general market conditions, tax rulings and opinions, final Board of Directors endorsement and shareholder approval in line with Swiss corporate law. The transaction is expected to be tax neutral to Novartis.
Sandoz CEO designate announcement
In anticipation of the intended Sandoz spin-off, Richard Saynor, will be appointed CEO designate of Sandoz and step down from the Executive Committee of Novartis with immediate effect. He will continue to report directly to Vas Narasimhan and lead the Sandoz division.
Financials
Third quarter
Net sales were USD 12.5 billion (-4%, +4% cc) in the third quarter, driven by volume growth of 11 percentage points, price erosion of 4 percentage points and the negative impact from generic competition of 3 percentage points.
Operating income was USD 2.2 billion (-33%, -23% cc), mainly due to higher impairments (USD 0.5 billion) and higher restructuring costs (USD 0.4 billion) primarily related to the implementation of the previously announced streamlined organizational model.
Net income was USD 1.6 billion (-43%, -33% cc), mainly due to lower operating income. Excluding the impact of Roche income, net income declined -27% (cc). EPS was USD 0.73 (-41%, -31% cc). Excluding the impact of Roche income, EPS declined -25% (cc).
Core operating income was USD 4.3 billion (-4%, +5% cc), mainly driven by higher sales, partly offset by higher R&D and M&S investments. Core operating income margin was 34.1% of net sales, decreasing by 0.2 percentage points (+0.2 percentage points cc).
Core net income was USD 3.4 billion (-11%, -2% cc), as growth in core operating income was more than offset by the loss of Roche core income. Excluding the impact of Roche core income, core net income grew +7% (cc). Core EPS was USD 1.58 (-8%, +1% cc), benefiting from lower weighted average number of shares outstanding. Excluding the impact of Roche core income, core EPS grew +10% (cc).
Free cash flow amounted to USD 4.2 billion (-6% USD), compared to USD 4.4 billion in the prior year quarter, mainly due to lower operating income adjusted for non-cash items.
Innovative Medicines net sales were USD 10.3 billion (-3%, +4% cc) with volume contributing 12 percentage points to growth. Sales growth was mainly driven by continued strong performance from Entresto, Kesimpta, Kisqali, Cosentyx, and the Pluvicto launch. Generic competition had a negative impact of 4 percentage points, mainly due to Afinitor/Votubia, Gilenya (ex-US), Gleevec/Glivec and Exjade. Pricing had a negative impact of 4 percentage points. Sales in the US were USD 4.1 billion (+8%) and in the rest of the world USD 6.2 billion (-9%, +2% cc).
Sandoz net sales were USD 2.2 billion (-7%, +4% cc) with volume contributing 10 percentage points to growth. Pricing had a negative impact of 6 percentage points. Sales in Europe were USD 1.2 billion (-13%, +1% cc), in the US USD 435 million (-1%) and in the rest of the world USD 647 million (+4%, +14% cc). Global sales of Biopharmaceuticals grew to USD 533 million (+1%, +14% cc) partly benefiting from a one-time revenue deduction adjustment.
Nine months
Net sales were USD 37.9 billion (-1%, +5% cc) in the first nine months, driven by volume growth of 12 percentage points, price erosion of 4 percentage points and the negative impact from generic competition of 3 percentage points.
Operating income was USD 7.2 billion (-21%, -13% cc), mainly due to higher impairments (USD 0.7 billion), higher restructuring costs (USD 0.6 billion) primarily related to the implementation of the previously announced streamlined organizational model and lower divestment gains (USD 0.5 billion).
Net income was USD 5.5 billion (-29%, -20% cc), mainly due to lower operating income. Excluding the impact of Roche income, net income declined -12% (cc). EPS was USD 2.50 (-27%, -19% cc). Excluding the impact of Roche income, EPS declined -10% (cc).
Core operating income was USD 12.6 billion (-1%, +6% cc), mainly driven by higher sales, partly offset by higher R&D and M&S investments. Core operating income margin was 33.4% of net sales, increasing by 0.1 percentage points (+0.5 percentage points cc).
Core net income was USD 10.1 billion (-8%, -1% cc), as growth in core operating income was offset by the loss of Roche core income. Excluding the impact of Roche core income, core net income grew +8% (cc). Core EPS was USD 4.60 (-6%, +2% cc), benefiting from lower weighted average number of shares outstanding. Excluding the impact of Roche core income, core EPS grew +11% (cc).
Free cash flow amounted to USD 8.4 billion (-18% USD), compared to USD 10.3 billion in the prior year period, mainly due to lower divestment proceeds, unfavorable changes in working capital and the loss of Roche annual dividend (prior year USD 0.5 billion).
Innovative Medicines net sales were USD 30.9 billion (-1%, +5% cc) with volume contributing 12 percentage points to growth. Sales growth was mainly driven by continued strong performance from Entresto, Kesimpta, Cosentyx and Kisqali. Generic competition had a negative impact of 3 percentage points, mainly due to Afinitor/Votubia, Gleevec/Glivec, Gilenya (ex-US), Exjade, and Exforge. Pricing had a negative impact of 4 percentage points. Sales in the US were USD 11.7 billion (+6%) and in the rest of the world USD 19.2 billion (-5%, +4% cc).
Sandoz net sales were USD 6.9 billion (-3%, +6% cc) with volume contributing 13 percentage points to growth. Pricing had a negative impact of 7 percentage points. Sales in Europe were USD 3.6 billion (-7%, +5% cc), in the US USD 1.3 billion (-1%) and in the rest of the world USD 2.0 billion (+6%, +12% cc). Sales growth benefited from a strong cough and cold season and a return towards normal business dynamics in the first half of the year. Global sales of Biopharmaceuticals grew to USD 1.6 billion (+1%, +11% cc).
Q3 key growth drivers
Underpinning our financial results in the quarter is a continued focus on key growth drivers (ranked in order of cc contribution to Q3 growth) including:
Entresto | (USD 1,135 million, +31% cc) sustained robust demand-led growth in the US, Europe and Japan, with increased patient share across all geographies |
Kesimpta | (USD 289 million, +172% cc) strong sales growth mainly driven by US launch momentum |
Kisqali | (USD 327 million, +49% cc) grew strongly across all geographies based on increasing recognition of OS and quality of life benefits in HR+/HER2- advanced breast cancer |
Cosentyx | (USD 1,274 million, +7% cc) continued volume growth in China, Europe and the US |
Pluvicto | (USD 80 million) launch progressing well, with more than 120 active centers ordering |
Tafinlar + Mekinist | (USD 450 million, +16% cc) grew across all geographies, driven by demand in BRAF+ adjuvant melanoma and NSCLC indications |
Scemblix | (USD 41 million) strong launch uptake demonstrating the high unmet need in CML |
Promacta/Revolade | (USD 523 million, +7% cc) growth was driven mainly by the US, with increased use in chronic ITP and 1L for severe aplastic anemia |
Leqvio | (USD 34 million) launch in the US and other markets is ongoing, with focus on patient on-boarding, removing access hurdles and enhancing medical education |
Ilaris | (USD 272 million, +10% cc) continued growth across all geographies |
Mayzent | (USD 94 million, +29% cc) sales grew in MS patients showing signs of progression |
Piqray | (USD 103 million, +26% cc) sales grew mainly in the US, benefiting from indication expansion into PIK3CA-related overgrowth spectrum (PROS) |
Lutathera | (USD 132 million, +15% cc) saw strong growth across all geographies, with approximately 500 centers actively treating patients globally |
Jakavi | (USD 386 million, +4% cc) grew mainly in Emerging Growth Markets and Japan, driven by strong demand in myelofibrosis and polycythemia vera |
Sandoz Biopharmaceuticals | (USD 533 million, +14% cc) continued to grow across all geographies, partly benefiting from a one-time revenue deduction adjustment |
Emerging Growth Markets* | Overall, grew +9% (cc); China delivered growth (+5% cc, USD 832 million) despite continued COVID-19 related lockdowns in the quarter |
*All markets except the US, Canada, Western Europe, Japan, Australia, and New Zealand
Net sales of the top 20 Innovative Medicines products in 2022
Q3 2022 | % change | 9M 2022 | % change | |||
USD m | USD | cc | USD m | USD | cc | |
Cosentyx | 1 274 | 2 | 7 | 3 708 | 7 | 11 |
Entresto | 1 135 | 23 | 31 | 3 353 | 29 | 35 |
Gilenya | 507 | -28 | -24 | 1 667 | -22 | -18 |
Promacta/Revolade | 523 | 0 | 7 | 1 548 | 3 | 9 |
Lucentis | 455 | -18 | -7 | 1 476 | -11 | -2 |
Tasigna | 489 | -5 | 2 | 1 448 | -7 | -2 |
Tafinlar + Mekinist | 450 | 8 | 16 | 1 305 | 6 | 12 |
Jakavi | 386 | -9 | 4 | 1 173 | -1 | 9 |
Zolgensma | 319 | -15 | -13 | 1 061 | 5 | 9 |
Xolair | 322 | -12 | 1 | 1 042 | -1 | 9 |
Sandostatin | 295 | -16 | -12 | 933 | -13 | -10 |
Kisqali | 327 | 41 | 49 | 874 | 34 | 41 |
Ilaris | 272 | 0 | 10 | 832 | 7 | 16 |
Kesimpta | 289 | 165 | 172 | 723 | 221 | 227 |
Galvus Group | 212 | -22 | -12 | 650 | -20 | -11 |
Exforge Group | 185 | -9 | 0 | 584 | -17 | -12 |
Gleevec/Glivec | 178 | -30 | -25 | 570 | -28 | -24 |
Diovan Group | 160 | -11 | -2 | 510 | -13 | -6 |
Afinitor/Votubia | 125 | -49 | -44 | 406 | -47 | -43 |
Kymriah | 134 | -8 | 0 | 397 | -11 | -4 |
Top 20 brands total | 8 037 | -3 | 4 | 24 260 | 0 | 6 |
R&D update - key developments from the third quarter
New approvals
Scemblix | Approved in the EU for adult patients with Philadelphia chromosome-positive CML in chronic phase, previously treated with two or more tyrosine kinase inhibitors |
Regulatory updates
Biosimilar natalizumab | FDA and EMA accepted sBLA/MAA for proposed first-of-a-kind multiple sclerosis biosimilar natalizumab. The application includes all indications of the reference medicine Tysabri® (natalizumab) |
Biosimilar adalimumab | FDA accepted for review sBLA for high concentration formulation of biosimilar Hyrimoz (adalimumab-adaz). The application includes the indications of the reference medicine Humira® (adalimumab) not protected by orphan exclusivity |
Ganaplacide/ Lumefantrine | FDA granted Fast Track Designation and Orphan Drug Designation for ganaplacide and lumefantrine (combination), which is being co-developed with Medicines for Malaria Venture, for acute, uncomplicated malaria |
Results from ongoing trials and other highlights
Iptacopan | In October, Ph3 APPLY-PNH trial met its two primary endpoints for superiority vs anti-C5 treatment in adult paroxysmal nocturnal hemoglobinuria (PNH) patients with residual anemia despite prior anti-C5 treatment |
Cosentyx | Positive results from two parallel, pivotal Ph3 trials (SUNSHINE and SUNRISE) demonstrated Cosentyx 300 mg resulted in rapid and sustained relief from signs and symptoms of moderate-to-severe hidradenitis suppurativa (HS). A statistically significant proportion of patients achieved HiSCR with Cosentyx 300 mg dosed every two weeks vs placebo at Week 16 in both trials. Cosentyx 300 mg dosed every four weeks was superior to placebo for achieving HiSCR in SUNRISE, but not statistically significantly different in SUNSHINE. Available data support the sustained efficacy delivered by Cosentyx over continuous treatment up to 52 weeks. Safety results were consistent with the well-established Cosentyx safety profile. Data presented at EADV 2022 |
Kisqali | New large pooled exploratory analysis from MONALEESA-2, -3 and -7 reinforces OS benefit (median OS of 63.4 months) with Kisqali + endocrine therapy (ET) vs ET alone (median OS of 51.8 months), in HR+/HER2- aBC patients with visceral metastases, which are typically associated with a poor prognosis. Data presented at ESMO 2022 |
Tislelizumab | Ph3 RATIONALE 301 trial demonstrated non-inferior OS for tislelizumab vs sorafenib (median OS: 15.9 months vs 14.1 months) in patients wi
By: GlobeNewswire
- 25 Oct 2022
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