Change in the leadership position
Novartis unexpectedly raises forecast
April 23, 2024, 3:36 p.m
The heavily restructured pharmaceutical company Novartis reports solid growth in the first quarter of the year. Reason enough for the Swiss to raise their forecast. The company has changed strategy in recent months and is now concentrating again on patent-protected drugs.
The Swiss pharmaceutical giant Novartis is raising its annual targets after a start to the year that exceeded expectations. In the first three months, annual sales from continuing operations climbed by ten percent to 11.8 billion. The company earned 16 percent more operationally. Along with the figures, the Swiss announced that long-time boss Jörg Reinhardt will step down as chairman of the board of directors next year. The successor is to be the former head of the US drug manufacturer Bristol Myers Squibb (BMS), Giovanni Caforio.
According to the information, the drivers of the increase in sales and earnings were the heart drug Entresto and Cosentyx – the drug previously used primarily against psoriasis benefited from approval for the treatment of a painful, acne-like skin disease. The new form of administration as an intravenous infusion as an alternative to injections under the skin has also boosted demand, said CFO Harry Kirsch. “The new launch in the US and Europe went much better than expected.”
Novartis now expects sales growth in the high single-digit to low double-digit percentage range and an increase in operating profit in the low to mid-teen percent range. “The very significant upgrade to the guidance for 2024 is unexpected, but can be explained by the better-than-expected performance of high-margin products,” said ZKB analyst Laurent Flamme. “Strictly speaking, this was the first full quarter as a focused innovative medicines company,” explained Stefan Schneider from Bank Vontobel: “These results underline what to expect from Novartis in the coming quarters as we expect the momentum to continue.”
Consistent group restructuring
With the spin-off of the comparatively low-margin business with copycat drugs in October, Novartis took the last step in a restructuring that lasted almost ten years, which focused the pharmaceutical company entirely on the lucrative business with patent-protected drugs. Before Sandoz, Novartis had also sold off the Alcon eye care business as well as the low-profit sectors of vaccines, animal health and over-the-counter medicines.
Reinhardt made a U-turn after the then CEO Daniel Vasella made Novartis into one of the most diversified healthcare companies in the world through acquisitions. In return, Novartis also made acquisitions worth billions. The Swiss are taking over the German biotech company Morphosys for 2.7 billion euros.
Even though investors have recently honored the development at Novartis, the long-term balance for the former Bayer manager is mixed: Novartis shares have performed significantly worse than the European healthcare stocks as a whole since Reinhardt took office. After his maximum term of office has expired, the German now wants to hand over the helm at the 2025 shareholders’ meeting.