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Novartis delivered strong growth and innovation during the third quarter, including progressing advanced therapy platforms to drive future growth | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
By: Nasdaq / GlobeNewswire - 18 Oct 2018 | Back to overview list |
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The digital press release with multimedia content can be accessed here:
nm = not meaningful [1] Constant currencies (cc), core results and free cash flow are non-IFRS measures. An explanation of non-IFRS measures can be found on page 55 of the Condensed Interim Financial Report. Unless otherwise noted, all growth rates in this Release refer to same period in prior year. Basel, October 18, 2018 - Commenting on the results, Vas Narasimhan, CEO of Novartis, said: "We progressed our breakthrough medicines pipeline including our leading advanced therapy platforms in cell and gene with multiple submissions for AVXS-101 in SMA and the planned acquisition of Endocyte in radioligand therapy. We also completed first in class filings for BAF312 in secondary progressive MS. Our strong operational performance continues as we delivered margin accretive growth, driven by the Innovative Medicines Division, and we are on track to deliver our full year guidance." GROUP REVIEW Third quarter financials Net sales were USD 12.8 billion (+3%, +6% cc) in the third quarter driven by volume growth of 9 percentage points (cc), mainly from Cosentyx, Entresto, Oncology including AAA, and Alcon. Strong volume growth was partly offset by the negative impacts of pricing (-2 percentage points) and generic competition (-1 percentage point). Operating income was USD 1.9 billion (-18%, -13% cc) mainly due to net charges from the voluntary withdrawal of CyPass (USD 0.3 billion), higher restructuring and growth investments, partly offset by continued sales growth and gross margin expansion. Core adjustments amounted to USD 1.6 billion (2017: USD 1.0 billion). Net income was USD 1.6 billion, (-22%, -18% cc) mainly due to the lower operating income and the discontinuation of income from the GSK consumer healthcare joint venture, divested to GSK in the second quarter. EPS was USD 0.70 (-21%, -17% cc), due to the lower net income partly offset by the lower number of shares outstanding. Core operating income was USD 3.6 billion (+5%, +9% cc) driven by higher sales and improved gross margin, partly offset by growth and launch investments, including AveXis. Core operating income margin in constant currencies increased 0.8 percentage points; currency had a negative impact of 0.2 percentage points, resulting in a net increase of 0.6 percentage points to 27.8% of net sales. Core net income was USD 3.1 billion (+2%, +5% cc) as growth in core operating income was partly offset by the discontinuation of core income from the GSK consumer healthcare joint venture. Core EPS was USD 1.32 (+2%, +6% cc), driven by growth in core net income and the lower number of shares outstanding. Free cash flow amounted to USD 3.3 billion (+8% USD) compared to USD 3.1 billion in prior year as higher cash flows from operating activities were partly offset by higher net investments in intangible assets. Innovative Medicines net sales were USD 8.6 billion (+6%, +9% cc) in the third quarter, as both the Pharmaceuticals and Oncology business units grew 9% (cc). Volume contributed 11 percentage points driven by growth drivers and higher Diovan and Exforge benefitting from the recall of competitor generic products. Pricing had a negative impact of 1 percentage point and generic competition a negative impact of 1 percentage point. Operating income was USD 2.2 billion (+2%, +6% cc), mainly driven by higher sales and improved gross margin, partly offset by higher growth and launch investments as well as higher restructuring costs. Core adjustments were USD 0.7 billion (2017: USD 0.4 billion). Core operating income was USD 2.9 billion (+12%, +16% cc). Core operating income margin in constant currencies increased by 2.1 percentage points; currency had a negative impact of 0.2 percentage points, resulting in a net increase of 1.9 percentage points to 33.7% of net sales. Sandoz net sales were USD 2.4 billion (-6%, -4% cc) in the third quarter with 8 percentage points of price erosion, mainly in the US partially offset by volume growth of 4 percentage points. Excluding the US, net sales grew by 2% (cc). Global sales of Biopharmaceuticals grew 21% (cc), mainly driven by Rixathon (rituximab) and Erelzi (etanercept) in Europe, and Zarxio (filgrastim) in the US. Operating income was USD 358 million (-8%, -3% cc) mainly due to lower sales and higher ex-US M&S investments partly offset by continued strong gross margin improvements. Core operating income was USD 541 million (-7%, -3% cc). Core operating income margin increased by 0.2 percentage points; currency had a negative impact of 0.2 percentage points, resulting in a margin of 22.4% of net sales, in line with prior year. Novartis announced on September 6th, 2018 that it has agreed to sell selected portions of its Sandoz US portfolio, specifically the Sandoz US dermatology business and US oral solids portfolio, to Aurobindo Pharma USA Inc., for USD 0.9 billion of cash plus USD 0.1 billion of potential earn-outs. The portfolio to be sold includes approximately 300 products, as well as additional development projects. This transaction supports the Sandoz strategy of focusing on complex generics, value-added medicines and biosimilars to achieve sustainable, profitable growth in the US over the long-term. This transaction is expected to be completed during 2019. Alcon net sales were USD 1.8 billion (+3%, +5% cc) in the third quarter. Surgical growth of +7% (cc) was driven by double digit growth of advanced technology IOLs (AT-IOLs), as well as continued growth in consumables and equipment. Vision Care sales grew +3% (cc), driven by double digit growth of Dailies Total1 and Systane. Alcon's results reflect the seventh consecutive quarter of net sales growth mainly as a result of improved operations and customer relationships. Operating loss was USD 297 million, compared to a loss of USD 2 million in the prior year, impacted by the net charges from the voluntary withdrawal of CyPass (USD 0.3 billion). Core operating income was USD 301 million (-5%, +1% cc) as higher sales and gross margin were offset by higher growth investments, including direct to consumer advertising for Dailies Total1 and Systane, as well as operational investments. Core operating income margin in constant currencies decreased by 0.7 percentage points; currency had a negative impact of 0.7 percentage points, resulting in a net decrease of 1.4 percentage points to 17.1% of net sales. Nine month financials Net sales were USD 38.6 billion (+7%, +5% cc) in the first nine months driven by volume growth of 9 percentage points (cc), mainly from Cosentyx, Entresto, Oncology including AAA, and Alcon. Strong volume growth was partly offset by the negative impacts of pricing (-2 percentage points) and generic competition (-2 percentage points). Operating income was USD 6.9 billion (+5%, +3% cc) driven by higher sales, gross margin and net divestment gains, partly offset by growth investments, net charges from the voluntary withdrawal of CyPass (USD 0.3 billion) and higher restructuring. Core adjustments amounted to USD 3.6 billion (2017: USD 3.1 billion). Net income was USD 11.4 billion, compared to USD 5.7 billion in prior year, mainly benefiting from a USD 5.7 billion net gain from the divestment of our stake in the GSK consumer healthcare joint venture, in the second quarter. EPS was USD 4.92, compared to USD 2.43 in prior year, driven by higher net income and lower number of shares outstanding. Core operating income was USD 10.4 billion (+8%, +7% cc) driven by higher sales and improved gross margin, partly offset by growth investments, including AveXis. Core operating income margin in constant currencies increased 0.5 percentage points; currency had a negative impact of 0.1 percentage points, resulting in a net increase of 0.4 percentage points to 27.0% of net sales. Core net income was USD 9.1 billion (+6%, +4% cc) driven by growth in core operating income, partly offset by the discontinuation of core income from the GSK consumer healthcare joint venture from April 1, 2018. Core EPS was USD 3.90 (+7%, +5% cc) driven by growth in core net income and the lower number of shares outstanding. Free cash flow amounted to USD 8.8 billion (+10% USD) compared to USD 8.0 billion in prior year as higher cash flows from operating activities were partly offset by higher net investments in intangible assets. Innovative Medicines net sales were USD 25.9 billion (+9%, +7% cc) in the first nine months, as Pharmaceuticals grew 7% (cc) and Oncology grew 8% (cc). Volume contributed 11 percentage points to sales growth. Generic competition had a negative impact of 2 percentage points. Pricing had a negative impact of 2 percentage points. Operating income was USD 6.6 billion (+13%, +11% cc) mainly driven by higher sales and improved gross margin, partly offset by higher growth and launch investments and higher restructuring. Core adjustments were USD 1.8 billion (2017: USD 1.6 billion). Core operating income was USD 8.4 billion (+13%, +11% cc). Core operating income margin in constant currencies increased by 1.1 percentage points; currency impact was not significant, resulting in a net increase of 1.1 percentage points to 32.4% of net sales. Sandoz net sales were USD 7.4 billion (-1%, -3% cc) in the first nine months, as 8 percentage points of price erosion, mainly in the US, were partially offset by volume growth of 5 percentage points. Excluding the US, net sales grew by 4% (cc). Global sales of Biopharmaceuticals grew 22% (cc) mainly driven by Rixathon (rituximab) and Erelzi (etanercept) in Europe, and Zarxio (filgrastim) in the US. Operating income was USD 1.1 billion (+3%, +1% cc) mainly driven by strong gross margin improvement, and higher divestment gains, offset by lower sales and ex-US M&S investments. Core operating income was USD 1.5 billion (-1%, -2% cc). Core operating income margin increased by 0.2 percentage points; currency had a negative impact of 0.3 percentage points, resulting in a net decrease of 0.1 percentage points to 20.5% of net sales. Alcon net sales were USD 5.4 billion (+7%, +6% cc) in the first nine months. Surgical sales grew +8% (cc), mainly driven by AT-IOLs and cataract consumables. Vision Care sales grew +3% (cc) driven by growth in contact lenses with continued double-digit growth of Dailies Total1. Operating loss was USD 142 million in the nine months, compared to an income of USD 25 million in prior year, as higher sales and improved gross margin were more than offset by the net charges from the voluntary withdrawal of CyPass (USD 0.3 billion) and higher growth investments. Core operating income was USD 1.0 billion (+15%, +14% cc). Core operating income margin in constant currencies increased by 1.3 percentage points; currency impact was not significant, resulting in a net increase of 1.3 percentage points to 18.6% of net sales. Key growth drivers (Q3 performance) Underpinning our financial results in the third quarter is a continued focus on key growth drivers including:
Key developments from the third quarter of 2018 include: New approvals and regulatory opinions (in Q3)
Regulatory submissions and filings (in Q3)
Results from ongoing trials and other highlights (in Q3)
Capital structure and net debt Retaining a good balance between investment in the business, a strong capital structure and attractive shareholder returns remains a priority. In June 2018, Novartis announced a new up-to USD 5.0 billion share buyback on the second trading line for cancellation, to be executed until the end of 2019. During the first nine months of 2018, Novartis repurchased 7.2 million shares (USD 0.6 billion) under this buyback and 14.0 million shares (USD 1.1 billion) to mitigate dilution related to participation plans of associates. In addition, 1.4 million shares (USD 0.1 billion) were repurchased from associates, and 15.1 million treasury shares (USD 1.0 billion) were delivered as a result of options exercised and share deliveries related to participation plans of associates. Consequently, the total number of shares outstanding decreased by 7.5 million versus December 31, 2017. These treasury share transactions resulted in an equity decrease of USD 0.8 billion and a net cash outflow of USD 1.4 billion. As of September 30, 2018, the net debt decreased by USD 1.9 billion to USD 17.1 billion versus December 31, 2017. The decrease was mainly driven by the USD 13.0 billion inflow from the sale of the stake in the GSK consumer healthcare joint venture and USD 8.8 billion free cash flow in the first nine months of 2018. These inflows were partially offset by the USD 7.0 billion annual dividend payment, the acquisitions of Advanced Accelerator Applications S.A. and of AveXis, Inc. for a total of USD 11.8 billion (net of cash acquired) and a net cash outflow for treasury share transactions of USD 1.4 billion. The long-term credit rating for the company is A1 with Moody's Investors Service, AA- with S&P Global Ratings and AA with Fitch Ratings. 2018 Outlook Barring unforeseen events We have revised upwards our guidance for Group net sales in 2018, which we now expect to grow mid-single digit (cc). We confirm our guidance for Group core operating income in 2018, which we expect to grow mid to high-single digit (cc). From a divisional perspective, we expect net sales performance (cc) in 2018 to be as follows:
If mid-October exchange rates prevail for the remainder of 2018, currency is expected to have a negligible impact on the full year results. The estimated impact of exchange rates on our results is provided monthly on our website. Summary Financial Performance
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Copyright 2018 Nasdaq / GlobeNewswire | Back to overview list |