Novartis
shares experienced a surge on Tuesday following the announcement by the Swiss pharmaceutical company that it has raised its full-year guidance due to strong drug sales. In addition to this, Novartis also unveiled a $15 billion share buyback plan.
The company’s positive financial performance was revealed during the release of its second-quarter earnings report, which exceeded expectations set by Wall Street analysts.
The buyback program, set to continue until the end of 2025, comes as Novartis accumulates a significant amount of cash from the sale of its stake in Swiss competitor Roche in 2021. It should be noted that Novartis recently completed another buyback program of a similar size last month.
Novartis has revised its sales growth projection for 2023, expecting a high-single-digit percentage increase compared to the previous forecast of mid-single-digit growth. The company also revised its expectation for group core operating income, anticipating a low double-digit percentage growth instead of the previously predicted high-single-digit growth.
As part of its strategy to prioritize patented prescription medicines, Novartis announced a plan in August to spin off its generics unit Sandoz.
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Novartis shares closed over 4% higher on Tuesday, contributing to a total increase of more than 12% in market value for the company this year, reaching approximately $236 billion.
Here’s a breakdown of Novartis’ reported results compared to the analysts’ expectations based on a survey by Refinitiv:
- Earnings per share: $1.83 (adjusted) vs. $1.68 (expected)
- Revenue: $13.62 billion vs. $13.19 billion (expected)
During an interview with CNBC’s “Squawk on the Street,” Novartis CEO Vas Narasimhan attributed the positive announcements and quarterly results to the strategic moves implemented by the company. These moves include a comprehensive restructuring plan that focused Novartis’ research and development efforts and resulted in approximately 10,000 job cuts within the organization over the past year.
Narasimhan expressed confidence that Novartis would be able to pursue mergers and acquisitions while executing the new buyback program.
He also highlighted recent acquisitions made by the company, including the $3.5 billion deal to acquire biotech firm Chinook Therapeutics. Additionally, Novartis announced a deal to acquire preclinical biotech company DTx Pharma for $500 million, with the potential for further investment after the completion of the acquisition.
In the second quarter, Novartis achieved a net income of $2.32 billion, or $1.11 per share, compared to $1.70 billion, or 77 cents per share, during the same period last year. Adjusted earnings per share for the quarter were $1.83.
The company reported total revenue of $13.62 billion for the quarter, reflecting a 7% increase compared to the same period last year.
Sales growth was primarily driven by the strong performance of four key drugs, including Entresto, a treatment for adults with long-lasting heart failure, and Pluvicto, a prostate cancer treatment.
Narvatis’ generic medicines division, Sandoz, experienced a 5% increase in sales compared to last year, reaching $2.38 billion. This growth was fueled by a more severe cough and cold season, which led to increased demand for certain generic medicines produced by Sandoz.
In preparation for a stronger focus on its innovative medicines business, Novartis has been working towards spinning off Sandoz. The spinoff is scheduled to occur in the fourth quarter of this year, subject to approval by shareholders at a meeting on September 15. The stock will be listed on the Swiss exchange and will have an American Depositary Receipt program in the United States.
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