On October 29, 2024 Novartis reported on Q3 2024 results, and Vas Narasimhan, CEO of Novartis, said (Press release, Novartis, OCT 29, 2024, View Source [SID1234647456]):
"Novartis delivered another quarter of strong operational performance in Q3, with sales up 10% and core operating income up 20%. All key growth drivers contributed to the momentum. We achieved important indications expansions for Kisqali in early breast cancer and Fabhalta in IgA nephropathy, and we completed our PSMAfore filing for Pluvicto in the US. With the momentum in our business and pipeline, we were able to once again upgrade our full-year guidance and remain highly confident in our mid-term outlook."

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Key figures Continuing operations3
Q3 2024 Q3 2023 % change 9M 2024 9M 2023 % change
USD m USD m USD cc USD m USD m USD cc
Net sales 12 823 11 782 9 10 37 164 34 017 9 11
Operating income 3 627 1 762 106 123 11 014 7 187 53 61
Net income 3 185 1 513 111 121 9 119 5 934 54 62
EPS (USD) 1.58 0.73 116 127 4.50 2.84 58 67
Free cash flow 5 965 5 043 18 12 618 11 019 15
Core operating income 5 145 4 405 17 20 14 635 12 551 17 20
Core net income 4 133 3 585 15 17 11 822 10 320 15 18
Core EPS (USD) 2.06 1.74 18 20 5.83 4.95 18 21

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 46 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 7. 3. As defined on page 35 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

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

Third quarter

Net sales were USD 12.8 billion (+9%, +10% cc), with volume contributing 12 percentage points to growth. Generic competition had a negative impact of 2 percentage points and pricing was flat.

Operating income was USD 3.6 billion (+106%, +123% cc), mainly driven by lower impairments and higher net sales, partly offset by higher R&D investments.

Net income was USD 3.2 billion (+111%, +121% cc), mainly driven by higher operating income. EPS was USD 1.58 (+116%, +127% cc), benefiting from the lower weighted average number of shares outstanding.

Core operating income was USD 5.1 billion (+17%, +20% cc), mainly driven by higher net sales, partly offset by higher R&D investments. Core operating income margin was 40.1% of net sales, increasing 2.7 percentage points (+3.4 percentage points cc).

Core net income was USD 4.1 billion (+15%, +17% cc), mainly due to higher core operating income. Core EPS was USD 2.06 (+18%, +20% cc), benefiting from the lower weighted average number of shares outstanding.

Free cash flow from continuing operations amounted to USD 6.0 billion (+18% USD), compared with USD 5.0 billion in the prior-year quarter, driven by higher net cash flows from operating activities from continuing operations.

Nine months

Net sales were USD 37.2 billion (+9%, +11% cc) with volume contributing 14 percentage points to growth. Generic competition had a negative impact of 2 percentage points and pricing had a negative impact of 1 percentage point.

Operating income was USD 11.0 billion (+53%, +61% cc), mainly driven by higher net sales, lower impairments and restructuring charges, partly offset by prior-year one-time income from legal matters and higher R&D investments.

Net income was USD 9.1 billion (+54%, +62% cc), mainly driven by higher operating income. EPS was USD 4.50 (+58%, +67% cc), benefiting from the lower weighted average number of shares outstanding.

Core operating income was USD 14.6 billion (+17%, +20% cc), mainly driven by higher net sales, partly offset by higher R&D investments. Core operating income margin was 39.4% of net sales, increasing 2.5 percentage points (+3.2 percentage points cc).

Core net income was USD 11.8 billion (+15%, +18% cc), mainly due to higher core operating income. Core EPS was USD 5.83 (+18%, +21% cc), benefiting from the lower weighted average number of shares outstanding.

Free cash flow from continuing operations amounted to USD 12.6 billion (+15% USD), compared with USD 11.0 billion in the prior-year period, driven by higher net cash flows from operating activities from continuing operations.

Discontinued operations

Discontinued operations 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.

Third quarter

As the Sandoz spin-off was completed on October 3, 2023, there were no operating results in the third quarter of 2024 related to discontinued operations. In the third quarter of 2023, discontinued operations net sales were USD 2.5 billion, operating loss amounted to USD 86 million and net income from discontinued operations was USD 250 million. For further details see Note 3 "Significant acquisition of businesses and spin-off of Sandoz business" and Note 11 "Discontinued operations" to the condensed interim consolidated financial statements.

Nine months

As the Sandoz spin-off was completed on October 3, 2023, there were no operating results in the first nine months of 2024 related to discontinued operations. In the first nine months of 2023, discontinued operations net sales were USD 7.4 billion, operating income amounted to USD 265 million and net income from discontinued operations was USD 440 million. For further details see Note 3 "Significant acquisition of businesses and spin-off of Sandoz business" and Note 11 "Discontinued operations" to the condensed interim consolidated financial statements.

Total Company

Third quarter

Total Company net income was USD 3.2 billion in 2024, compared to USD 1.8 billion in 2023 and basic EPS was USD 1.58 compared to USD 0.85 in prior year quarter. Net cash flows from operating activities for total Company amounted to USD 6.3 billion and free cash flow amounted to USD 6.0 billion.

Nine months

Total Company net income was USD 9.1 billion in 2024, compared to USD 6.4 billion in 2023 and basic EPS was USD 4.50 compared to USD 3.05 in prior year. Net cash flows from operating activities for total Company amounted to USD 13.4 billion and free cash flow amounted to USD 12.6 billion.

Q3 key growth drivers

Underpinning our financial results in the quarter is a continued focus on key growth drivers (ranked in order of contribution to Q3 growth) including:

Entresto (USD 1 865 million, +26% cc) sustained robust, demand-led growth, with increased penetration in the US and Europe following guideline-directed medical therapy in heart failure, as well as in China with increased penetration in hypertension
Cosentyx (USD 1 693 million, +28% cc) sales grew mainly in the US, Europe and emerging growth markets, driven by recent launches (including the HS indication and the IV formulation in the US) and volume growth in core indications
Kisqali (USD 787 million, +43% cc) sales grew strongly across all regions, based on increasing recognition of its overall survival benefit in HR+/HER2- advanced breast cancer and Category 1 NCCN guidelines recommendation
Kesimpta (USD 838 million, +28% cc) sales grew reflecting increased demand for a high efficacy product with convenient self-administered dosing; the prior-year period benefited from a one-time revenue deduction adjustment in Europe
Pluvicto (USD 386 million, +50% cc) sales grew in the US and Europe. Q3 sales benefited from a one-time revenue deduction adjustment in Europe. With supply now unconstrained, the focus is on increasing share in established RLT sites, while opening new sites and referral pathways, and initiating new patients
Leqvio (USD 198 million, +119% cc) continued to show steady growth, with a focus on increasing account and patient adoption, and continuing medical education
Jakavi (USD 500 million, +18% cc) sales grew across all regions driven by strong demand across indications
Scemblix (USD 182 million, +72% cc) sales grew across all regions demonstrating the continued high unmet need in CML
Tafinlar + Mekinist (USD 534 million, +12% cc) sales grew mainly in the US and emerging growth markets, driven by increased demand
Xolair (USD 418 million, +15% cc) grew mainly in emerging growth markets and Europe
Fabhalta (USD 44 million) launch continues in PNH with an approval in IgAN in Q3
Ilaris (USD 372 million, +12% cc) sales grew across all regions, led by the US and Europe
Lutathera (USD 190 million, +19% cc) sales grew across all regions due to increased demand and earlier line adoption (within indication) in the US and Japan
Emerging Growth Markets* Grew +12% (cc) overall. China grew +18% (cc) to USD 1.0 billion, mainly driven by Entresto, Cosentyx and Leqvio
*All markets except the US, Canada, Western Europe, Japan, Australia, and New Zealand

Net sales of the top 20 brands in the third quarter and nine months

Q3 2024 % change 9M 2024 % change
USD m USD cc USD m USD cc
Entresto 1 865 26 26 5 642 28 30
Cosentyx 1 693 27 28 4 545 24 25
Kesimpta
– excl. PY revenue deduction adjust. 838 28
55 28
56 2 274 49
61 49
62
Kisqali 787 40 43 2 131 45 48
Promacta/Revolade 569 -1 0 1 633 -4 -3
Tafinlar + Mekinist 534 11 12 1 531 7 9
Jakavi 500 17 18 1 449 14 16
Tasigna 419 -10 -9 1 260 -10 -9
Xolair 418 13 15 1 244 15 17
Ilaris 372 11 12 1 096 12 16
Pluvicto
– excl. revenue deduction adjust. 386 51
37 50
36 1 041 47
42 47
42
Sandostatin Group 305 -10 -8 973 -3 -1
Zolgensma 308 0 1 952 3 4
Lucentis 245 -33 -32 834 -29 -28
Exforge Group 174 -7 -4 544 -2 1
Lutathera 190 19 19 534 17 17
Leqvio 198 120 119 531 129 130
Scemblix 182 72 72 482 67 69
Galvus Group 159 -12 -6 458 -15 -8
Diovan Group 150 -2 2 450 -3 1
Top 20 brands total 10 292 17 18 29 604 17 19
R&D update – key developments from the third quarter

New approvals

Kisqali
(ribociclib) FDA approved Kisqali with a broad indication for HR+/HER2- stage II and III early breast cancer (eBC) at high risk of recurrence, approximately doubling the population eligible for CDK4/6 inhibitor adjuvant therapy, with the inclusion of those without nodal involvement. In addition, the CHMP issued a positive opinion for Kisqali in eBC in October.
Fabhalta
(iptacopan) FDA granted accelerated approval to Fabhalta for the reduction of proteinuria in adults with primary immunoglobulin A nephropathy (IgAN) at risk of rapid disease progression.
Regulatory updates

Pluvicto
(lutetium Lu177 vipivotide tetraxetan) Completed FDA submission for Pluvicto pre-taxane mCRPC label expansion based on the positive Phase III PSMAfore study.
Scemblix
(asciminib) FDA granted Priority Review status to Scemblix for the treatment of newly diagnosed adult patients with Philadelphia chromosome-positive CML in chronic phase (Ph+ CML-CP). Scemblix is also under regulatory review in this indication in key international markets worldwide, including in China and Japan.
Fabhalta
(iptacopan) Submissions for the treatment of C3 glomerulopathy (C3G) completed in the EU, China and Japan.
Results from ongoing trials and other highlights

Kisqali
(ribociclib) Results from a four-year post-hoc analysis of the pivotal Phase III NATALEE trial showed the addition of Kisqali to endocrine therapy (ET) in patients with stage II and III HR+/HER2- eBC reduced the risk of recurrence by 28.5% compared to ET alone. This invasive disease-free survival benefit was consistent across all pre-specified patient subgroups, including those with node-negative disease. Results were also consistent across secondary efficacy endpoints, with a trend for improvement in overall survival. Safety and tolerability remained consistent with previously reported results. Data presented at ESMO (Free ESMO Whitepaper) Congress 2024.
Leqvio
(inclisiran) In the Phase III V-MONO study, Leqvio demonstrated clinically meaningful and statistically significant low-density lipoprotein cholesterol (LDL-C) lowering versus both placebo and ezetimibe in patients who were at low or moderate risk of developing atherosclerotic cardiovascular disease (ASCVD) and not receiving lipid-lowering therapy. Novartis plans to present results from this trial at an upcoming medical meeting and share with regulatory agencies including FDA.
Kesimpta
(ofatumumab) Data from the ALITHIOS open-label extension study showed first-line Kesimpta treatment for up to six years led to less disability and disease progression in recently diagnosed (≤3 years) and treatment-naïve people with relapsing multiple sclerosis (RMS), compared to those who switched from teriflunomide.

In the separate US-based single-arm OLIKOS Phase IIIb study, all clinically stable RMS patients who switched from intravenous anti-CD20 therapy to Kesimpta showed no new gadolinium-enhancing (Gd+) T1 lesions at 12 months. Data from both studies were presented at the ECTRIMS 2024 Annual Meeting.
Pelabresib Based on Novartis review of 48-week data from the Phase III MANIFEST-2 study, longer follow-up time is needed to determine, in consultation with Health Authorities, the regulatory path for pelabresib in myelofibrosis. We will continue to follow patients in MANIFEST-2 and evaluate the potential for additional studies to support registration. The 48-week data will be presented at an upcoming medical meeting.
XXB750 Novartis will not advance further development of XXB750 in resistant hypertension and heart failure, following current scientific assessment and review of available data from early investigational studies.
BD&L Novartis, in collaboration with Versant Ventures, established Borealis Biosciences, an independent, discovery-stage biotechnology company focused on developing next-generation RNA-based medicines for kidney diseases. Under the agreement, Novartis has the option to acquire two future development-ready programs to augment its renal portfolio, a strategic area of focus for the company.

Novartis entered into a collaboration agreement with Generate: Biomedicines to discover and develop protein therapeutics across multiple disease areas with generative AI. The collaboration will combine Generate’s AI platform with Novartis expertise and capabilities in target biology, biologics development, and clinical development to create novel therapeutics and to accelerate the pace of drug discovery and development.
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.

During the first nine months of 2024, Novartis repurchased a total of 52.7 million shares for USD 5.7 billion on the SIX Swiss Exchange second trading line. These purchases included 45.4 million shares (USD 4.8 billion) under the up-to USD 15 billion share buyback announced in July 2023 (with up to USD 7.9 billion still to be executed). In addition, 7.3 million shares (USD 0.9 billion) were repurchased to mitigate dilution related to participation plans of associates, with the remainder of repurchases for this purpose to be executed in Q4 2024. Further, 1.1 million shares (for an equity value of USD 0.1 billion) were repurchased from associates. In the same period, 9.1 million shares (for an equity value of USD 0.8 billion) were delivered as a result of share deliveries related to participation plans of associates. Consequently, the total number of shares outstanding decreased by 44.7 million versus December 31, 2023. These treasury share transactions resulted in an equity decrease of USD 5.0 billion and a net cash outflow of USD 5.5 billion.

As of September 30, 2024, net debt increased to USD 16.3 billion compared to USD 10.2 billion net debt at December 31, 2023. The increase was mainly due to the free cash flow of USD 12.6 billion being more than offset by the USD 7.6 billion annual dividend payment, net cash outflow for M&A / intangible assets transactions of USD 5.5 billion, and cash outflow for treasury share transactions of USD 5.5 billion.

As of Q3 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 low double-digit (from high single to low double-digit)
Core operating income Expected to grow high teens (from mid to high teens)
Key assumptions:

We assume Tasigna, Promacta and Entresto US generic entry mid-2025 for forecasting purposes
Foreign exchange impact

If late-October exchange rates prevail for the remainder of 2024, the foreign exchange impact for the year would be negative 1 percentage point on net sales and negative 3 to negative 4 percentage points on core operating income. The estimated impact of exchange rates on our results is provided monthly on our website.

Key figures1

Continuing operations2 Q3 2024 Q3 2023 % change 9M 2024 9M 2023 % change
USD m USD m USD cc USD m USD m USD cc
Net sales 12 823 11 782 9 10 37 164 34 017 9 11
Operating income 3 627 1 762 106 123 11 014 7 187 53 61
As a % of sales 28.3 15.0 29.6 21.1
Net income 3 185 1 513 111 121 9 119 5 934 54 62
EPS (USD) 1.58 0.73 116 127 4.50 2.84 58 67
Cash flows from
operating activities 6 286 5 304 19 13 426 11 673 15
Non-IFRS measures
Free cash flow 5 965 5 043 18 12 618 11 019 15
Core operating income 5 145 4 405 17 20 14 635 12 551 17 20
As a % of sales 40.1 37.4 39.4 36.9
Core net income 4 133 3 585 15 17 11 822 10 320 15 18
Core EPS (USD) 2.06 1.74 18 20 5.83 4.95 18 21


Discontinued operations2 Q3 2024 Q3 2023 % change 9M 2024 9M 2023 % change
USD m USD m USD cc USD m USD m USD cc
Net sales 2 476 nm nm 7 428 nm nm
Operating (loss)/income -86 nm nm 265 nm nm
As a % of sales -3.5 3.6
Net income 250 nm nm 440 nm nm
Non-IFRS measures
Core operating income 250 nm nm 1 185 nm nm
As a % of sales 10.1 16.0


Total Company Q3 2024 Q3 2023 % change 9M 2024 9M 2023 % change
USD m USD m USD cc USD m USD m USD cc
Net income 3 185 1 763 nm nm 9 119 6 374 nm nm
EPS (USD) 1.58 0.85 nm nm 4.50 3.05 nm nm
Cash flows from
operating activities 6 286 5 378 nm nm 13 426 11 911 nm nm
Non-IFRS measures
Free cash flow 5 965 5 043 nm nm 12 618 11 038 nm nm
Core net income 4 133 3 784 nm nm 11 822 11 209 nm nm
Core EPS (USD) 2.06 1.83 nm nm 5.83 5.37 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 46 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 35 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