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Research Tree provides access to ongoing research coverage, media content and regulatory news on NOVARTIS AG-REG. We currently have 7 research reports from 1 professional analysts.
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2017 to look like 2016...disappointing; buy-back provides a cushion
01 Feb 17
Novartis’s Q4 sales met our expectations, coming in flat at CER to $12.3bn, taking the full-year sales to $48.5bn (again flat yoy). Volume growth of 6ppts was nullified by the 4ppts loss to generics and 2ppts loss to pricing during the quarter. The strong dollar scooped out another 2ppts at the reported level. All revenue growth numbers at CER, unless specified otherwise. Generic erosion of Gleevec/Glivec led the decline in Innovative medicines (-1% for Q4 and nearly flat sales for the year), while Sandoz picked up after a disappointing Q3 (+3% for Q4 and +2% for the year). Alcon, on the other hand, did not offer much to cheer, barring the announcement of an exit optionality by the year end. Profitability too remained lacklustre, pulled down further by the impairment of R&D assets worth $433m in the innovative medicines (pharma) segment. In effect, the company-reported operating profit fell by 9% at CER (-13% in USD) during the quarter and by 3% (-8%) for the full year. Segment-wise, Sandoz held up well at 22% growth (although the growth is inflated by a legal provisioning in 2015), while pharma (-4%) and Alcon (-$120m vs +$29m last year) remained in the red during the quarter. This setback, however, was offset at the net level by higher associate income from GSK-consumer healthcare JV ($36m income vs $76m loss last year) and Roche ($120m vs $85m in 2015) during the quarter; net profit came in at $936m (flat at CER and -11% in USD) for the quarter and at $6.7bn for the year. The 2017 guidance wasn’t encouraging either, indicating flat revenue (at CER) and a flat/low single-digit decline in core operating income, with growth largely in H2. Based on the mid-January rates, forex is expected to have a negative impact of 2ppt on sales and 3ppt on core operating income. As compensation to the uninspiring performance and a weak outlook, a share buy-back programme worth ~$5bn for 2017 (to be financed by debt) will be launched.
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.
Interim results lead to upgrades
27 Mar 17
Bioventix reported a strong set of interim results with revenues increasing by 32% (c.12-17% at constant exchange rates (CER)), driven largely by the continued roll-out of its customers’ Vitamin D assay products. This, in turn, led to a 41% increase in pre-tax profits and a 40% increase in adjusted EPS; which is reflective of the operational gearing of the business. We are upgrading our adjusted EPS to 78.7p (+5%) and, consequently, are raising our target price to 1750p. At this price level, the shares would trade on a 22.4x FY 2018 P/E and an EV/EBITDA of 17x. We await confirmation of Siemen’s high sensitivity troponin assay launch, expected in FY 2018.
27 Mar 17
Elecosoft* (ELCO): Steadily building profits (CORP) | Bioventix* (BVXP): Interim results lead to upgrades (CORP) | Hurricane Energy (HUR): Halifax discovery (BUY) | KBT Business Technology* (KBT): interims and contract win (CORP) | Independent Oil & Gas* (IOG): Licence updates (CORP)
N+1 Singer - Morning Song 22-03-2017
22 Mar 17
Carador Income Fund (CIFU LN) Premium rating restored, high levels of refinancing activity | Cello Group (CLL LN) Outlook getting brighter – watch Pulsar | Eckoh (ECK LN) Largest ever US secure payments win | eg solutions (EGS LN) Full year results in line | Futura Medical (FUM LN) Licensing deal for CSD500 in Portugal | Verona Pharma (VRP LN) Global agreement with QuintilesIMS to support development of RPL554 | Xaar (XAR LN) 2016 results slightly ahead, reduced visibility in 2017
Sinclair Pharma - Aesthetically Positioned to Continue Double-Digit Growth
23 Mar 17
With an innovative and differentiated product portfolio of injectable devices addressing the fast-growing aesthetics market, Sinclair is best positioned to continue to achieve double-digit revenue growth in the medium term.
N+1 Singer - Futura Medical - Licensing deal for CSD500 in Portugal
22 Mar 17
The agreement with F Lima further extends the market reach of CSD500, Futura’s erectogenic condom, and brings the total number of distribution partners to eight. The deal is in line with the company’s stated strategy of partnering with leading regional players in the consumer products space. We expect the condom to be launched in Portugal later this year. We retain a positive stance.