Novartis shares soar on strong profit outlook for 2019
Swiss drugmaker Novartis saw its share price skyrocket by 6% last week as it released a positive profit outlook for the coming year. The pharmaceutical giant had its issues in the first quarter: notably, a legal battle with partner Amgen and questions over the safety of a key gene therapy (which Novartis is hoping will win approval next month). Nonetheless, the company struck a positive tone which went down well with investors.
Last week saw Novartis’s share price make solid gains on the market
Source: Yahoo Finance
Here’s the top and bottom line from the company’s first quarter: sales (excluding the spin off of eyecare business Alcon) came in at $11.1 billion. That’s a 7% rise, year on year, and outpaced consensus estimates of $10.9 billion. And net income rose by 13% against the year-ago quarter to $2.81 billion. Again, that’s a beat against expectations of $2.76 billion. A major driver of this strong performance was Cosentyx, Novartis’s top-selling psoriasis medicine (sales rose by 41% from the first quarter of 2018 to $791 million). Entresto, the company’s heart medication, also performed very strongly (showing a massive 85% year on year increase in sales to $357 million).
Regarding these two hugely successful medicines, Novartis’s CEO, Vas Narasimhan, told reporters on a call: “taken together, we’re really well positioned for growth.” It was the outperformance of these two drug therapies that also encouraged Narasimhan to raise Novartis’s forecast over “core operating income”. Having previously forecast mid-to-high single digit growth, the company now expects high single digit growth.
One of the major issues facing Novartis over the quarter were reports that two babies undergoing its Zolgensma gene therapy trials died in a manner “possibly related to treatment.” Narasimhan, however (himself a doctor) told investors that the children could have had pneumonia prior to treatment, and offered some insight as to what these reports mean: “when you can’t definitively prove one thing or another, the investigator is required to say there could be a potential contribution. That does not mean the investigational agent actually contributed.” The FDA is expected to deliver its decision over Zolgensma by May 31, and Narasimhan said he does not expect the deaths to have an impact.
Dominion holds Novartis in its Global Trends Manged Fund.
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