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Novartis (NVS) Raises Mid-Term Sales Outlook; Outlines Strategy

Swiss pharma giant Novartis NVS raised its sales and operating income goals for the mid-term, post its transformation into a ‘pure-play’ innovative medicines company following the spin-off of its Sandoz division.

The company now targets sales to grow by 5% on a compound annual growth rate basis from 2022 to 2027, up from the previous target of 4%. Its core operating income margin is expected to be around approximately 40% by 2027, driven by the continued strong momentum of key growth drivers.

The company also outlined the progress made in delivering its pure-play strategy, focused on four core therapeutic areas (Cardiovascular-Renal-Metabolic, Immunology, Neuroscience, Oncology) and two plus three technology platforms (Chemistry, Biotherapeutics, xRNA, Radioligand, Gene & Cell Therapy) in four priority geographies (United States, China, Germany, Japan).

Novartis had earlier spun off its eye care division, Alcon. With both Alcon and Sandoz's separation, the company is now only focused on its pharmaceutical business and has made good progress in advancing its portfolio and pipeline.

Resources have been streamlined to maximize focus and enhance competencies. The robust and streamlined portfolio now comprises 103 projects, with up to 15 key submissions for regulatory approval expected in the 2024-2027 timeframe.

Key growth drivers include blockbuster oncology drugs Kisqali and Pluvicto and multiple sclerosis drug Kesimpta.

Novartis plans to submit a label expansion for Kisqali for HR+/HER2- breast cancer in the adjuvant setting, Pluvicto for metastatic castration-resistant prostate cancer (“mCRPC”) in both pre-taxane settings and for metastatic hormone-sensitive prostate cancer and Scemblix in first-line chronic myeloid leukemia, as well as iptacopan for paroxysmal nocturnal hemoglobinuria by 2027.

The positive top-line results from NATALEE support Novartis’ efforts to expand the benefits of Kisqali to patients with earlier stages of breast cancer. Pluvicto and Scemblix have witnessed robust launches and recorded solid sales. Pluvicto continues to see strong demand in the United States as the first and only radioligand therapy approved by the FDA for the treatment of adult patients with progressive, PSMA-positive mCRPC. The Leqvio launch also continues to progress well.

Submissions planned by 2027 include iptacopan, atrasentan and zigakibart for the treatment of IgAN, iptacopan for treating C3G, pelacarsen to lower lipoprotein(a) for cardiovascular risk reduction and Leqvio for pediatric hyperlipidemia.

Multiple filings to extend Cosentyx indications, remibrutinib for chronic spontaneous urticaria, ianalumab for Sjögren’s syndrome and remibrutinib for multiple sclerosis are also planned.

In 2021, Novartis sold its stake in Roche RHHBY for $20.7 billion. The company has been a shareholder of RHHBY since May 2001. Novartis was reportedly looking for strategic acquisitions in the pharma/biotech space using the cash proceeds from its stake sale in Roche.

Shares of Novartis have risen 7% year-to-date compared with the industry’s 4.7% growth.

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Earlier in 2023, Novartis acquired Chinook Therapeutics for $3.5 billion to strengthen its renal pipeline. The acquisition added two late-stage candidates, atrasentan and zigakibart, for the treatment of IgA nephropathy to NVS’ pipeline.

 

NVS is also streamlining its pharma business. It divested its “front of eye” ophthalmology assets to Bausch + Lomb, a global eye-health company, for $2.5 billion.

The deal included Xiidra, a treatment for the signs and symptoms of dry eye disease and investigational medicine SAF312 (libvatrep), which is in development as a first-in-class therapy for chronic ocular surface pain, as well as the AcuStream delivery device in dry eye indications and OJL332 in pre-clinical development.

NVS is making efforts to return value to its shareholders through buybacks and dividends. It repurchased $30 billion in shares through 2018-2023 and announced a new buyback plan in July 2023 for $15 billion.

Strong performance of key drugs, a deep pipeline and a streamlined focus should help NVS maintain momentum amid competition.

Zacks Rank and Stocks to Consider

Novartis currently has a Zacks Rank #3 (Hold).

A couple of top-ranked stocks in the overall healthcare sector are Ligand Pharmaceuticals LGND and Dynavax Technologies DVAX. While LGND sports a Zacks Rank #1 (Strong Buy), DVAX carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings estimates for Ligand Pharmaceuticals’ 2023 earnings per share have increased from $4.98 to $5.39 in the past 90 days. During the same period, earnings estimates for 2024 rose from $4.26 to $4.44. Ligand beat earnings estimates in each of the last four quarters. The company has delivered an earnings surprise of 67.19%, on average.

Dynavax’s loss per share estimates for 2023 have narrowed from 23 cents to 12 cents for 2023 in the past 30 days. During the same period, earnings estimates for 2024 rose from 3 cents to 18 cents. Shares of DVAX have gained 28.1% year to date.

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Novartis AG (NVS) : Free Stock Analysis Report

Roche Holding AG (RHHBY) : Free Stock Analysis Report

Dynavax Technologies Corporation (DVAX) : Free Stock Analysis Report

Ligand Pharmaceuticals Incorporated (LGND) : Free Stock Analysis Report

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