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Novartis' (NVS) Q3 Earnings Surpass Estimates, Sales Miss

Swiss pharma Novartis AG’s NVS third-quarter 2020 results were hit by the coronavirus outbreak as sales missed expectations while earnings beat the same.

Third-quarter 2020 core earnings (excluding one-time charges) of $1.52 per share easily beat the Zacks Consensus Estimate of $1.42 and increased from $1.41 reported in the year-ago quarter.

Novartis AG Price, Consensus and EPS Surprise

 

Novartis AG price-consensus-eps-surprise-chart | Novartis AG Quote

However, revenues of $12.2 billion missed the Zacks Consensus Estimate of $12.9 billion as the outbreak of COVID-19 negatively impacted demand. Particularly, the dermatology, ophthalmology and Sandoz retail businesses were affected.

The stock has lost 11.1% in the year so far compared with the industry’s decline of 2.6%.

All growth rates mentioned below are on a year-over-year basis and at constant exchange rates.

Quarter in Detail

Novartis operates under two segments — Innovative Medicines and Sandoz (generics).

The Innovative Medicines division recorded sales of $9.8 billion, up 1% year over year. Within this segment, the Pharmaceuticals business unit grew 2%, driven by strong performance of Entresto, Cosentyx and Zolgensma. Growth was partly offset by declines in Established Medicines and ophthalmology brands.

Cosentyx sales increased 7% to $1.02 billion, driven by continued growth despite lower new patient starts across the market in dermatology and rheumatology due to COVID-19. Entresto sales grew 45 % to $632 million owing to strong growth with increased patient share across markets, driven by increased demand as the essential first choice therapy for rEF heart failure. Increasing contribution from Zolgensma (gene therapy for spinal muscular atrophy) also boosted this business unit, as sales jumped 79% to $291 million.

Oncology business unit sales were down 1% as strong performance of Kisqali, Promacta/Revolade, Jakavi, Tafinlar + Mekinist and Piqray was offset by generic competition for Afinitor and Exjade. The COVID-19 pandemic continued to negatively impact dermatology and ophthalmology sales. Kisqali sales came in at $183 million, up 50% year over year. Promacta sales came in at $442 million, up 16%.

Sales at the Sandoz division were $2.4 billion, down 3% due to COVID-19 impacts. Nevertheless, biopharmaceutical sales grew 13%, driven by continued strong double-digit growth in Europe from Hyrimoz (adalimumab), Erelzi (etanercept) and Zessly (infliximab), and from Omnitrope (somatropin) across all regions.

Guidance for 2020

The company expects net sales in 2020 to grow in mid-single digits. Innovative Medicines revenues are projected to grow in mid-single digits. Revenues from Sandoz are now expected to grow broadly in line with the prior-year level (previous guidance: low-single-digit growth).

Key Pipeline Updates

Novartis received FDA approval for Kesimpta (ofatumumab) as a subcutaneous injection for the treatment of relapsing forms of multiple sclerosis (RMS).

Breast cancer drug, Piqray, in combination with fulvestrant, was approved in Europe for the treatment of HR+/HER2- advanced breast cancer with a PIK3CA mutation, after disease progression following endocrine therapy as monotherapy.

Leqvio (inclisiran) received a positive CHMP opinion for the treatment of adults with hypercholesterolemia or mixed dyslipidemia.

Cosentyx’ label was expanded as it received EC approval for the treatment of moderate-to-severe plaque psoriasis in children and adolescents aged 6 to 18 years. The drug was also approved in Japan for non-radiographic axial spondyloarthritis.

Our Take

Novartis’ third-quarter results were mixed as sales were hit by the coronavirus pandemic but earnings beat expectations. Entresto maintained momentum driven by increased patient share across markets. However, revenues from growth-driving psoriasis drug Cosentyx, which faces stiff competition from AbbVie’s ABBV Humira and Taltz and Johnson & Johnson’s JNJ Tremfya, were up only 7%.

Per Novartis, overall market conditions have been recovering despite a second wave of the pandemic.

Earlier in the month, another Swiss pharma company, Roche RHHBY, also reported lackluster results due to the impacts of the COVID-19 outbreak and competition from biosimilars. 

Zacks Rank

Novartis currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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