Novartis: Q3 results Top, Alcon’s decision on 2019

7 years ago - Published in Finance, Fundamental Analysis

Novartis’s third-quarter core net income rose 4 percent at constant currencies, beating analyst expectations, as the Swiss drugmaker said it made “significant progress” in preparing its Alcon eyecare unit for a possible spinoff by the first half of 2019.

For fiscal 2017, the company continues to expects net sales to be broadly in line with prior year and core operating income to be broadly in line or decline low single digit, both at constant currency rates.

Joseph Jimenez, CEO of Novartis, said, "Novartis became the first company to commercialize a CAR-T therapy, Kymriah, in Q3. Group sales were solid, with growth in all divisions, and Alcon delivered strong growth in both sales and core operating income. We are on track to deliver our full year guidance, and have confidence in our growth phase."

The company revised upward the sale forecast, at constant rates, for Innovative Medicines division to a slight increase, while revised downward Sandoz' forecast to broadly in line with prior year to a slight decrease. The company sees low single digit sales growth for Alcon.

For the third quarter, net income increased 7 percent to $2.08 billion from last year's $1.95 billion. Earnings per share grew 10 percent to $0.89 from $0.81 a year ago.

Core net income was $3.02 billion or $1.29 per share, compared to $2.94 billion or $1.23 per share last year.

On average, eight analysts polled by Thomson Reuters expected earnings of $1.25 per share for the quarter. Analysts' estimates typically exclude special items.

Operating income was $2.4 billion, up 4%. Core operating income remained flat at $3.38 billion, while it increased 1 percent in constant currency as growth drivers and productivity offset generic erosion of Gleevec/Glivec. Net sales for the quarter increased 2 percent to $12.41 billion from $12.13 billion last year. Analysts expected sales of $12.25 billion for the quarter.

The company noted that the volume growth of 7 percentage points, including growth from Cosentyx, Entresto and Alcon, was partly offset by the negative impacts of generic competition of 4 percentage points and pricing of 1 percentage point.

Novartis said it delivered growth on top and bottom line in all divisions in the quarter. Innovative Medicines net sales grew 2 percent from last year to $8.3 billion.

Regarding the strategic review of the Alcon Division, the company said the strategic plan confirmed that it has the potential to grow sales at or above market while delivering profitability at least in line with the industry.

The latest results indicate that the Alcon growth acceleration plan is beginning to generate growth. The strategic review also indicates that creating a stand-alone company via a capital markets exit could create additional shareholder value.

Novartis added that key criteria for a final decision and timing are dependent on continued Alcon sales growth and margin improvement which need to be demonstrated for multiple quarters leading to potential action not likely before first half of 2019.