Novartis beats estimates, considers eye care unit spin off
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Novartis beats estimates, considers eye care unit spin off

Novartis reported second quarter earnings for the year last week, showing a decline in revenue as patents expired on one of its cancer-fighting drugs (Gleevec). This decline was in-line with analysts’ expectations: what wasn’t was a 10% rise in net profit. Novartis’ CEO Joe Jimenez said that the company had “fully offset” this revenue loss, in part, through sales of other drugs. Another driver of profit growth last quarter was the company’s eye care unit, Alcon.

Novartis’ share price is up 16% year to date

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SOURCE: Yahoo Finance

Alcon saw sales rise by 3% to $1.5 billion, causing Novartis to increase its full year guidance for the division to low single-digit growth. Alcon has been under scrutiny since the beginning of the year, when Jimenez said that he would consider all the options for what was, then, a struggling division. These options include being sold or spun off.

Jimenez told reporters on a call that looking at Alcon in the widest way “just increases the options we have. It makes a capital markets exit a possibility, because you’ve got a growing business with presumably over time margins that are going to grow.”

Jimenez has underscored his plans to return Novartis to growth in 2018, when new drugs like Entresto, Cosentyx, and Kisqali can further offset the expiry of Gleevec’s patent.   

Disclosure

Dominion holds Novartis in its Global Trends Managed Fund.


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