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2016-10-25

Novartis International AG: Novartis delivered solid third quarter with Growth Products[1] offsetting Gleevec patent expiration; several positive readouts for po

Novartis International AG / Novartis delivered solid third quarter with Growth
Products[1]offsetting Gleevec patent expiration; several positive readouts
for potential blockbusters. Processed and transmitted by Nasdaq Corporate
Solutions. The issuer is solely responsible for the content of this
announcement.
* Q3 net sales (-1% cc[2] and USD) broadly in line with prior year due to
strong performance of Growth Products * Gilenya (USD 790 million, +15% cc)
continued double-digit growth * Cosentyx (USD 301 million) on track for
blockbuster status in first full year after approval * Oncology growth
drivers includingTafinlar + Mekinist (USD 172 million, +29%
cc),Promacta/Revolade (USD 168 million, +44% cc) andJakavi (USD 149
million, +47% cc) * Sandoz Biopharmaceuticals[1] (USD 262 million, +41% cc)
delivered strong growth
* Q3 core[2] operating income down 3% (cc and USD), reflecting generic
erosion and growth investments, partially offset by productivity
initiatives * Core M&S up 0.8 percentage points (cc) to 24.3% of sales,
supporting new launches and Alcon * Core operating income margin declined
0.6 percentage points (cc) * Core EPS was USD 1.23 (-3% cc) * Free cash
flow[2] was USD 2.6 billion (-7% USD) in Q3; USD 6.5 billion (+3% USD) in
9M
* Q3 net income up 7% (cc and USD) from higher operating income and income
from associated companies
* Strong pipeline progress with key data readouts, filings and regulatory
decisions in Q3 * LEE011 plus letrozole demonstrated superior PFS as
first-line treatment of HR+/HER2- advanced breast cancer vs. letrozole
alone; granted FDA Breakthrough Therapy designation * BAF312 in SPMS[3] met
primary endpoint, significantly reducing risk of disability progression *
AMG 334 met primary endpoint in first Phase III episodic migraine study *
Ilaris received three new FDA approvals for Periodic Fever Syndromes *
Sandoz biosimilar etanercept,Erelzi , received FDA approval
* Entresto (USD 53 million in Q3) grew steadily ; FY sales guidance of ~USD
0.2 billion confirmed
* Continuing to invest in Alcon growth plan * Contact lenses delivered
another quarter of growth;Dailies Total1 Multifocal launches in US and EU
expected to continue growth trajectory * Innovation continued to accelerate
in Surgical with FDA approvals forCyPass ,UltraSert Toric IOL
* 2016 Outlook confirmed * Net sales expected to be broadly in line with
prior year (cc) * Core operating income expected to be broadly in line or
decline low single digit (cc)

------------------------------------------------------------------------------
| Key figures[2] Continuing operations[4] |
| Q3 2016 Q3 2015 % change 9M 2016 9M 2015 % change |
| USD m USD m USD cc USD m USD m USD cc |
| Net sales 12 126 12 265 -1 -1 36 196 36 894 -2 0 |
| Operating income 2 269 2 234 2 1 6 813 7 300 -7 -3 |
| Net income 1 945 1 812 7 7 5 762 5 974 -4 1 |
| EPS (USD) 0.81 0.75 8 8 2.42 2.48 -2 2 |
| Free cash flow 2 591 2 788 -7 6 479 6 317 3 |
| Core |
| Operating income 3 381 3 489 -3 -3 9 974 10 733 -7 -4 |
| Net income 2 938 3 061 -4 -4 8 656 9 334 -7 -4 |
| EPS (USD) 1.23 1.27 -3 -3 3.63 3.87 -6 -3 |
------------------------------------------------------------------------------
Basel, October 25, 2016 -
Commenting on the results, Joseph Jimenez, CEO of Novartis, said:
"Novartis delivered a solid Q3 despite the
Gleevecgeneric impact in the US, due to the strong performance of our Growth
Products. We continued to drive innovation, with positive pipeline readouts
for LEE011 in advanced breast cancer, BAF312 in SPMS and AMG 334 in episodic
migraine. We are continuing to invest for the future, as we manage the
Gleevecloss of exclusivity in 2016 and 2017."

[1] Growth Products are defined on page 2. Biopharmaceuticals are defined on
page 3.
[2] 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
Condensed Interim Financial Report. Unless otherwise noted, all growth rates
in this Release refer to same period in prior year.
[3] SPMS = secondary progressive multiple sclerosis.
[4] Refers to continuing operations, defined on page 38 of the Condensed
Interim Financial Report.

GROUP REVIEW

Novartis laid out five priorities for 2016: deliver strong financial results;
strengthen innovation; improve Alcon performance; capture cross-divisional
synergies; and build a higher-performing organization. We made progress in
each of these areas in the third quarter.

Financial results

On January 27, 2016, Novartis announced plans to further focus its divisions,
integrating businesses that share therapeutic areas to better leverage our
development and marketing capabilities. These plans included a new divisional
structure. In compliance with International Financial Reporting Standards
(IFRS), Novartis updated its segment financials to reflect the new structure,
both for the current and prior year, to aid comparability of year-on-year
results. As a result, all comparisons of divisional results from 2016 to 2015
reflect the new structure.

In addition, as a result of the portfolio transformation transactions
completed in 2015, Novartis reported the Group's financial results in 2015 as
"continuing operations" and "discontinued operations." All comparisons from
2016 to 2015 are versus continuing operations, unless otherwise noted. See
page 38 of the Condensed Interim Financial Report for a full explanation.

Third quarter

Continuing operations

Net sales were USD 12.1 billion (-1%, -1% cc) in the third quarter, as volume
growth of 5 percentage points was more than offset by the negative impact of
generic competition (-4 percentage points) and pricing (-2 percentage
points). Growth Products[1] contributed USD 4.3 billion or 36% of net sales,
up 20% (USD) over the prior-year quarter.

Operating income was USD 2.3 billion (+2%, +1% cc). Core adjustments amounted
to USD 1.1 billion (2015: USD 1.3 billion), broadly in line with the
prior-year quarter.

Core operating income was USD 3.4 billion (-3%, -3% cc). Core operating income
margin in constant currencies decreased 0.6 percentage points, mainly due to
investments behind new launches and the Alcon growth plan, partially offset
by productivity improvements. Currency had a positive impact of 0.1
percentage points, resulting in a net decrease of 0.5 percentage points in US
dollar terms to 27.9% of net sales.

Net income was USD 1.9 billion (+7%, +7% cc), up more than operating income
mainly due to higher income from associated companies.

EPS was USD 0.81 (+8%, +8% cc), up more than net income due to a reduction in
the number of shares outstanding.

Core net income was USD 2.9 billion (-4%, -4% cc), broadly in line with core
operating income.

Core EPS was USD 1.23 (-3%, -3% cc), down less than core net income due to a
reduction in the number of shares outstanding.

Free cash flow was USD 2.6 billion (-7% USD), a decrease of USD 0.2 billion
compared to the prior-year quarter. The decrease was driven by higher net
investments in intangible assets, mainly due to the ofatumumab milestone
payment, which more than offset an increase in cash flows from operating
activities.

[1] "Growth Products" are an indicator of the rejuvenation of the portfolio,
and comprise products launched in a key market (EU, US, Japan) in 2011 or
later, or products with exclusivity in key markets until at least 2020
(except Sandoz, which includes only products launched in the last 24 months).
They include the acquisition effect of the GSK oncology assets.

Innovative Medicines
(formerly named the Pharmaceuticals Division) net sales were USD 8.2 billion
(-1%, -1% cc) in the third quarter. Volume contributed 5 percentage points to
sales growth. Generic competition had a negative impact of 5 percentage
points and pricing had a negative impact of 1 percentage point, both largely
due toGleevec/Glivec
genericization in the US. Growth Products grew 21% (cc) to USD 3.8 billion, or
46% of division net sales.

Operating income was USD 2.0 billion (+8%, +9% cc). Core operating income was
USD 2.7 billion (-2%, -1% cc). Core operating income margin in constant
currencies was flat; currency had a negative impact of 0.3 percentage points,
resulting in a net decrease of 0.3 percentage points to 32.7% of net sales.

Sandoz
net sales were USD 2.5 billion (-1%, -1% cc) in the third quarter, as volume
growth of 5 percentage points was offset by 6 percentage points of price
erosion. Performance was impacted by significantly lower launch activity in
the US compared to a strong prior-year quarter. Global sales of
Biopharmaceuticals[1] grew 41% (cc) to USD 262 million. Anti-Infectives
franchise sales (partner label and finished dosage form sales) were USD 339
million (-2% cc), reflecting discontinuation of low-margin products.

Operating income was USD 354 million (-9%, -9% cc). Core operating income was
USD 530 million (0%, +1% cc). Core operating income margin in constant
currencies increased by 0.2 percentage points; currency had a positive impact
of 0.1 percentage points, resulting in a net increase to 21.1% of net sales.

Alcon
net sales were USD 1.4 billion (-2%, -3% cc) in the third quarter. Surgical
sales (-4% cc) were down, impacted by lower IOL sales, mainly due to
competitive pressures, and a continued decline in cataract equipment,
primarilyLenSx
, which has reached high penetration in its market segment. The strong
installed cataract equipment base continued to generate good growth of
consumables (+4% cc).
Vision Care sales (0% cc) were flat, as contact lenses delivered another
quarter of growth, benefitting from the continued strong performance
ofDailies Total1
, offsetting a slight decline in contact lens care. Launches ofDailies Total1
Multifocal in the US and EU are expected to continue the growth trajectory in
contact lenses.

Operating loss was USD 50 million, compared to an income of USD 57 million in
the prior-year quarter. Core operating income was USD 206 million (-32%, -35%
cc), primarily impacted by declining sales and increased investments in M&S
behind the growth plan. Core operating income margin in constant currencies
decreased by 6.8 percentage points; currency had a positive impact of 0.5
percentage points, resulting in a net decrease of 6.3 percentage points to
14.3% of net sales.

[1] Biophar...

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