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Research Tree provides access to ongoing research coverage, media content and regulatory news on NOVARTIS AG-REG. We currently have 6 research reports from 1 professional analysts.
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03 Nov 16
No surprises in Q3 from Novartis, with most of the dampeners, including Gleevec’s patent erosion in the US, being in the wash. Sales declined by 1% (all revenue growth numbers at CER, unless specified otherwise) to $12.1bn, marked by volume growth of 5%, nullified by generic competition (-4%) and an unfavourable pricing environment (-2%); there was no currency impact on sales during the quarter. The main defaulters were Gleevec/Glivec (-30%) and subdued growth in the Sandoz business (-1%), while Alcon remained in the red (-3% vs -1% in Q2 and -3% in Q1; the variation in Q1 and Q2 is, however, attributable to inventory phasing. Geographically, the weak US (-9%) weighed on a strong Europe (+5%) and a sluggish Asia/Africa/Australasia region (+1%). The core operating profit (company-reported metric) was down by 3% (15% volume growth being nullified by 7% negative price impact and 11% generic erosion), marked by weakness in the Alcon business and the investments behind Cosentyx and Entresto. Adjusted operating profit (as per our calculations) also fell by the same magnitude. Segment-wise, Alcon’s top-line woes were aggravated by higher investments, resulting in a significant profit plunge, although the pharma and the Sandoz businesses came in ahead of our expectation. The profit share from Roche and GSK Consumer Healthcare JV, however, pushed the growth to +7% at the net income level to $1.9bn. The guidance has been maintained at flat revenue growth and flat/low-single digit decline in core operating profit.
Cosentyx and growth products underpin top-line outperformance
22 Jul 16
Novartis’s Q2 top-line showed resilience at flat growth (NB all revenue growth numbers at constant currency unless specified otherwise), delivering sales of $12.5bn. These numbers were ahead of our as well as consensus estimates, strongly driven by the outperformance of Cosentyx, Gilenya and oncology assets bought from GSK, offsetting the underperformance primarily of Afinitor and ophthalmology assets shifted to the pharma business (including Lucentis). The 5% volume growth was offset by a 4% negative impact from generic erosion and a percentage point adverse impact from pricing. The strong dollar sliced out another 2% from the top-line and 3% from the bottom-line. Growth products were up 19% to $4.4bn, now contributing 35% to net sales. The core operating profit (company reported metric) declined by 4% (at cc) to $3.3bn. The margin declined by 1.6ppts to 26.7%, as a result of the investments in Entresto, Cosentyx and other new products. The underlying operating profit (as per our adjustments) came in at $2.4bn, in line with our expectations. For the full year, the company maintained its revenue guidance of flat growth (in CC). Profitability, however, will take a hit from the additional $200m investment in Entresto, resulting in a flat to low single-digit decline in core operating profit for the year. For the next quarter, the core operating profit outlook stands at a decline in the low to mid-single digits. In terms of currency impact, going by July’s levels, negative forex is expected to dilute the top-line by 1% and the bottom-line by 3% for the year (-1% for top-line and 2% for bottom-line in Q3). The CEO, Joseph Jimenez, warned of pricing pressure in the US, irrespective of who wins the elections and reiterated the change of winds towards newer pricing models. He also sounded non-committal on dealing with the Roche stake, reiterating that it would be sold at the right time, even without any premium.
Recovery efforts continuing
01 Jun 16
As expected, Novartis begins the year with a whimper. However, sales growth of 1% at CER to $11.6bn came in marginally ahead of our expectation which had factored in a deeper generic erosion of Gleevec. NB all revenue growth numbers at CER unless specified. Excluding Gleevec, the revenue growth was 4%. Volume growth of 7% was offset by generic competition (-4%), pricing pressure (-2%) and negative forex (-4%), culminating in a decline of 3% in reported $ sales. Growth products (contributing 34% of group sales) were up 24% (in $). Underlying operating income (differs both from the company reported operating profit as well as company reported core operating profit), however fell short of our expectations, coming in at $2.3bn (-20% in $). Company reported core operating profit declined by 5% (-11% in $) to $3.3bn, while net profit came in at $2bn (-4%, -13% in $). Additional debt of $6.5bn was taken for the dividend payment during the quarter. FY16 guidance has been maintained. As a reminder, management has guided for flat (CER) revenue as well as for core operating profit for 2016. Segment-wise, pharma is expected to be flat or to decline slightly (attributable to Gleevec’s generic erosion, without which the growth should come in at mid single-digit), Alcon guided to grow at low single-digit while Sandoz is expected to grow at low-to-mid single-digit growth. Based on March exchange rates, the negative impact of forex has been trimmed to 2% (from 3%) on sales and 3% (from 5%) on core operating profit.
Gleevec erosion and Alcon weakness to weigh on H1 2016
02 Feb 16
*Q4 below expectations* Languishing Alcon and flat Sandoz slowed Q4 sales growth to 4% (vs 6% in Q3) in cc (all revenue growth numbers in cc unless specified). Strong dollar against most currencies wiped out 8% points from top-line, which came in 4% lower at reported level to $12.5bn for the quarter. For the full year, net sales (from continuing operations) grew by 5% to $49.4bn, which was slightly behind our estimate of $50.2bn. Unfavourable currency impact of 10% pulled down reported growth to -5%. Underlying EBIT for the year came in at $10.8bn (-1.6% yoy, margin 21.8% vs 20.9% in 2014), which was a shade better than our expectation of $10.7bn. Currency dented core operating income to the extent of 15%. Negative return on plan asset (-$286m vs +$1.4bn in 2014), negative currency impact ($254m) on financial income (not factored in our forecast) and lower-than-anticipated income from associates (Roche and GSK Consumer Healthcare) resulted in lower-than-estimated attributable net profit of $17.8bn. Sales growth was in line with company targets in the pharma (mid-single digit sales growth) and Sandoz (high single-digit sales growth), but lower in Alcon (low single- digit sales growth). Dividend was upped by 4% to CHF2.7 per share, largely in line with our expectation. *Followed by unimpressive guidance* Management has guided a flat (at cc) revenue as well as core operating profit for 2016. Segment-wise, pharma is expected to be flat or to decline slightly (attributable to Gleevec generic erosion, without which the growth should come in at mid-single-digit), Alcon guided to grow at low single-digit while Sandoz is expected to grow at low to mid-single-digit growth. Management expects the year to be back-end loaded with Q1 seeing additional spending (launch cost on Cosentyx and Entresto, and planned investments towards restructuring) and tough comps for Sandoz taking over growth. Forex (based on January level) is guided to have a negative impact of 5% on Q1 16 and 3% on full-year sales; 7% in Q1 and 5% on full-year core operating profit.
Pharma and Sandoz encouraging but Alcon remains a drag
15 Dec 15
The strong dollar along with sluggishness in the Alcon business spoilt an otherwise decent Q3 for Novartis. Q3 sales were up 6% (all growth figures at CER unless specified) to $12.3bn, with volume growth of 11% being offset to some extent by generic erosion of 3% and pricing pressure of 2%. Core operating income increased 14% to $3.5bn (margin improved 2.2ppts). Currency continued to be unforgiving, knocking off 12% from sales and 17% from core operating income, resulting in a decline of 6% and 3% in sales and core operating income, respectively, at the reported level. Reported net income was down 28% (-42% in $) to $1.8bn, mainly due to c.$400m of provisions recognised in relation to the legal settlement in the US, and c.$800m of gains from the sale of the stake in Idenix Pharmaceuticals included in the prior year. Management maintained its FY 15 outlook of sales growth of a mid single-digit and core operating income growth of a high single-digit, with the expectation of robust growth in Sandoz compensating for weakness in Alcon. Forex is expected to have a negative impact of 10% on sales and 14% on core operating income.
Alcon needs innovation while Sandoz braces for opportunities
24 Jul 15
The Q2 15 performance of Novartis had the same theme as in the last quarter – strong dollar headwind overshadowing the strong operating performance. CER revenue growth to $12.7bn was 6% - a function of volume growth of 12%, generic erosion of -5% and a negative pricing impact of 1%. Core operating profit too was up 6% at CER to $3.6bn. Negative forex impact, however, eroded 11% off the sales and 13% from the core operating profit, leading to a revenue decline of 5% and core operating profit decline of 7% yoy in CHF. The growth momentum was also disturbed by weakness in the Alcon business, but supported by a strong Sandoz. For the half year, group revenue was up 4% at CER (-6% reported), while core operating profit was up 8% (-5% reported). While the group's 2015 revenue guidance has been maintained at a mid single-digit level, the downward revision in Alcon’s revenue outlook to low single-digit growth has been compensated by an upward revision in the Sandoz business to high single-digits. The guidance for core operating profit at CER remains unchanged at high single-digit.
30 Nov 16
Abzena (ABZA): Interim results indicate happy customers (BUY) | Horizonte Minerals* (HZM): Fund raise completed (CORP) | SacOil* (SAC): Half-year trading statement (CORP) | Revolution Bars (RBG): New openings (BUY) | Amino Technologies* (AMO): Multi operator FUSION roll out (CORP)
N+1 Singer - Morning Song 30-11-2016
30 Nov 16
Sanderson has delivered full year results in line with expectations and the 19 October trading update after a strong finish to the year compensated for a slower start. A healthy level of pre-contracted recurring revenue (50%), incremental sales to existing customers and new customer wins at higher average order values helped deliver solid revenue growth in both the Digital Retail (+9%) and Enterprise (+12%) divisions. A decent order book and good sales momentum suggest that the company is on track to deliver on unchanged profit expectations for the current year. We continue to view the valuation (FY17 EV/EBITDA 8.6x) as undemanding given an attractive combination of accelerating growth potential, strong cash generation and growing dividends.
N+1 Singer - Morning Song 29-11-2016
29 Nov 16
Vp has reported another impressive set of interims, confirming strong growth in most markets and a positive outlook. Recent acquisitions are bedding in well and the full year outturn is set to exceed previous expectations (5%/6% EPS upgrades in FY17/FY18). The recent Capital Markets Day provided a reminder of Vp’s qualities (specialist focus, high returns, strong cash generation) and its growth potential, which in our view are not reflected in a modest <11x P/E rating. We firmly believe the shares are due a re-rating and see intrinsic value in excess of 800p.
Panmure Morning Note 02-12-16
02 Dec 16
We expect CareTech to report FY results to September on 8th December. A positive trading update in October indicated that performance for the year was in line with market expectations therefore we are focusing on the outlook. We expect a confident statement since the end of 2016 showed positive trends across fee rates, expansion in places and occupancy. We believe CareTech is well positioned for further expansion, and remains at an attractive valuation. We retain our BUY and 380p price target.
Food intolerance driving growth
29 Nov 16
Omega Diagnostics Group has an established core business providing high quality in vitro diagnostic tests within three core areas of competence – Food Intolerance, Allergy & Autoimmune, Infectious Disease – that are sold in over 100 countries. The group offers steady low single-digit growth which is profitable and cash generative. Investment in new products has seen the launch of a new panel of automated allergy tests and progress on Visitect CD4 for monitoring of HIV positive patients. Interim results highlighted the opportunities to accelerate growth of the business, particularly Allersys, which has drawn attention from its partner.
Small Cap Breakfast
29 Nov 16
Asia Pacific Investment Partner - the research-driven emerging and frontier markets real estate development business intends to float on AIM and conduct a placing in December RM Secured Direct Lending - The secured direct lending fund intends to float on the Main Market on 15 December raising up to £100m Diversified Oil & Gas— Schedule One now out. $60m to be raised. Expected admission 6 December. Creo Medical Group —UK based medical device company focused on surgical endoscopy, a recent development in minimally invasive surgery. Admission due 7 December. Fundraising details TBA.