Novartis says operating profit to grow again ahead of Sandoz spin-off

By Ludwig Burger

BASEL (Reuters) – Novartis on Wednesday predicted that core operating income would grow in a “mid single digit” percentage range in 2023 following stagnation last year, as the Swiss drugmaker prepares to spin off its Sandoz generics business.

Full-year core operating income was broadly flat at $16.7 billion, it said in a statement, coming in slightly below market expectations of $16.8 billion.

Adjusted for overall negative currency effects, group sales in 2022 advanced 4% to $50.5 billion as gains from heart failure drug Entresto and multiple sclerosis (MS) drug Kesimpta were partly offset by competition from cheap generic copies of established MS drug Gilenya.

Novartis said it was on track to spin off its generics unit Sandoz in the second half of the year as part of its effort to sharpen its focus on its patented prescription medicines.

Analysts have welcomed a programme unveiled in 2022 to trim costs and cut 8,000 jobs and plans to focus on fewer therapy areas and drug technologies. But the market has been underwhelmed by prospects for medium-term growth from new drugs.

Novartis shares were down 1.3% in early trade on Wednesday and have fallen about 11% since January 2020, underperforming most rivals.

Credit Suisse analysts said that best-selling psoriasis and arthritis drug Cosentyx fell short of estimates as the company cited retroactive price cuts under the U.S. Medicaid programme for low-income households. 

They were also disappointed by guidance for Sandoz’s core operating income to decline by a “low double digit” percentage in 2023 due to cost inflation and investments to make it a stand-alone entity.

The market has been pinning hopes for future sales growth on wider use of breast cancer drug Kisqali and iptacopan, which is being tested against a rare genetic blood disorder, possibly challenging AstraZeneca’s drugs Soliris and Ultomiris.

MS drug Kesimpta, which requires fewer injections than standard therapies, is expected to become Novartis’ second largest growth driver in 2023, after Entresto.

Novartis shares lag https://fingfx.thomsonreuters.com/gfx/mkt/myvmokorxvr/novartis.PNG

(Reporting by Ludwig Burger; editing by Josephine Mason and Jason Neely)