By Bhanvi Satija and Marleen Kaesebier
July 21 – Novartis’ beat market expectations for second-quarter core operating profit on Tuesday, as lower-than-expected costs helped the Swiss drugmaker absorb a sharp drop in sales of its top-selling heart drug Entresto.
Novartis quarterly group operating income, adjusted for special items, came in at $5.94 billion dollars, above average analyst expectations of about $5.31 billion cited by Visible Alpha. The company said the decline was mainly because of a lower gross profit, partly offset by lower costs.
Novartis, with a market capitalization of $315 billion, is navigating its most severe period of patent expiries, most notably for the company’s top-selling heart failure drug Entresto, which made up 14% of total net sales last year.
Sales of Entresto declined by 50% in the second quarter, hurt by generic competition in its largest market, the United States, and came in at $1.18 billion, slightly below analysts’ expectations of $1.23 billion.
The drug will lose patent exclusivity in Europe starting from November, and Novartis expects the drop-off in sales will be less steep in the latter half of the year. Entresto sales declined 42% in the first quarter.
Novartis is leaning on cancer drugs Kisqali and Scemblix, which grew 44% and 89%, respectively, in the quarter, and its recent string of dealmaking to offset patent expiries. Psiorarisis drug Cosentyx stood out by beating expectations with 12% growth.
Investors are increasingly focused beyond quarterly results to high-stakes trial data from three experimental drugs – pelacarsen, remibrutinib and del-desiran – which analysts estimate hold potential for $10 billion in peak annual sales.
Those drug will shape Novartis’ growth beyond 2030, when Cosentyx and Kisqali also lose patent exclusivity. Novartis previously said it expects sales to decline by $4 billion this year due to competition from generics.
Data from the late-stage studies will be key to supporting the Swiss drugmaker’s premium valuation of 16 times forward earnings, ahead of peers AstraZeneca, Roche and GSK.
It is now “all eyes on pipeline” Barclays analysts wrote in a note ahead of the results.
“We are on track for multiple important readouts ahead in the second half, and remain on track to deliver our full-year guidance and mid-term outlook,” chief executive Vas Narasimhan said in a statement.
Novartis expects a low single-digit percentage core operating income for the full year, excluding currency swings
(Reporting by Bhanvi Satija and Marleen Kaesebier; Editing by Miranda Murray and Lincoln Feast.)
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