Novartis continues to grow with further core margin expansion and achieves important innovation milestones
Ad hoc announcement pursuant to Art. 53 LR
Full year
- Net sales grew +4% (cc1, -2% USD) with core operating income growing +8% (cc, 0% USD)
- IM sales grew +4% (cc, -2% USD) and core operating income +8% (cc, 0% USD), with IM core margin reaching 36.9% (+130 bps cc)
- Sandoz sales grew +4% (cc, -4% USD) with core operating income decreasing -1% (cc, -8% USD)
- Operating income declined -13% (cc, -21% USD), mainly due to higher restructuring and impairments. Net income declined -67% (cc, -71% USD), or -9% (cc) excluding the impact of Roche income2. Free cash flow was USD 11.9 billion (-10% USD)
- Core EPS was USD 6.12 +6% (cc, -3% USD); excluding Roche core income impact, core EPS grew +14% (cc)
Fourth quarter
- Net sales grew +3% (cc, -4% USD) with core operating income growing +15% (cc, +6% USD), mainly driven by higher sales and productivity
- Innovative Medicines (IM) sales grew +3% (cc, -3% USD), growth drivers include: Entresto (+44% cc), Kesimpta (+157% cc), Pluvicto (reaching USD 179 million) and Kisqali (+33% cc)
- Sandoz sales were in line with the prior year (0% cc, -8% USD) with continued growth in biopharmaceuticals
- Q4 selected innovation milestones:
- Pluvicto Ph3 PSMAfore positive results in mCRPC; EC approval for progressive PSMA+ mCRPC
- Iptacopan Ph3 APPLY-PNH demonstrated iptacopan superiority vs. anti-C5 in refractory PNH
- Iptacopan Ph3 APPOINT-PNH met primary endpoint in complement inhibitor naive PNH patients
Share buyback, dividend and 2023 guidance
- Previously announced up-to USD 15 billion share buyback ongoing; USD 4.9 billion still to be executed3
- Dividend of CHF 3.20 per share, an increase of 3.2%, proposed for 2022
- 2023 guidance4 – Group expected to grow sales low-to-mid single digit and core operating income mid single digit. IM expected to grow sales low-to-mid single digit and core operating income mid-to-high single digit
Basel, February 1, 2023 - commenting on 2022 results, Vas Narasimhan, CEO of Novartis, said: “Novartis is on track to become a pure-play innovative medicines company, uniquely positioned to leverage its global scale and R&D platforms. Our six multi-billion brands5 now represent 32% of our Innovative Medicines sales and are growing 26%. Pluvicto and Scemblix had very strong launch performances, and the Leqvio launch continues to progress. Pivotal Ph3 readouts for two iptacopan studies and Pluvicto in earlier lines of therapy provide strong confidence for near to mid-term growth. Looking ahead, we have a catalyst rich pipeline with 15 pivotal readouts in the mid-term. We expect to continue to deliver improved financials and strengthen Novartis ESG foundations, on our journey to become most trusted and valued medicines company in the world”.
Key figures1
Q4 2022 | Q4 2021 | % change | FY 2022 | FY 2021 | % change | |||
USD m | USD m | USD | cc | USD m | USD m | USD | cc | |
Net sales | 12 690 | 13 229 | -4 | 3 | 50 545 | 51 626 | -2 | 4 |
Operating income | 1 949 | 2 562 | -24 | -14 | 9 197 | 11 689 | -21 | -13 |
Net income | 1 466 | 16 306 | -91 | -90 | 6 955 | 24 018 | -71 | -67 |
EPS (USD) | 0.69 | 7.29 | -91 | -89 | 3.19 | 10.71 | -70 | -66 |
Free cash flow | 3 552 | 3 027 | 17 | 11 945 | 13 282 | -10 | ||
Core operating income | 4 030 | 3 819 | 6 | 15 | 16 665 | 16 588 | 0 | 8 |
Core net income | 3 251 | 3 135 | 4 | 14 | 13 352 | 14 094 | -5 | 3 |
Core EPS (USD) | 1.52 | 1.40 | 9 | 19 | 6.12 | 6.29 | -3 | 6 |
1 Constant currencies (cc), core results and free cash flow are non-IFRS measures. An explanation of non-IFRS measures can be found on page 50 of the Condensed Financial Report. Unless otherwise noted, all growth rates in this Release refer to same period in prior year. 2 A table showing the Q4 2022 and FY 2022 key figures excluding Roche can be found on page 8 and a reconciliation of 2021 IFRS results and non-IFRS measures core results to exclude the impacts of the 2021 divestment of our Roche investment can be found on page 58 of the Condensed Financial Report. 3 As per December 31, 2022. 4 Please see detailed guidance assumptions on page 6. 5 Potential USD sales.
Strategy Update
Our focus
During 2022, 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 planned spin-off
The planned spin-off remains on track for H2 2023. 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.
Financials
Fourth quarter
Net sales were USD 12.7 billion (-4%, +3% cc) in the fourth quarter driven by volume growth of 10 percentage points, partly offset by price erosion of 3 percentage points and the negative impact from generic competition of 4 percentage points.
Operating income was USD 1.9 billion (-24%, -14% cc), mainly due to higher restructuring costs (USD 0.6 billion), primarily related to the implementation of the previously announced streamlined organizational model.
Net income was USD 1.5 billion (-91%, -90% cc), impacted by Roche income in the prior year of USD 14.6 billion. Excluding the impact of Roche income, net income grew +2% (cc). EPS was USD 0.69 (-91%, -89% cc). Excluding the impact of Roche income, EPS grew +7% (cc).
Core operating income was USD 4.0 billion (+6%, +15% cc) driven by higher sales and productivity, including initial savings from the previously announced streamlined organizational model. Core operating income margin was 31.8% of net sales, increasing by 2.9 percentage points (+3.5 percentage points cc).
Core net income was USD 3.3 billion (+4%, +14% cc), mainly driven by growth in core operating income, partly offset by the loss of Roche core income. Excluding the impact of Roche core income, core net income grew +17% (cc). Core EPS was USD 1.52 (+9%, +19% cc), benefiting from lower weighted average number of shares outstanding. Excluding the impact of Roche core income, core EPS grew +23% (cc).
Free cash flow amounted to USD 3.6 billion (+17% USD), mainly driven by higher net cash flows from operating activities and lower purchases of intangible assets.
Innovative Medicines net sales were USD 10.4 billion (-3%, +3% cc) with volume contributing 11 percentage points to growth, mainly driven by continued strong performance from Entresto, Kesimpta, Pluvicto and Kisqali. Generic competition had a negative impact of 5 percentage points, mainly due to Gilenya, Exjade and Afinitor. Pricing had a negative impact of 3 percentage points, including approximately 1 percentage point impact from a revenue deduction true-up for Cosentyx in the US, which was related to prior quarters in 2022. Sales growth for the quarter was also negatively impacted by the prior year reclassification of contract manufacturing from other revenues to sales. Excluding the contract manufacturing reclassification impact, sales would have grown +4% (cc). Sales in the US were USD 4.2 billion (+7%) and in the rest of the world USD 6.2 billion (-9%, +1% cc).
Sandoz net sales were USD 2.3 billion (-8%, 0% cc) with volume contributing 5 percentage points to growth. Pricing had a negative impact of 5 percentage points. Sales in Europe were USD 1.3 billion (-7%, +3% cc), in the US USD 429 million (-10%) and in the rest of the world USD 612 million (-8%, +1% cc). Sales were negatively impacted by a prior year biopharmaceuticals contract manufacturing revenue reclassification. Excluding this impact, overall Sandoz sales would have grown +1% (cc). Global sales of Biopharmaceuticals grew to USD 517 million (-7%, +3% cc), with growth in Europe, Canada and Latin America.
Full year
Net sales were USD 50.5 billion (-2%, +4% cc) in the full year, driven by volume growth of 11 percentage points, partly offset by price erosion of 4 percentage points and the negative impact from generic competition of 3 percentage points.
Operating income was USD 9.2 billion (-21%, -13% cc), mainly due to higher restructuring (USD 1.2 billion) primarily related to the implementation of the previously announced streamlined organizational model, higher impairments (USD 1.0 billion) and lower divestment gains (USD 0.6 billion).
Net income was USD 7.0 billion (-71%, -67% cc), impacted by Roche income in the prior year. Excluding the impact of Roche income, net income declined -9% (cc). EPS was USD 3.19 (-70%, -66% cc). Excluding the impact of Roche income, EPS declined -7% (cc).
Core operating income was USD 16.7 billion (0%, +8% cc) benefiting from higher sales, partly offset by higher R&D investments. Core operating income margin was 33.0% of net sales, increasing by 0.9 percentage points (+1.3 percentage points cc).
Core net income was USD 13.4 billion (-5%, +3% cc) as growth in core operating income was partly offset by the loss of Roche core income. Excluding the impact of Roche core income, core net income grew +11% (cc). Core EPS was USD 6.12 (-3%, +6% cc), benefiting from lower weighted average number of shares outstanding. Excluding the impact of Roche core income, core EPS grew +14% (cc).
Free cash flow amounted to USD 11.9 billion (-10% USD), mainly due to a decrease in net cash flows from operating activities and lower divestment proceeds, partly offset by lower purchases of property, plant and equipment.
Innovative Medicines net sales were USD 41.3 billion (-2%, +4% cc), with volume contributing 12 percentage points to growth. Sales growth was mainly driven by continued strong growth from Entresto, Kesimpta, Kisqali, Pluvicto and Cosentyx. Generic competition had a negative impact of 4 percentage points, mainly due to Gilenya, Afinitor/Votubia and Gleevec/Glivec. Pricing had a negative impact of 4 percentage points. Sales in the US were USD 15.9 billion (+6%) and in the rest of the world USD 25.4 billion (-6%, +3% cc).
Sandoz net sales were USD 9.2 billion (-4%, +4% cc) with volume contributing 10 percentage points to growth. Pricing had a negative impact of 6 percentage points. Sales in Europe were USD 4.9 billion (-7%, +4% cc), in the US USD 1.8 billion (-4%) and in the rest of the world USD 2.6 billion (+2%, +9% cc). Global sales of Biopharmaceuticals grew to USD 2.1 billion (-1%, +9% cc) across all regions.
Q4 key growth drivers
Underpinning our financial results in the quarter is a continued focus on key growth drivers (ranked in order of contribution to Q4 growth) including:
Entresto | (USD 1,291 million, +44% cc) sustained robust demand-led growth, with increased patient share across all geographies |
Kesimpta | (USD 369 million, 157% cc) driven by strong launch uptake, access and increased demand; approved in 80 countries |
Pluvicto | (USD 179 million, nm cc) with strong US launch performance, more than 160 active centers |
Kisqali | (USD 357 million, +33% cc) grew strongly across all geographies, based on increasing recognition of its overall survival and quality of life benefits in HR+/HER2- advanced breast cancer |
Promacta/Revolade | (USD 540 million, +11% cc) showed growth across most regions, driven by increased use in chronic ITP and as first-line and/or second-line treatment for severe aplastic anemia |
Scemblix | (USD 52 million, nm cc) continued its strong launch uptake demonstrating the high unmet need in CML, particularly patients previously treated with 2 or more tyrosine kinase inhibitors, or with the T315I mutation |
Leqvio | (USD 42 million, nm cc) launch is ongoing, with focus on patient on-boarding, removing access hurdles and enhancing medical education |
Ilaris | (USD 301 million, +14% cc) showed continued growth across all geographies |
Tafinlar + Mekinist | (USD 465 million, +8% cc) sales grew across all geographies, driven by demand in BRAF+ adjuvant melanoma and NSCLC indications |
Jakavi | (USD 388 million, +8% cc) sales grew (cc) mainly in Europe, Emerging Growth Markets and Japan, driven by strong demand in both the myelofibrosis and polycythemia vera indications |
Piqray | (USD 112 million, +30% cc) sales grew mainly in the US, benefiting from indication expansion into PIK3CA-related overgrowth spectrum (PROS) |
Mayzent | (USD 99 million, +28% cc) continued to grow in patients with multiple sclerosis showing signs of progression despite being on other treatments |
Lutathera | (USD 128 million, +15% cc) sales grew across all geographies, with approximately 500 centers actively treating patients globally |
Cosentyx | (USD 1,080 million, -9% cc), with ex-US growing +5% (cc). US sales growth was impacted by a revenue deduction true-up for Cosentyx (mainly due to higher than expected Medicaid patient mix), which was related to prior quarters in 2022. For the full year, Cosentyx grew +5% (cc) worldwide |
Sandoz Biopharmaceuticals | (USD 517 million, +3% cc) with growth in Europe, Canada and Latin America |
Emerging Growth Markets* | Grew +5% (cc) overall. China declined (-2% cc) to USD 581 million, with sales impacted by COVID-19 related regional lockdowns. For the full year, China grew +6% (cc) *All markets except the US, Canada, Western Europe, Japan, Australia, and New Zealand |
nm= not meaningful
Net sales of the top 20 Innovative Medicines products in 2022
Q4 2022 | % change | FY 2022 | % change | |||
USD m | USD | cc | USD m | USD | cc | |
Cosentyx / excl. revenue deduction true-up* | 1 080 | -13 / -6* | -9 / -2* | 4 788 | 1 | 5 |
Entresto | 1 291 | 36 | 44 | 4 644 | 31 | 37 |
Promacta/Revolade | 540 | 4 | 11 | 2 088 | 4 | 9 |
Gilenya | 346 | -47 | -44 | 2 013 | -28 | -24 |
Tasigna | 475 | -6 | 0 | 1 923 | -7 | -1 |
Lucentis | 398 | -22 | -12 | 1 874 | -13 | -4 |
Tafinlar + Mekinist | 465 | 2 | 8 | 1 770 | 5 | 11 |
Jakavi | 388 | -5 | 8 | 1 561 | -2 | 9 |
Zolgensma | 309 | -10 | -5 | 1 370 | 1 | 5 |
Xolair | 323 | -13 | -3 | 1 365 | -4 | 6 |
Sandostatin | 305 | -12 | -8 | 1 238 | -12 | -10 |
Kisqali | 357 | 25 | 33 | 1 231 | 31 | 38 |
Ilaris | 301 | 6 | 14 | 1 133 | 7 | 15 |
Kesimpta | 369 | 151 | 157 | 1 092 | 194 | 200 |
Galvus Group | 209 | -25 | -16 | 859 | -21 | -12 |
Gleevec/Glivec | 175 | -25 | -18 | 745 | -27 | -22 |
Exforge Group | 159 | -19 | -12 | 743 | -18 | -12 |
Diovan Group | 142 | -25 | -16 | 652 | -16 | -9 |
Kymriah | 139 | -3 | 5 | 536 | -9 | -2 |
Afinitor/Votubia | 106 | -39 | -32 | 512 | -45 | -41 |
Top 20 products total | 7 877 | -4 | 2 | 32 137 | -1 | 5 |
* Sales growth with/without true-up: US Cosentyx sales growth was impacted by a revenue deduction true-up (mainly due to higher than expected Medicaid patient mix), which was related to prior quarters in 2022
R&D update - key developments from the fourth quarter
New approvals
Pluvicto | EC approval for treatment of patients with progressive PSMA-positive metastatic castration-resistant prostate cancer (mCRPC) who have been treated with androgen-receptor pathway inhibition and taxane-based chemotherapy |
Results from ongoing trials and other highlights
Pluvicto | Ph3 PSMAfore trial met its primary endpoint, demonstrating statistically significant and clinically meaningful improvement in radiographic PFS in patients with PSMA-positive mCRPC who have been treated with androgen-receptor pathway inhibition. No unexpected safety findings were observed. Detailed data to be presented at an upcoming medical meeting with submission to regulatory authorities for approval planned for 2023 |
Iptacopan | Ph3 APPLY-PNH study met both primary and most secondary endpoints demonstrating iptacopan’s superiority over anti-C5 treatment in adult PNH patients with residual anemia despite prior anti-C5 treatment. Iptacopan demonstrated an 80% difference to anti-C5 in the estimated proportion of patients achieving ?2 g/dL Hb-level increases from baseline and a 67% difference to anti-C5 in the estimated proportion of patients achieving ?12 g/dL Hb levels without the need for red blood cell transfusions. Iptacopan also provided blood-transfusion independence for almost all patients with no serious cases of breakthrough hemolysis and clinically meaningful patient-reported fatigue improvements. Data presented at ASH 2022 Ph3 APPOINT-PNH study (evaluating iptacopan in complement-inhibitor-naïve PNH patients) met its primary endpoint. With iptacopan, a significant proportion of patients achieved clinically meaningful Hb-level increases of ?2 g/dL from baseline without the need for blood transfusions at 24 weeks. Detailed data to be presented at an upcoming medical meeting and included in iptacopan PNH global regulatory submissions planned in 2023 |
Kisqali | Ph2 RIGHT Choice trial demonstrated approximately one year PFS benefit of Kisqali plus ET over combination chemotherapy (24 months compared to 12.3 months; HR=0.54; p=.0007) in the 1L setting for pre- and perimenopausal patients with aggressive forms of HR+/HER2? mBC, including patients with visceral crisis. RIGHT Choice is the first randomized study comparing a CDK4/6i plus ET vs. combination CT in aggressive HR+/HER2? mBC. Data presented at SABCS 2022 |
Leqvio | New long-term data from the ORION-3 open-label study demonstrated effective and sustained reductions in LDL cholesterol over four years of treatment. At any time throughout the trial, approximately 80% of patients reached an LDL-C level of <70mg/dL. Data presented at AHA 2022 |
Ganaplacide/ lumefantrine-SDF combination | Novartis and Medicines for Malaria Venture announced that ganaplacide/ lumefantrine would advance to a Ph3 study in patients with acute uncomplicated malaria due to Plasmodium falciparum |
Branaplam | Novartis ended the development of branaplam in Huntington’s Disease based on an overall assessment of potential benefit-risk from the Ph2b VIBRANT-HD study |
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