On April 22, 2024 Novartis reported on Q1 2024 results and Vas Narasimhan, its CEO, said (Press release, Novartis, APR 23, 2024, View Source [SID1234642209]):
"Novartis continued its strong momentum with both sales growth and core margin expansion in Q1. Our performance was broad-based, across all key growth brands and geographies, allowing us to raise guidance for the full year 2024. We continued to advance our pipeline in Q1, with submission-enabling data for Scemblix first-line, Pluvicto pre-taxane and remibrutinib in CSU. The momentum in our business and pipeline gives us continued confidence in our mid- and long-term growth outlook."
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Key figures
Continuing operations3
Q1 2024 Q1 2023 % change
USD m USD m USD cc
Net sales 11 829 10 798 10 11
Operating income 3 373 2 618 29 39
Net income 2 688 2 150 25 37
EPS (USD) 1.31 1.02 28 41
Free cash flow 2 038 2 684 -24
Core operating income 4 537 3 906 16 22
Core net income 3 681 3 233 14 19
Core EPS (USD) 1.80 1.54 17 23
1. Constant currencies (cc), core results and free cash flow are non-IFRS measures. An explanation of non-IFRS measures can be found on page 34 of the Interim Financial Report. Unless otherwise noted, all growth rates in this Release refer to same period in prior year.
2. Please see detailed guidance assumptions on page 6.
3. As defined on page 26 of the Interim Financial Report, Continuing operations include the retained business activities of Novartis, comprising the innovative medicines business and the continuing corporate activities and Discontinued operations include operational results from the Sandoz business.
Strategy update
Our focus
In 2023, Novartis completed its transformation into a "pure-play" innovative medicines business. We have a clear focus on four core therapeutic areas (cardiovascular-renal-metabolic, immunology, neuroscience and oncology), with multiple significant in-market and pipeline assets in each of these areas, that address high disease burden and have substantial growth potential. In addition to two established technology platforms (chemistry and biotherapeutics), three emerging platforms (gene & cell therapy, radioligand therapy and xRNA) are being prioritized for continued investment into new R&D capabilities and manufacturing scale. Geographically, we are focused on growing in our priority geographies – the US, China, Germany and Japan.
Our priorities
Accelerate growth: Renewed attention to deliver high-value medicines (NMEs) and focus on launch excellence, with a rich pipeline across our core therapeutic areas.
Deliver returns: Continuing to embed operational excellence and deliver improved financials. Novartis remains disciplined and shareholder-focused in our approach to capital allocation, with substantial cash generation and a strong capital structure supporting continued flexibility.
Strengthening foundations: Unleashing the power of our people, scaling data science and technology and continuing to build trust with society.
Financials
Following the September 15, 2023, shareholder approval of the spin-off of Sandoz, Novartis reported its consolidated financial statements as "continuing operations" and "discontinued operations."
Continuing operations include the retained business activities of Novartis, comprising the innovative medicines business and the continuing corporate activities. Discontinued operations include the Sandoz Division and selected portions of corporate activities attributable to Sandoz’s business, as well as certain expenses related to the spin-off.
While the commentary below focuses on continuing operations, we also provide information on discontinued operations.
Continuing operations
Net sales were USD 11.8 billion (+10%, +11% cc), with volume contributing 14 percentage points to growth. Generic competition had a negative impact of 2 percentage points and pricing had negative impact of 1 percentage point.
Operating income was USD 3.4 billion (+29%, +39% cc), mainly driven by higher net sales.
Net income was USD 2.7 billion (+25%, +37% cc), mainly driven by higher operating income. EPS was USD 1.31 (+28%, +41% cc), benefiting from the lower weighted average number of shares outstanding.
Core operating income was USD 4.5 billion (+16%, +22% cc), mainly driven by higher net sales. Core operating income margin was 38.4% of net sales, increasing 2.2 percentage points (+3.4 percentage points cc).
Core net income was USD 3.7 billion (+14%, +19% cc), mainly due to higher core operating income. Core EPS was USD 1.80 (+17%, +23% cc), benefiting from the lower weighted average number of shares outstanding.
Free cash flow from continuing operations amounted to USD 2.0 billion (-24% USD), compared with USD 2.7 billion in the prior-year quarter, due to a prior-year one-timer and timing of payments.
Discontinued operations
Discontinued operations in first quarter 2023 include the Sandoz generic pharmaceuticals and biosimilars division, certain corporate activities attributable to Sandoz and certain other expenses related to the spin-off of the Sandoz business.
As the Sandoz spin-off was completed on October 3, 2023, there were no operating results in the first quarter 2024 related to discontinued operations. In the first quarter 2023, discontinued operations net sales were USD 2.5 billion, operating income amounted to USD 238 million and net income from discontinued operations was USD 144 million. For further details see Note 3 "Significant transactions 2023 – Completion of the spin-off of the Sandoz business through a dividend in kind distribution to Novartis AG shareholders" and Note 12 "Discontinued operations" to the condensed interim consolidated financial statements.
Total Company
Total Company net income was USD 2.7 billion in 2024, compared to USD 2.3 billion in 2023 and basic EPS was USD 1.31 compared to USD 1.09 in prior year. Net cash flows from operating activities for total Company amounted to USD 2.3 billion and free cash flow amounted to USD 2.0 billion.
Q1 key growth drivers
Underpinning our financial results in the quarter is a continued focus on key growth drivers (ranked in order of contribution to Q1 growth) including:
Entresto (USD 1 879 million, +36% cc) sustained robust demand-led growth, with increased penetration in the US and Europe following continued adoption of guideline-directed medical therapy in heart failure, as well as in China with increased penetration in hypertension
Cosentyx (USD 1 326 million, +25% cc) sales grew mainly in the US, emerging growth markets and Europe, driven by recent launches (including HS and the IV formulation in the US) in addition to volume growth in core indications
Kesimpta (USD 637 million, +66% cc) sales grew across all regions reflecting increased demand for a high efficacy product with convenient self-administered dosing
Kisqali (USD 627 million, +54% cc) sales grew strongly across all regions, based on increasing recognition of consistently reported overall survival in HR+/HER2- advanced breast cancer
Pluvicto (USD 310 million, +47% cc) delivered sales growth in the US and Europe. With supply now unconstrained, the focus is on opening new sites and referral pathways, and initiating new patients
Leqvio (USD 151 million, +139% cc) continued to show steady growth, with a focus on patient on-boarding, removing access hurdles and enhancing medical education
Jakavi (USD 478 million, +18% cc) sales grew in Europe, emerging growth markets and Japan, driven by strong demand in both myelofibrosis and polycythemia vera
Scemblix (USD 136 million, +83% cc) sales grew across all regions, demonstrating the high unmet need in later lines of CML
Xolair (USD 399 million, +15% cc) sales grew across all regions
Ilaris (USD 356 million, +14% cc) sales grew across all regions, led by the US and Europe
Sandostatin Group (USD 355 million, +9% cc) sales grew mainly in the US
Tafinlar + Mekinist (USD 474 million, +5% cc) sales grew in emerging growth markets and Japan, partly offset by a decline in the US
Lutathera (USD 169 million, +14% cc) sales grew across all regions due to increased demand
Emerging Growth Markets* Grew +21% (cc) overall. China grew 31% (cc) to USD 1.0 billion, mainly driven by Entresto and Cosentyx
*All markets except the US, Canada, Western Europe, Japan, Australia, and New Zealand
Net sales of the top 20 brands in Q1 2024
Q1 2024 % change
USD m USD cc
Entresto 1 879 34 36
Cosentyx 1 326 23 25
Kesimpta 637 66 66
Kisqali 627 51 54
Promacta/Revolade 520 -5 -4
Jakavi 478 15 18
Tafinlar+Mekinist 474 3 5
Xolair 399 13 15
Tasigna 395 -15 -13
Ilaris 356 9 14
Sandostatin Group 355 8 9
Lucentis 314 -25 -23
Pluvicto 310 47 47
Zolgensma 295 -5 -3
Exforge Group 192 3 5
Gilenya 175 -25 -24
Lutathera 169 13 14
Leqvio 151 136 139
Galvus Group 149 -19 -12
Diovan Group 140 -11 -7
Top 20 brands total 9 341 16 18
R&D update – key developments from the first quarter
New approvals
Xolair
(omalizumab) FDA approval of Xolair for the reduction of allergic reactions, including anaphylaxis, that may occur with accidental exposure to one or more foods in adult and pediatric patients aged 1 year and older with IgE-mediated food allergy
Regulatory updates
Fabhalta
(iptacopan) Positive CHMP opinion received for Fabhalta for the treatment of paroxysmal nocturnal hemoglobinuria (PNH) patients
FDA filing accepted for the treatment of adult patients with IgA nephropathy (IgAN), and priority review granted
Results from ongoing trials and other highlights
Scemblix
(asciminib) Phase III ASC4FIRST study met both primary endpoints (major molecular response rate vs imatinib and vs investigator-selected tyrosine kinase inhibitors) with clinically meaningful and statistically significant results in newly diagnosed patients with Philadelphia chromosome-positive chronic myeloid leukemia in chronic phase (Ph+ CML-CP). Additionally, Scemblix showed a favorable safety and tolerability profile. Data will be presented at upcoming medical conferences and submitted to regulatory authorities in 2024
Fabhalta
(iptacopan)
Phase III APPLAUSE-IgAN data showed a clinically meaningful and statistically significant proteinuria reduction of 38.3% vs placebo for patients with IgA nephropathy (IgAN). Fabhalta was well tolerated with a favorable safety profile consistent with previously reported data. Data presented at WCN 2024
In addition, extension data from the Phase III APPLY-PNH and APPOINT-PNH studies were presented at EBMT 2024, demonstrating the sustained long-term efficacy and safety profile of Fabhalta in PNH patients
Pluvicto In the Phase III PSMAfore study, updated OS results from a pre-planned analysis at approximately 75% information fraction demonstrated an OS HR<1.0 in the intent-to-treat population unadjusted for cross-over. Novartis is on track to file for the Pluvicto pre-taxane label expansion in H2 2024
Remibrutinib 52-week data from the Phase III REMIX-1 and REMIX-2 studies showed consistent efficacy of remibrutinib in CSU as early as week 2 and sustained up to 1 year. Remibrutinib was well tolerated and demonstrated a consistent, favorable long-term safety profile. Overall rates of AEs in remibrutinib arms were comparable to placebo with balanced liver function tests across both studies. Full data will be presented at an upcoming medical meeting. Novartis plans to submit remibrutinib for regulatory approval in H2 2024
In addition, a Phase II trial in hidradenitis suppurativa demonstrated that remibrutinib (both doses) met the primary endpoint with patients reporting a greater rate of simplified HiSCR at week 16 compared with placebo. Data presented at AAD 2024
Lutathera
Phase III NETTER-2 trial demonstrated that Lutathera plus octreotide LAR significantly extended median PFS to 22.8 months vs 8.5 months with high-dose octreotide LAR alone in patients with newly diagnosed grade 2 and 3 advanced GEP-NETs. No new or unexpected safety findings were observed. Data presented at ASCO (Free ASCO Whitepaper)-GI 2024
Leqvio
New data demonstrating the early addition of Leqvio to maximally tolerated statin therapy in a real-world setting significantly reduced LDL-C in ASCVD patients, including those with a history of an ASCVD-related event, who could not reach their goal on statin therapy alone. Data presented at ACC 2024 and published in the Journal of the American College of Cardiology
Kesimpta ALITHIOS open-label extension study showed sustained efficacy of first-line, continuous Kesimpta treatment up to six years in recently diagnosed treatment-naïve RMS patients, including 44% fewer relapses vs those who switched later to Kesimpta from teriflunomide. Kesimpta treatment was also well-tolerated with a consistent safety profile across the ALITHIOS population. Data presented at AAN 2024
Kisqali Results of the Phase III NATALEE study were published in the New England Journal of Medicine. In the trial, ribociclib plus endocrine therapy (ET) compared to ET alone significantly reduced the risk of recurrence by 25% across a broad population of patients with stage II and III HR+/HER2- early breast cancer, including those with no lymph node involvement
Zolgensma Final data from Phase IIIb SMART study supports use of Zolgensma in older and heavier SMA patients (1.5-9.1 years of age and weighing ≥8.5kg to ≤21kg) than the children treated in previous clinical studies. Nearly all treated patients maintained or improved motor milestones after 52 weeks, with most switching to the one-time gene therapy from chronically administered disease-modifying therapy. Data presented at MDA 2024
BD&L Announced the planned acquisition of MorphoSys, including pelabresib (late-stage BET inhibitor for myelofibrosis) and tulmimetostat (early-stage dual EZH2 and EZH1 inhibitor for solid tumors or lymphomas). The transaction aligns with Novartis strategic focus on oncology and strengthens our efforts in developing next-generation treatment options for cancer. Transaction is expected to close in Q2 2024
Novartis has exercised its exclusive option to acquire IFM Due. The acquisition gives Novartis full rights to IFM Due’s portfolio of STING antagonists, strengthening the company’s inflammatory diseases pipeline and building on our efforts to innovate new treatments for inflammation-driven conditions.
Novartis entered into a transaction with Arvinas including an exclusive strategic license agreement for the worldwide development and commercialization of ARV-766, a second generation PROTAC androgen receptor (AR) degrader, complementing our radioligand therapy platform in prostate cancer.
Capital structure and net debt
Retaining a good balance between investment in the business, a strong capital structure and attractive shareholder returns remains a priority.
In Q1 2024, Novartis repurchased a total of 10.3 million shares for USD 1.0 billion on the SIX Swiss Exchange second trading line under the up-to USD 15 billion share buyback announced in July 2023 (with up to USD 11.7 billion still to be executed). In addition, 1.0 million shares (for an equity value of USD 0.1 billion) were repurchased from associates. In the same period, 7.7 million shares (for an equity value of USD 0.3 billion) were delivered as a result of share deliveries related to participation plans of associates. Consequently, the total number of shares outstanding decreased by 3.6 million versus December 31, 2023. These treasury share transactions resulted in an equity decrease of USD 0.9 billion and a cash outflow of USD 1.1 billion.
As of March 31, 2024, net debt increased to USD 15.8 billion compared to USD 10.2 billion net debt at December 31, 2023. The increase was mainly due to the USD 5.2 billion annual net dividend payment in March (which is the gross dividend of USD 7.6 billion reduced by the USD 2.4 billion Swiss withholding tax that was paid in April 2024, according to its due date), cash outflow for treasury share transactions of USD 1.1 billion and net cash outflow for M&A / intangible assets transactions of USD 1.2 billion, partially offset by USD 2.0 billion free cash flow.
As of Q1 2024, the long-term credit rating for the company is Aa3 with Moody’s Ratings and AA- with S&P Global Ratings.
2024 outlook
Barring unforeseen events; growth vs prior year in cc Previous guidance
Net sales Expected to grow high single to low double-digit (from mid-single-digit)
Core operating income Expected to grow low double-digit to mid-teens (from high single-digit)
Key assumptions:
Our guidance assumes that no Entresto generics and no Promacta generics launch in the US in 2024
Foreign exchange impact
If late-April exchange rates prevail for the remainder of 2024, the foreign exchange impact for the year would be negative 2 percentage points on net sales and negative 4 percentage points on core operating income. The estimated impact of exchange rates on our results is provided monthly on our website.
Novartis proposes Dr. Giovanni Caforio as Chair of the Board of Directors at the AGM in 2025
The 12-year term of Dr. Joerg Reinhardt as Chair of the Board of Directors ends as scheduled in 2025, when he will retire and not be available for re-election at the Annual General Meeting. Dr. Reinhardt joined Sandoz in 1982 and has held managerial positions with increasing responsibility in Sandoz and thereafter Novartis, including Head of the Vaccines and Diagnostics Division and Chief Operating Officer. In 2013, he was appointed Chair of the Board of Directors. During his leadership, Novartis transformed from a diversified healthcare enterprise to a focused medicines company.
The Board of Directors is proposing the nomination of Dr. Giovanni Caforio as Chair of the Board of Directors. Shareholders will vote on Dr. Caforio’s nomination to the Board at the next AGM 2025.
Since joining Bristol Myers Squibb in 2000, Dr. Caforio has served in various senior roles at the company. From May 2015 to November 2023, Dr. Caforio was CEO and from May 2017 to March 2024, he served as Executive Chairman. Under his leadership, BMS successfully transformed into a global medicines company with strong capabilities across R&D and commercialization. Dr. Caforio was born and educated in Italy and holds Italian and US citizenship. He is a physician by training and received his M.D. from the University of Rome. Dr. Caforio is fluent in Italian, French, Spanish, Portuguese and English.
Key figures1
Continuing operations2 Q1 2024 Q1 2023 % change
USD m USD m USD cc
Net sales 11 829 10 798 10 11
Operating income 3 373 2 618 29 39
As a % of sales 28.5 24.2
Net income 2 688 2 150 25 37
EPS (USD) 1.31 1.02 28 41
Cash flows from operating activities 2 265 2 852 -21
Non-IFRS measures
Free cash flow 2 038 2 684 -24
Core operating income 4 537 3 906 16 22
As a % of sales 38.4 36.2
Core net income 3 681 3 233 14 19
Core EPS (USD) 1.80 1.54 17 23
Discontinued operations2 Q1 2024 Q1 2023 % change
USD m USD m USD cc
Net sales 2 503 nm nm
Operating income 238 nm nm
As a % of sales 9.5
Net income 144 nm nm
Non-IFRS measures
Core operating income 507 nm nm
As a % of sales 20.3
Total Company Q1 2024 Q1 2023 % change
USD m USD m USD cc
Net income 2 688 2 294 nm nm
EPS (USD) 1.31 1.09 nm nm
Cash flows from
operating activities 2 265 2 957 nm nm
Non-IFRS measures
Free cash flow 2 038 2 720 nm nm
Core net income 3 681 3 614 nm nm
Core EPS (USD) 1.80 1.71 nm nm
nm=not meaningful
1. Constant currencies (cc), core results and free cash flow are non-IFRS measures. An explanation of non-IFRS measures can be found on page 34 of the Interim Financial Report. Unless otherwise noted, all growth rates in this Release refer to same period in prior year.
2. As defined on page 26 of the Interim Financial Report, Continuing operations include the retained business activities of Novartis, comprising the innovative medicines business and the continuing corporate activities and Discontinued operations include operational results from the Sandoz business.
Detailed financial results accompanying this press release are included in the Interim Financial Report at the link below:
View Source