Novartis Profit Dented by Investment in New Drugs -- Update
25 April 2017 - 5:23PM
Dow Jones News
By Denise Roland
Novartis AG said profit fell in the first quarter as it pumped
investment into the launch of its new heart-failure drug Entresto
that it hopes will help offset revenue lost as best-selling cancer
medicine Gleevec loses out to cheaper competitors.
Basel, Switzerland-based Novartis is counting on two recently
launched drugs--Entresto for heart failure and Cosentyx for
psoriasis and some rheumatoid diseases--to offset a sharp decline
in revenue from Gleevec, which last year started to face
competition from cheaper alternatives.
Its heavy investment in those launches is denting profit. Core
operating income--a measure that excludes certain one-time gains
and impairments--fell 8% to $3 billion in the first quarter.
Cosentyx has ramped up quickly since its launch in 2015,
notching sales of $1.1 billion last year, but Entresto has so far
proved a disappointment. Also launched in 2015, the heart-failure
drug generated sales of just $170 million last year, missing even
Novartis's own modest goal of $200 million.
"This is going to be a slow build," said Chief Executive Joe
Jimenez. "This is a brand that doesn't have competition, we are
driving it."
He is betting that Entresto sales growth will accelerate this
year thanks to a bigger sales force, more favorable coverage from
insurers and the recent endorsement of major cardiology societies
in the U.S. and Europe. Entresto sales were $84 million in the
first quarter compared with $17 million a year earlier.
Also hurting core operating profit was Novartis's investment in
its ailing eyecare unit Alcon, which it is considering selling or
spinning off. That business, which sells contact lenses and kits
for lens implant surgery, is struggling to grow amid intensifying
competition, especially in the lens implant market.
Still, revenue rose in the quarter as sales of new drugs--mostly
Cosentyx--more than offset Gleevec's decline. First-quarter sales
were $11.5 billion, up 2% at constant currencies. Alcon and Sandoz,
Novartis's generic drugs business, also contributed to sales
growth, with revenue up 1% at both divisions.
Net income fell 17% to $1.7 billion in the first quarter largely
due to a $200 million net charge related to the failure of acute
heart failure drug serelaxin during late stage development.
Novartis confirmed its overall guidance for the year despite
fine-tuning the outlook for its individual divisions, slightly
raising expectations for its innovative medicines unit while
lowering them for Sandoz.
Overall, Novartis still expects 2017 sales to be broadly in line
with last year and for core operating profit to be flat or decline
at a low single-digit percentage.
Write to Denise Roland at Denise.Roland@wsj.com
(END) Dow Jones Newswires
April 25, 2017 03:08 ET (07:08 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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