Novartis Sees Profit Gaining Despite Copycats for Top Drug
(Bloomberg) — Novartis AG said profit will rise this year as new medicines help offset competition from copycats of its best-selling drug, an optimistic forecast that boosted the stock.
The shares rose as much as 3% in early Zurich trading, the biggest gain in almost six months. Core operating profit will likely grow by a high single- to a low double-digit percentage, outpacing sales, the Swiss drugmaker said.
Novartis is facing patent expiries for three key drugs, with top-selling heart medicine Entresto expected to face generic competitors in the US mid-year. The companys says new therapies will continue to drive growth.
The patent expiries are a test of Chief Executive Officer Vas Narasimhan’s years-long overhaul of the company, with its focus narrowed to specific types of diseases. Last year Narasimhan first issued what many investors saw as a cautious forecast, then repeatedly raised it in successive quarters.
Sales will probably increase at a mid- to high-single digit pace this year, Novartis said. The drugmaker reported a 7% increase in fourth-quarter net income to $2.8 billion. Both earnings and sales beat analysts’ estimates.
The results “add on to a continuous streak where Novartis beats their own and the market’s expectations,” Stefan Schneider, an analyst at Vontobel, wrote in a note. “This should help to close the gap between Novartis mid-term growth guidance that is clearly above the market’s expectations.”
Besides Entresto, two of Novartis’s top 20 drugs, Tasigna for leukemia and Promacta for a blood disorder, will face generics in the US. But they have successors: The company anticipates more than 15 regulatory submissions or approvals for key drugs this year.
Novartis shares have lagged those of cross-town rival Roche Holding AG in recent months. Roche on Thursday said profit excluding some items would probably grow in the high single-digit range at constant currencies this year.
–With assistance from Allegra Catelli.
(Updates with shares in second paragraph)
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