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Novartis sees return to growth this year with new chief
[LONDON] Novartis AG starts 2018 with a new chief executive and a rosier outlook, projecting a return to growth after three lackluster years.
The percentage increase in earnings excluding some expenses this year will probably be in the mid-to-high single digits, after showing no change in 2017 at constant currencies, the Basel, Switzerland-based drugmaker said in a statement Wednesday.
Novartis, whose Chief Executive Officer Joe Jimenez will hand the reins to Vas Narasimhan next week, is counting on new medicines - heart drug Entresto, psoriasis treatment Cosentyx and Kisqali for breast cancer - to buoy sales and counter the erosion to its aging blockbuster medicine Gleevec from cheaper copycats. The company also released a breakthrough cancer treatment called Kymriah for a deadly form of leukemia in August, with a price tag of US$475,000.
"Pharma performance underlines that the division has exited the shadow of Gleevec and enters a new dawn of growth," Tim Anderson, an analyst at Sanford C Bernstein & Co in New York, wrote in a note to clients.
Mr Narasimhan, who climbed through the ranks to become global head of drug development, will initially receive up to 8.9 million francs (S$12.2 million) in annual compensation, including a salary of 1.55 million francs, according to the company's annual report. That's 26 per cent less than Jimenez's pay, reflecting that it's Narasimhan's first job as CEO, Novartis said.
Earnings excluding some items climbed 7 per cent to US$3.2 billion in the fourth quarter, compared with the US$3.1 billion average of analysts' estimates compiled by Bloomberg. Sales rose 5 per cent to US$12.9 billion, compared with analysts' estimate of US$12.7 billion.
The report shows price pressure on generics hurt sales at the Sandoz unit at the end of 2017 and will probably continue to do so next year. The percentage increase for overall sales next year will probably be in the low-to-mid single digits, with a possible decline at Sandoz, Novartis said.
The company reiterated that a decision on whether to spin off the Alcon eye-care division, whose sales grew by 8 per cent last quarter, probably won't come before the first half of 2019. Alcon needs to show sales and margin improvements for multiple quarters before Novartis can reach a decision about its future, the company said.
Sandoz, the unit that makes generics, suffered from price erosion. Full-year sales decreased amid pressure in the US, where the business makes almost a third of its revenue. The company is broadening a review of its US generics business in a move that may lead to more divestitures beyond a potential sale of its skin-care treatments, people familiar with the matter said earlier this month.
Sales of Cosentyx, the psoriasis drug, rose 53 per cent to US$615 million, less than the US$623 million analysts had forecast for the quarter. Entresto climbed to US$185 million, compared with analysts' estimates of US$151 million in sales.