Novartis delivered solid performance in the second quarter, with strong innovation and progress on new launches
(Thomson Reuters ONE) -
Novartis International AG /
Novartis delivered solid performance in the second quarter, with strong
innovation and progress on new launches
. Processed and transmitted by NASDAQ OMX Corporate Solutions.
The issuer is solely responsible for the content of this announcement.
* Sales, core[1] operating income and core EPS grew (cc[1]) for continuing
operations[2] in Q2:
* Net sales amounted to USD 12.7 billion (-5%, +6% cc)
* Operating income was USD 2.3 billion (-28%, -14% cc)
* Core operating income was USD 3.6 billion (-7%, +6% cc)
* Q2 core margin improved 0.3 percentage points (cc)
* Core EPS was USD 1.27 (-7%, +7% cc), and free cash flow[1] was USD 2.1
billion
* Further strengthening of USD impacted sales by -11% and core operating
income by -13%
* Strong performance for Sandoz (net sales +11% cc, core operating income
+30% cc) and Pharmaceuticals (net sales +6% cc, core operating income
+9% cc), more than offset weak quarter for Alcon (net sales 0% cc, core
operating income -10% cc)
* Strong innovation momentum continued in Q2, culminating in key launches
* Entresto approved and launched in US (July) for chronic heart failure
with reduced ejection fraction
* Glatopa, the first generic competitor to Copaxone® 20mg, approved and
launched in US
* Approvals for Zykadia (EU) and Promacta (US), and positive CHMP opinion
for Farydak
* Positive data including Tafinlar/Mekinist combination in metastatic
melanoma, Afinitor in GI and lung NET and Cosentyx in ankylosing
spondylitis
* Growth Products continued to drive Q2 performance and rejuvenate portfolio
* Growth Products[3] grew 24% (USD) to USD 4.4 billion, or 35% of net
sales
* Strong performance in Emerging Growth Markets[3] (+8% cc)
* Outlook 2015 for continuing operations confirmed:
* Continuing operations net sales expected to grow mid-single digit (cc);
core operating income expected to grow ahead of sales at a high-single
digit rate (cc)
* To reflect first half performance, Novartis raises Sandoz FY guidance to
high single digit sales growth (cc), lowers Alcon FY guidance to low
single digit sales growth (cc)
Key figures[1] Continuing operations[2]
-------------------------------------------------
% %
Q2 2015 Q2 2014 change H1 2015 H1 2014 change
USD m USD m USD cc USD m USD m USD cc
----------------------------------------- -----------------------
Net sales 12 694 13 347 -5 6 24 629 26 114 -6 4
Operating income 2 281 3 184 -28 -14 5 066 5 999 -16 -1
Net income 1 856 2 723 -32 -18 4 162 5 177 -20 -5
EPS (USD) 0.77 1.11 -31 -16 1.72 2.10 -18 -3
Free cash flow 2 064 2 693 -23 3 529 3 845 -8
Core
Operating income 3 593 3 859 -7 6 7 244 7 659 -5 8
Net income 3 074 3 335 -8 5 6 273 6 668 -6 7
EPS (USD) 1.27 1.36 -7 7 2.60 2.71 -4 9
----------------------------------------- -----------------------
[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 52 of the
Condensed Interim Financial Report. Unless otherwise noted, all growth rates in
this Release refer to same period in prior year.
[2] Continuing operations are defined on page 42 of the Condensed Interim
Financial Report.
[3] Growth Products are defined on page 2 and Emerging Growth Markets on page 6.
Basel, July 21, 2015 - Commenting on the results, Joseph Jimenez, CEO of
Novartis, said:
"Novartis had a strong quarter for innovation, with US approval and launch of
both Entresto and Glatopa being key highlights. Additionally, we reported a
broad range of positive clinical data across franchises, including
Tafinlar/Mekinist in metastatic melanoma and Cosentyx in ankylosing spondylitis.
We are confident we will deliver on our priorities for the year, and confirm our
full-year guidance."
GROUP REVIEW
Novartis has laid out five clear priorities for 2015: deliver strong financial
results; strengthen innovation; complete the portfolio transformation; capture
cross-divisional synergies; and build a high-performing organization. In each of
these areas, we made solid progress in the second quarter and first half.
Financial results
Following the announcement of our portfolio transformation transactions on April
22, 2014, Novartis reported the Group's financial results for the current and
prior years as "continuing operations" and "discontinued operations." See page
42 of the Condensed Interim Financial Report for full explanation.
The commentary below focuses on continuing operations, which include the
businesses of Pharmaceuticals, Alcon, Sandoz and Corporate activities. Starting
on March 2, 2015, the date of the completion of the GSK transactions, continuing
operations also includes the results from the new oncology assets acquired from
GSK and the 36.5% interest in the GSK consumer healthcare joint venture (the
latter reported as part of income from associated companies). We also provide
information on discontinued operations and total Group performance on pages 3
and 5.
Second quarter
Continuing operations
Net sales amounted to USD 12.7 billion (-5%, +6% cc). Growth Products[1]
contributed USD 4.4 billion or 35% of net sales, up 24% (USD) over the prior-
year quarter.
Operating income was USD 2.3 billion (-28%, -14% cc), down mainly due to the
amortization of the new oncology assets as well as a commercial settlement gain
related to intellectual property in the prior-year period, partly offset by
strong operating performance. The adjustments made to operating income to arrive
at core operating income amounted to USD 1.3 billion (2014: USD 0.7 billion),
mainly on account of higher amortization charges for the acquisition of the new
oncology assets, an intangible asset impairment in Alcon and exceptional charges
mainly related to the planned closure of two manufacturing sites in Sandoz,
whereas 2014 included exceptional revenue from a commercial settlement gain
related to intellectual property.
Core operating income was USD 3.6 billion (-7%, +6% cc). Core operating income
margin in constant currencies increased 0.3 percentage points, mainly due to
higher sales and productivity initiatives. Currency had a negative impact of
0.9 percentage points, resulting in a net decrease of 0.6 percentage points in
USD to 28.3% of net sales.
Net income was USD 1.9 billion (-32%, -18% cc), declining more than operating
income mainly due to lower income from associated companies.
EPS was USD 0.77 (-31%, -16% cc), declining less than net income due to the
lower number of average outstanding shares.
Core net income was USD 3.1 billion (-8%, +5% cc), broadly in line with core
operating income.
Core EPS was USD 1.27 (-7%, +7% cc), growing ahead of core net income due to the
lower number of average outstanding shares.
Free cash flow for the second quarter was USD 2.1 billion (-23%), a decrease of
USD 0.6 billion compared to the prior-year period. This was primarily due to
lower operating income, including a negative currency impact on operations,
partially offset by lower net working capital and higher hedging gains.
[1] "Growth Products" are an indicator of the rejuvenation of the portfolio, and
comprise products launched in a key market (EU, US, Japan) in 2010 or later, or
products with exclusivity in key markets until at least 2019 (except Sandoz,
which includes only products launched in the last 24 months). They include the
acquisition effect of the GSK oncology assets.
Pharmaceuticals net sales reached USD 7.8 billion (-4%, +6% cc), with volume
growth of 13 percentage points, which includes the new oncology assets acquired
from GSK (sales of USD 0.5 billion in Q2), and a positive price impact of 1
percentage point, partly offset by the negative impact of generic competition (-
8 percentage points), largely for Diovan monotherapy, Exforge and Vivelle-Dot in
the US. Growth Products - which include Gilenya, Lucentis, Afinitor, Tasigna,
Xolair, the COPD portfolio[1], the Tafinlar/Mekinist combination and Jakavi -
generated USD 3.5 billion or 44% of division net sales. These products grew 38%
(cc) over the same period last year.
Operating income decreased 17% (-4% cc) to USD 2.0 billion, as amortization of
intangible assets of USD 384 million and acquisition-related costs of USD 69
million, mainly related to the new oncology assets, were partly offset by solid
operating performance. Core operating income was USD 2.5 billion (-4%, +9% cc).
Core operating income margin in constant currencies increased by 1.0 percentage
point; currency had a negative impact of 1.0 percentage point, resulting in a
core operating income margin of 31.6% of net sales.
Alcon net sales of USD 2.6 billion (-9%, 0% cc) were flat in the second quarter,
mainly driven by lower surgical equipment sales, a decline in intraocular lens
(IOL) sales due to competitive pressure, and an accelerated contact lens care
decline; this slowdown in business performance would have resulted in underlying
growth of 2% (cc). In addition, Alcon was negatively impacted by approximately
2% from the phasing of US allergy shipments, as well as trade inventory
reductions, resulting in flat growth (cc) in the second quarter.
Operating income (-68%, -41% cc) was USD 150 million, reflecting a USD 119
million intangible asset impairment. Core operating income (-23%, -10% cc) was
USD 796 million, primarily impacted by product mix and slightly higher revenue
provisions, as well as higher spending in R&D and M&S. Core operating income
margin in constant currencies decreased by 3.7 percentage points; currency had a
negative impact of 1.8 percentage points, resulting in a net decrease of 5.5
percentage points to 31.1% of net sales.
Sandoz net sales were USD 2.3 billion (-2%, +11% cc) in the second quarter, as
volume growth of 17 percentage points more than compensated for 6 percentage
points of price erosion. Regionally, US performance was particularly strong
(+23% cc), driven by the launch of Glatopa, the first generic version of
Copaxone(®) 20mg, continued strong growth in Dermatology, and other recent
launches. Sandoz continued to strengthen its leading position in differentiated
generics, with global sales of Biopharmaceuticals (which include biosimilars,
biopharmaceutical contract manufacturing and Glatopa) up 57% (cc) to USD 222
million in the second quarter, driven in part by shipping of initial trade
inventories of Glatopa in June.
Operating income amounted to USD 193 million (-21%, -26% cc), significantly
impacted by USD 144 million of restructuring charges mainly related to our
manufacturing footprint initiative. Core operating income increased to USD 423
million (+21%, +30% cc), driven by strong base business performance and the
launch of Glatopa. Core operating income margin in constant currencies increased
2.6 percentage points; currency had a positive impact of 0.8 percentage points,
resulting in a net increase of 3.4 percentage points to 18.5% of net sales.
Discontinued operations[2]
Operational results for discontinued operations in the second quarter of 2015
include three months of results from the influenza Vaccines business. Animal
Health, OTC and non-influenza Vaccines are not included, as the divestments were
closed in the first quarter of 2015. The prior-year period included the results
of all divested units during the quarter.
Influenza Vaccines sales for the quarter amounted to USD 39 million, compared to
USD 29 million in the prior-year period.
Discontinued operations operating loss was USD 96 million in the second quarter
of 2015 compared to a loss of USD 89 million in the prior-year period.
Net loss from discontinued operations amounted to USD 18 million compared to a
net loss of USD 138 million in the prior-year quarter.
Core operating loss for discontinued operations amounted to USD 72 million
compared to a loss of USD 62 million in the prior-year quarter.
[1] The chronic obstructive pulmonary disease (COPD) portfolio includes Onbrez
Breezhaler/Arcapta Neohaler, Seebri Breezhaler and Ultibro Breezhaler.
[2] Discontinued operations are defined on page 42 of the Condensed Interim
Financial Report.
Total Group
For the total Group, net income amounted to USD 1.8 billion compared to USD 2.6
billion in the prior-year period, and basic earnings per share decreased to USD
0.76 from USD 1.05.
Free cash flow for the total Group amounted to USD 2.0 billion.
First half
Continuing operations
Net sales amounted to USD 24.6 billion (-6%, +4% cc) in the first half. Growth
Products contributed USD 8.1 billion or 33% of net sales, up 19% (USD) over the
first half of 2014.
Operating income was USD 5.1 billion (-16%, -1% cc), down mainly due to the
amortization of the new oncology assets as well as a commercial settlement gain
related to intellectual property in the prior-year period, mostly offset by
strong operating performance. The adjustments made to operating income to arrive
at core operating income amounted to USD 2.2 billion (2014: USD 1.7 billion).
Core operating income was USD 7.2 billion (-5%, +8% cc). Core operating income
margin in constant currencies increased 0.9 percentage points, mainly due to
higher sales and productivity initiatives. Currency had a negative impact of
0.8 percentage points, resulting in a net increase of 0.1 percentage points to
29.4% of net sales.
Net income was USD 4.2 billion (-20%, -5% cc), declining more than operating
income mainly due to lower income from associated companies.
EPS was USD 1.72 (-18%, -3% cc), declining less than net income due to the lower
number of average outstanding shares.
Core net income was USD 6.3 billion (-6%, +7% cc), broadly in line with core
operating income.
Core EPS was USD 2.60 (-4%, +9% cc), growing ahead of core net income due to the
lower number of average outstanding shares.
Free cash flow for the first half was USD 3.5 billion (-8%), a decrease of USD
0.3 billion compared to the prior-year period. This was primarily due to the
negative currency impact on operations, partially offset by lower net working
capital and higher hedging gains.
Pharmaceuticals delivered net sales of USD 15.0 billion (-6%, +4% cc) in the
first half, driven by volume growth (+12 percentage points), which more than
offset the impact of generic competition (-8 percentage points). Pricing impact
was negligible.
Operating income was USD 4.3 billion (-7%, +6% cc) for the first half. Included
in operating income were USD 552 million of amortization of intangible assets
and USD 110 million of acquisition-related costs, mainly related to the new
oncology assets acquired from GSK. Core operating income was USD 4.9 billion (-
5%, +9% cc), generating core operating leverage in constant currencies through
the continued reduction of functional costs and ongoing productivity
initiatives. Core operating income margin in constant currencies improved by
1.6 percentage points; currency had a negative impact of 1.0 percentage point,
resulting in a net margin expansion of 0.6 percentage points to 32.7% of net
sales.
Alcon net sales were USD 5.1 billion (-6%, +2% cc) in the first half. Surgical
sales increased 2% (cc), as solid cataract and vitreoretinal consumables sales
were partly offset by lower equipment sales and competitive pressure on IOLs.
Ophthalmic Pharmaceuticals grew (+3% cc), benefitting from double-digit growth
of Systane in Dry Eye and fixed-dose combination products in Glaucoma. Vision
Care (+1% cc) was driven by strong continued uptake of Dailies Total1 and
AirOptix Colors, offset by a continued decline in contact lens care and
reduction in US trade inventories of contact lenses.
Operating income amounted to USD 503 million (-41%, -12% cc), reflecting the
second quarter intangible asset impairment of USD 119 million. Core operating
income was USD 1.7 billion (-14%, -1% cc), primarily impacted by product mix and
slightly higher revenue provisions, as well as higher spending in M&S. Core
operating income margin in constant currencies decreased by 1.1 percentage
points; currency had a negative impact of 1.7 percentage points, resulting in a
net decrease of 2.8 percentage points to 33.0% of net sales.
Sandoz net sales were USD 4.5 billion (-3%, +10% cc), as volume growth of 15
percentage points more than offset 5 percentage points of price erosion. All
regions grew in the first half, led by double-digit growth in the US (+20% cc),
Asia-Pacific (+13% cc) and Latin America (+23% cc). From a franchise
perspective, global sales of Biopharmaceuticals increased 45% (cc) to USD 368
million.
Operating income decreased by 10% (-7% cc) to USD 472 million, including USD
180 million of restructuring charges mainly related to our manufacturing
footprint initiative. Core operating income grew 12% (+23% cc) to USD 829
million. Core operating income margin in constant currencies increased by 1.8
percentage points; currency had a positive impact of 0.6 percentage points,
resulting in a net increase of 2.4 percentage points to a core operating income
margin of 18.3% of net sales.
Discontinued operations
Operational results for discontinued operations in the first half of 2015
include six months of results from the influenza Vaccines business, as well as
results from the non-influenza Vaccines business and OTC until their divestment
date on March 2, 2015. Operational results from the Animal Health business,
which was divested on January 1, 2015, include only the divestment gain. The
prior year included the results of all divested units during the first half.
Net sales for the non-influenza Vaccines business and OTC up to March 2 amounted
to USD 75 million and USD 456 million, respectively. Influenza Vaccines sales
for the first half of 2015 amounted to USD 56 million, compared to USD 81
million in the prior-year period, mainly due to the acceleration of first
quarter southern hemisphere shipments to the fourth quarter of 2014 and an
exceptional shipment to the Pan American Health Organization in the prior-year
period.
Operating income for discontinued operations includes preliminary exceptional
pre-tax gains of USD 12.8 billion from the divestment of Animal Health (USD 4.6
billion) and from the transactions with GSK (USD 2.8 billion for the non-
influenza Vaccines business and USD 5.9 billion arising from the contribution of
Novartis OTC into the consumer healthcare joint venture). In addition, the GSK
transactions resulted in approximately USD 0.5 billion of additional
transaction-related expenses.
The remaining operating loss of USD 0.3 billion came from the operating
performance of OTC and the non-influenza Vaccines business up to their
divestment date, as well as a full six months of the influenza Vaccines
business.
Net income from discontinued operations amounted to USD 10.7 billion, mainly due
to the exceptional gains from the GSK and Lilly transactions, compared to USD
0.4 billion in the first half of 2014, which included the exceptional gain from
the divestment of the blood transfusion diagnostics to Grifols.
Core operating loss for discontinued operations, which excludes these
exceptional items, amounted to USD 174 million in first half of 2015, compared
to a loss of USD 205 million in the prior-year period.
Total Group[1]
For the total Group, net income amounted to USD 14.8 billion compared to USD
5.6 billion in the first half of 2014, impacted by the exceptional divestment
gains included in net income from the discontinued operations. Basic earnings
per share increased to USD 6.15 from USD 2.26.
Free cash flow for the total Group amounted to USD 3.2 billion.
[1] Total Group results in H1 2014 include six months of Consumer Health (both
Animal Health and OTC) and Vaccines (both influenza and non-influenza
businesses). H1 2015 includes two months of OTC and the non-influenza business
and six months of the influenza business. Total Group net income and EPS include
the impact of the exceptional divestment gains. Total Group free cash flow
comprises the free cash flow from continuing operations and discontinued
operations.
Key growth drivers
Underpinning our financial results in the second quarter is a continued focus on
key growth drivers, including Gilenya, Afinitor, Tasigna, Xolair,
Tafinlar/Mekinist and Jakavi, as well as Emerging Growth Markets.
Growth Products
* Growth Products, an indicator of the rejuvenation of the portfolio,
contributed 35% of continuing operations net sales in the second quarter,
and were up 24% (USD). In Pharmaceuticals, Growth Products contributed 44%
of division net sales in the quarter, and sales for these products were up
38% (cc).
* Gilenya (USD 700 million, +26% cc), our oral MS therapy, grew double-digit
in the quarter, with strong volume growth underpinned by trends towards oral
treatments with higher efficacy.
* Afinitor (USD 423 million, +19% cc), an oral inhibitor of the mTOR pathway,
saw strong growth in the US, Japan and other markets around the world.
* Tasigna (USD 412 million, +21% cc) continued to drive growth in our CML
franchise (which also includes Gleevec/Glivec), with strong volume growth in
the US and other markets.
* Xolair (USD 194 million, +18% cc) continued to grow double-digit in the
quarter, benefitting from indications in allergic asthma as well as chronic
spontaneous urticaria (also known as chronic idiopathic urticaria).
* Tafinlar/Mekinist (USD 131 million) grew as the first approved combination
therapy for the treatment of patients with BRAF V600 mutation positive
unresectable or metastatic melanoma.
* Jakavi (USD 98 million, +68% cc), an oral JAK inhibitor approved for
myelofibrosis and polycythemia vera, grew strongly over the previous-year
quarter.
Emerging Growth Markets
* Continuing operations net sales in our Emerging Growth Markets - which
comprise all markets except the US, Canada, Western Europe, Japan, Australia
and New Zealand - grew 8% (cc) in the second quarter. Growth was led by
Brazil (+16% cc) and China (+7% cc).
Strengthen innovation
The second quarter saw continued pipeline progress with positive regulatory
decisions and significant clinical trial data released. Key developments are
included below.
New approvals and positive opinions
* Entresto approved and launched in the US for chronic heart failure (July)
The FDA approved Entresto (sacubitril/valsartan), previously known as
LCZ696, for the treatment of heart failure with reduced ejection fraction.
Novartis started shipping in the US in July.
* Zykadia approved in EU for ALK+ NSCLC
The EC approved Zykadia (ceritinib) to treat adult patients with anaplastic
lymphoma kinase (ALK)-positive advanced non-small cell lung cancer (NSCLC)
previously treated with the ALK inhibitor crizotinib.
* FDA approved Promacta for children with chronic ITP
The FDA approved Promacta (eltrombopag) for the treatment of children six
years and older with chronic immune thrombocytopenia (ITP), a rare blood
disorder, who have had an insufficient response to corticosteroids,
immunoglobulins or splenectomy.
* Farydak recommended by CHMP to treat multiple myeloma; approved in Japan
The CHMP adopted a positive opinion for Farydak (panobinostat) capsules, in
combination with bortezomib and dexamethasone, for adult patients with
previously treated multiple myeloma. Farydak also received approval in
Japan.
* CHMP recommended approval for Odomzo in basal cell carcinoma
The CHMP adopted a positive opinion for Odomzo (sonidegib, formerly known as
LDE225) to treat adult patients with locally advanced basal cell carcinoma.
* Glatopa approved and launched in US for relapsing MS
Sandoz received FDA approval of Glatopa, the first fully substitutable
generic version of Copaxone(®) 20 mg. Glatopa, which was developed in
collaboration with Momenta, was launched in the US in June.
* AcrySof IQ PanOptix trifocal IOL received EU approval
Alcon received European CE Mark for its AcrySof IQ PanOptix trifocal
intraocular lens (IOL) for patients undergoing cataract surgery.
* UltraSert pre-loaded IOL delivery system received EU approval
Alcon also received European CE Mark for its AcrySof IQ Aspheric IOL with
the UltraSert Pre-loaded Delivery System for patients undergoing cataract
surgery.
Regulatory submissions and filings
* Global regulatory submissions filed for Cosentyx in AS and PsA
Global regulatory submissions have been filed for Cosentyx in ankylosing
spondylitis (AS) and psoriatic arthritis (PsA).
* Applications for Tafinlar/Mekinist in metastatic melanoma submitted in
Europe and Japan
Regulatory applications for the combination of Tafinlar and Mekinist as a
treatment for patients with BRAF V600 mutation-positive metastatic melanoma
were submitted in Europe and Japan. The submissions include results from the
Phase III COMBI-d and COMBI-v trials. These results were also submitted to
the FDA to meet conditions of full approval.
* FDA granted Breakthrough Therapy status to Tafinlar/Mekinist in type of
NSCLC
In July, the FDA granted Breakthrough Therapy status to combination therapy
Tafinlar and Mekinist in patients with BRAF V600E mutation-positive NSCLC.
Results from important clinical trials and other highlights
* COMBI-d study confirmed OS benefit of Tafinlar/Mekinist in metastatic
melanoma
Final analysis of the Phase III COMBI-d study showed a statistically
significant overall survival (OS) benefit for patients with BRAF V600E/K
mutation-positive metastatic melanoma when treated with the combination of
Tafinlar (dabrafenib) and Mekinist (trametinib) compared to Tafinlar
monotherapy alone (median of 25.1 months vs. 18.7 months).
* Phase III trial showed Afinitor extends PFS in advanced GI or lung NET
patients
The Phase III RADIANT-4 study met its primary endpoint, showing that
Afinitor (everolimus) significantly extended progression-free survival (PFS)
compared to placebo in patients with advanced non-functional NET of
gastrointestinal (GI) or lung origin. The RADIANT-4 study will serve as the
basis of worldwide regulatory filings in 2015.
* New one-year results showed sustained Cosentyx efficacy in ankylosing
spondylitis
Data from the MEASURE 2 pivotal Phase III study of secukinumab in ankylosing
spondylitis demonstrated that approximately 74% of patients achieved
clinically significant improvement in their symptoms after one year of
treatment.
* Cosentyx shown to have superior efficacy in difficult-to-treat locations of
plaque psoriasis
Cosentyx met the primary endpoints in two new clinical studies (GESTURE and
TRANSFIGURE), showing superior efficacy compared to placebo in patients with
psoriasis of the palms, soles and nails, all difficult-to-treat locations of
plaque psoriasis.
* BELLE-2 trial of BKM120 met primary objective
The Phase III BELLE-2 trial of oral BKM120 (buparlisib) in combination with
fulvestrant (Faslodex(®)) met its primary objective, demonstrating a
statistically significant improvement in PFS in postmenopausal women with
HR+/HER2- advanced breast cancer whose disease progressed or recurred on or
after treatment with an aromatase inhibitor when compared to fulvestrant
alone. The observed moderate PFS result in the overall study population and
the prospective analyses in certain predefined subgroups, including patients
with PIK3CA mutation assessed in archival tumor samples and circulating
tumor DNA, will be discussed with the health authorities before proceeding
with the regulatory submissions. In addition, the updated survival analysis
will be available in the second half of 2016.
* Update of Jakavi study showed durable response in PV patients
A preplanned analysis at 18 months of the pivotal Phase III RESPONSE study
showed that 80% of patients with polycythemia vera (PV) treated with Jakavi
(ruxolitinib) who responded at Week 32 experienced a durable response for at
least one year.
* ENEST1st data reinforced benefit of first-line Tasigna in newly diagnosed
CML patients
Results from the Phase IIIb ENEST1st study in over 1,000 patients with
newly-diagnosed, BCR-ABL positive chronic myeloid leukemia (CML) confirmed
the benefits of first-line Tasigna (nilotinib) treatment seen in earlier
trials.
* Phase II data presented on Zykadia and Tafinlar/Mekinist in aggressive NSCLC
tumors
In Phase II studies, Zykadia (ceritinib) shrank tumors in patients with ALK+
NSCLC, with comparable overall response in those with or without brain
metastases. Tafinlar (dabrafenib) and Mekinist (trametinib) combination
Phase II data showed 63% overall response rate in patients with metastatic
BRAF V600E-mutation positive NSCLC.
* Ongoing Phase II study of CTL019 showed potential in non-Hodgkin lymphoma
Findings from the ongoing study conducted by the University of Pennsylvania
in adults with relapsed or refractory diffuse large B-cell lymphoma (DLBCL)
and follicular lymphoma (FL) found an overall response rate of 100% in
patients with FL and 50% in patients with DLBCL. 13 of 19 evaluable patients
responded to the therapy.
* Pivotal Phase III studies of QVA149 and NVA237 met primary and secondary
endpoints
Two pivotal Phase III clinical trial programs for QVA149
(indacaterol/glycopyrronium bromide) and NVA237 (glycopyrronium bromide) in
patients with moderate-to-severe chronic obstructive pulmonary disease
(COPD) met their primary and secondary endpoints.
* Novartis adds to neuroscience pipeline with acquisition of Spinifex
Pharmaceuticals
Novartis entered into an agreement to acquire Spinifex Pharmaceuticals, a
privately held company focused on developing a peripheral approach to treat
neuropathic pain, such as EMA401, a novel angiotensin II Type 2 receptor
antagonist. The acquisition is expected to close in the second half of 2015.
Complete the portfolio transformation
Following our announcement on March 2, 2015 of the completion of the
transactions with GSK, the integration has progressed on track. The transfer of
marketing authorizations is complete for approximately 75% of sales, and field
forces are operational in over 50 markets.
As a result of the transactions with GSK, which closed in the first quarter, we
recorded preliminary exceptional pre-tax gains of approximately USD 8.7 billion
in the first half of 2015. This amount was in addition to the USD 4.6 billion
exceptional pre-tax gain from the Animal Health divestment in the first quarter.
In addition, the GSK transactions resulted in approximately USD 0.5 billion of
additional transaction-related expenses in the first quarter.
The divestment of the Novartis influenza business to CSL, the last step in
portfolio transformation, is expected to be completed in the second half of
2015, subject to customary closing conditions including regulatory approvals.
Novartis remains fully committed to the influenza Vaccines business until it is
divested to CSL.
Capture cross-divisional synergies
Improving productivity and leveraging synergies across divisions will help us
support margins.
* Novartis Business Services (NBS), our shared services organization,
continues to execute on its priorities and the transformation of the
organization is well on track. At the end of the second quarter, NBS had
over 9,000 full-time-equivalent associates, transferred from within the
Novartis Group.
* The cost within the scope of NBS was stable from the prior year. Moving from
division-specific services to a cross-divisional model, NBS is scaling up
the offshoring of transactional services to its five selected Global Service
Centers.
* In the second quarter, we generated approximately USD 400 million in
Procurement savings by leveraging our scale.
* In addition, we continued to optimize our manufacturing footprint. In the
second quarter, we announced the planned closure of two Sandoz manufacturing
sites, as well as the partial restructuring of a Pharmaceuticals
manufacturing site.
* For continuing operations, this brings the total number of production sites
that have been or are in the process of being restructured, closed or
divested to 23. Exceptional charges amounted to USD 214 million in the
second quarter and USD 259 million in the first half. Exceptional charges
recorded cumulatively since the program began amount to USD 834 million.
In total, our productivity initiatives generated gross savings that contributed
approximately USD 750 million in the second quarter.
Build a high-performing organization
We are committed to creating a culture of integrity at Novartis and
demonstrating ethical leadership, and have taken concrete steps to increase
transparency and strengthen our ethical business practices. The new Novartis
Values and Behaviors have an increased emphasis on integrity and the courage to
do the right thing.
Novartis continues to reinforce the culture of quality at all levels of the
organization. In the second quarter of 2015, a total of 46 global health
authority inspections were completed, ten of which were conducted by the FDA.
All 46 were deemed acceptable or good. The outcome of two FDA inspections of
manufacturing sites in India, which were conducted in August 2014, are still
pending. Novartis is committed to continue driving sustainable quality beyond
compliance solutions.
Capital structure and net debt
Retaining a good balance between investment in the business, a strong capital
structure and attractive shareholder returns will remain a priority in the
future. Strong cash flows and a sound capital structure have allowed Novartis to
focus on driving innovation and growth across its diversified healthcare
portfolio, while keeping its double-A credit rating as a reflection of financial
strength and discipline.
During the first six months of 2015, 37.8 million treasury shares were delivered
as a result of options exercised and share deliveries related to employee
participation programs. 8.4 million shares were repurchased on the SIX Swiss
Exchange first trading line and from employees. In addition, Novartis
repurchased 12.8 million shares on the second trading line in the first six
months of 2015 under the ongoing share buy-back of USD 5.0 billion spread over
two years. With these transactions, the total number of shares outstanding
increased by 16.6 million versus December 31, 2014. Novartis aims to offset the
dilutive impact from its employee participation programs experienced in the
first six months of 2015 over the remainder of the year. Such share buy-backs
are planned to be executed on the SIX Swiss Exchange second trading line in
addition to the ongoing USD 5.0 billion share buy-back announced in November
2013.
Also during the first quarter of 2015, Novartis issued three bonds in Swiss
francs for a total amount of USD 1.5 billion and repaid two bonds for a total
amount of USD 2.9 billion (USD 2.0 billion bond issued in March 2010 and a Swiss
franc denominated bond of USD 0.9 billion issued in June 2008) in the second
quarter of 2015 at maturity.
As of June 30, 2015, the net debt stood at USD 17.4 billion compared to USD 6.5
billion at December 31, 2014. The increase of USD 10.9 billion was driven by
outflows from the acquisition of the oncology assets from GSK of USD 16.0
billion, the dividend payment of USD 6.6 billion, share repurchases of USD 2.1
billion, and other net cash outflow items of USD 0.9 billion. This was partially
compensated by the free cash flow of USD 3.2 billion, net divestment proceeds of
USD 9.9 billion related to the portfolio transformation transactions, and
proceeds from options exercised of USD 1.6 billion.
The long-term credit rating for the company continues to be double-A (Moody's
Aa3; Standard & Poor's AA-; Fitch AA).
2015 Group outlook for continuing operations
Barring unforeseen events
Our outlook for full year 2015 remains unchanged. Group net sales in 2015 are
expected to grow mid-single digit (cc), after absorbing the impact of generic
competition, which is expected to be approximately the same as the prior year
(USD 2.4 billion). Group core operating income is expected to grow ahead of
sales at a high-single digit rate (cc) in 2015. All these comparisons are versus
2014 continuing operations.
From a divisional perspective:
* Pharmaceuticals: confirmed at mid-single digit sales growth (cc)
* Alcon: revised downward to low-single digit sales growth (cc)
* Sandoz: revised upward to high-single digit sales growth (cc)
If mid-July exchange rates prevail for the remainder of the year, the currency
impact for the year would be negative 9% on sales and negative 13-14% on core
operating income. This currency impact results from the continued strengthening
of the US dollar against most currencies.
Summary Financial Performance
% %
Continuing operations[1] Q2 2015 Q2 2014 change H1 2015 H1 2014 change
USD m USD m USD cc USD m USD m USD cc
------------------------------------------------- ------------------------
Net sales 12 694 13 347 -5 6 24 629 26 114 -6 4
Operating income 2 281 3 184 -28 -14 5 066 5 999 -16 -1
As a % of sales 18.0 23.9 20.6 23.0
Core operating income 3 593 3 859 -7 6 7 244 7 659 -5 8
As a % of sales 28.3 28.9 29.4 29.3
------------------------------------------------- ------------------------
% %
Pharmaceuticals Q2 2015 Q2 2014 change H1 2015 H1 2014 change
USD m USD m USD cc USD m USD m USD cc
------------------------------------------------- ------------------------
Net sales 7 847 8 199 -4 6 14 987 16 006 -6 4
Operating income 1 986 2 406 -17 -4 4 285 4 627 -7 6
As a % of sales 25.3 29.3 28.6 28.9
Core operating income 2 477 2 593 -4 9 4 897 5 132 -5 9
As a % of sales 31.6 31.6 32.7 32.1
------------------------------------------------- ------------------------
% %
Alcon Q2 2015 Q2 2014 change H1 2015 H1 2014 change
USD m USD m USD cc USD m USD m USD cc
------------------------------------------------- ------------------------
Net sales 2 559 2 817 -9 0 5 117 5 459 -6 2
Operating income 150 471 -68 -41 503 851 -41 -12
As a % of sales 5.9 16.7 9.8 15.6
Core operating income 796 1 031 -23 -10 1 690 1 956 -14 -1
As a % of sales 31.1 36.6 33.0 35.8
------------------------------------------------- ------------------------
% %
Sandoz Q2 2015 Q2 2014 change H1 2015 H1 2014 change
USD m USD m USD cc USD m USD m USD cc
------------------------------------------------- ------------------------
Net sales 2 288 2 331 -2 11 4 525 4 649 -3 10
Operating income 193 244 -21 -26 472 526 -10 -7
As a % of sales 8.4 10.5 10.4 11.3
Core operating income 423 351 21 30 829 738 12 23
As a % of sales 18.5 15.1 18.3 15.9
------------------------------------------------- ------------------------
% %
Corporate Q2 2015 Q2 2014 change H1 2015 H1 2014 change
USD m USD m USD cc USD m USD m USD cc
------------------------------------------------- ------------------------
Operating loss/income -48 63 nm nm -194 -5 nm nm
Core operating loss -103 -116 11 9 -172 -167 -3 -6
------------------------------------------------- ------------------------
Discontinued operations
% %
Q2 2015 Q2 2014 change H1 2015 H1 2014 change
USD m USD m USD cc USD m USD m USD cc
------------------------------------------------- ------------------------
Net sales 39 1 290 nm nm 587 2 545 nm nm
Operating loss/income -96 -89 nm nm 12 526 585 nm nm
As a % of sales nm -6.9 nm 23.0
Core operating loss -72 -62 -16 -23 -174 -205 15 22
As a % of sales nm -4.8 -29.6 -8.1
------------------------------------------------- ------------------------
% %
Total Group[2] Q2 2015 Q2 2014 change H1 2015 H1 2014 change
USD m USD m USD cc USD m USD m USD cc
------------------------------------------------- ------------------------
Net income 1 838 2 585 14 843 5 553
EPS (USD) 0.76 1.05 6.15 2.26
Free cash flow 2 013 2 413 3 239 3 178
--------------------------------------------------------------------------
nm = not meaningful
[1] Continuing operations include the businesses of Pharmaceuticals, Alcon,
Sandoz and Corporate activities, and starting on March 2, the results from the
new oncology assets acquired from GSK and the 36.5% interest in the GSK consumer
healthcare joint venture (the latter reported as part of income from associated
companies). See page 42 of the Condensed Interim Financial Report for full
explanation.
[2] Total Group net income and EPS include the impact of the exceptional
divestment gains. Total Group free cash flow comprises the free cash flow from
continuing operations and discontinued operations.
A condensed interim financial report with the information listed in the index
below can be found on our website at
http://hugin.info/134323/R/1940024/700298.pdf.
Novartis Q2 and H1 2015 Condensed Interim Financial Report - Supplementary Data
INDEX Page
--------------------------------------------------------------------------------
GROUP AND DIVISIONAL OPERATING PERFORMANCE Q2 AND H1 2015
Group 2
Pharmaceuticals 6
Alcon 14
Sandoz 17
Discontinued operations 19
--------------------------------------------------------------------------------
CASH FLOW AND GROUP BALANCE SHEET 22
--------------------------------------------------------------------------------
INNOVATION REVIEW 25
--------------------------------------------------------------------------------
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Condensed consolidated income statements 34
Condensed consolidated statements of comprehensive income 36
Condensed consolidated balance sheets 37
Condensed consolidated changes in equity 38
Condensed consolidated cash flow statements 39
Notes to condensed interim consolidated financial statements, including 41
update on legal proceedings
--------------------------------------------------------------------------------
SUPPLEMENTARY INFORMATION 52
CORE RESULTS
Reconciliation from IFRS to core results 54
Group 56
Pharmaceuticals 58
Alcon 60
Sandoz 62
Corporate 64
Discontinued operations 65
Condensed consolidated changes in net debt / Share information 67
Free cash flow 68
Net sales of the top 20 Pharmaceuticals products 69
Pharmaceuticals sales by business franchise 71
Net sales by region 73
Currency translation rates / Income from associated companies 75
--------------------------------------------------------------------------------
DISCLAIMER 76
--------------------------------------------------------------------------------
Disclaimer
This press release contains forward-looking statements that can be identified by
words such as "innovation," "progress," "launches," "momentum," "launched,"
"outlook," "confirmed," "expected," "launch," "confident," "will," "priorities,"
"confirm," "would," "turnaround plan," "under development," "focus," "growth
drivers," "trends towards," "pipeline," "positive opinions," "recommended,"
"positive opinion," "ongoing," "potential," "committed," "continues," "on
track," "priority," "in the future," "planned," "proposed," "underway,"
"contingent," "Breakthrough Therapy," "under review," "being developed,"
"strategy," "expects," "evolving," "could," "initiated," "positive
recommendation," or similar terms, or by express or implied discussions
regarding potential new products, potential new indications for existing
products, or regarding potential future revenues from any such products;
regarding potential shareholder returns or credit ratings; regarding the
potential completion of the announced transaction with CSL; regarding the
potential financial or other impact on Novartis of the transactions with GSK,
Lilly or CSL, or regarding any potential strategic benefits, synergies or
opportunities as a result of these transactions; or regarding potential future
sales or earnings of the Novartis Group or its divisions and associated
companies; or by discussions of strategy, plans, expectations or intentions. You
should not place undue reliance on these statements. Such forward-looking
statements are based on the current beliefs and expectations of management
regarding future events, and are subject to significant known and unknown risks
and uncertainties. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially from those set forth in the forward-looking statements.
There can be no guarantee that any new products will be approved for sale in any
market, or that any new indications will be approved for any existing products
in any market, or that any approvals which are obtained will be obtained at any
particular time, or that any such products will achieve any particular revenue
levels. Nor can there be any guarantee that the announced transaction with CSL
will be completed in the expected form or within the expected time frame or at
all. Neither can there be any guarantee that Novartis will be able to realize
any of the potential strategic benefits, synergies or opportunities as a result
of the transactions with GSK, Lilly or CSL. Neither can there be any guarantee
that the Novartis Group, or any of its divisions or associated companies, will
be commercially successful in the future, will achieve any particular financial
results, or achieve any particular credit rating or level of shareholder
returns. Nor can there be any guarantee that the turnaround plan under
development at Alcon will be successfully developed or implemented, or will
achieve its goals. In particular, management's expectations could be affected
by, among other things, unexpected regulatory actions or delays or government
regulation generally, including an unexpected failure to obtain necessary
government approvals for the announced transaction with CSL, or unexpected
delays in obtaining such approvals; the potential that the strategic benefits,
synergies or opportunities expected from the transactions with GSK, Lilly or CSL
may not be realized or may take longer to realize than expected; the inherent
uncertainties involved in predicting shareholder returns or credit ratings; the
uncertainties inherent in research and development, including unexpected
clinical trial results and additional analysis of existing clinical data; the
Company's ability to obtain or maintain proprietary intellectual property
protection, including the ultimate extent of the impact on the Company of the
loss of patent protection and exclusivity on key products which will continue
this year; unexpected manufacturing or quality issues; unexpected safety issues;
global trends toward health care cost containment, including ongoing pricing
pressures and ongoing reimbursement challenges with payors; uncertainties
regarding actual or potential legal proceedings, including, among others, actual
or potential product liability litigation, litigation and investigations
regarding sales and marketing practices, government investigations and
intellectual property disputes; general economic and industry conditions,
including uncertainties regarding the effects of the persistently weak economic
and financial environment in many countries; uncertainties regarding future
global exchange rates; uncertainties regarding future demand for our products;
uncertainties involved in the development of new healthcare products;
uncertainties regarding potential significant breaches of data security or
disruptions of the Company's information technology systems; and other risks and
factors referred to in Novartis AG's current Form 20-F on file with the US
Securities and Exchange Commission. Novartis is providing the information in
this press release as of this date and does not undertake any obligation to
update any forward-looking statements as a result of new information, future
events or otherwise.
All product names appearing in italics are trademarks owned by or licensed to
Novartis Group Companies. Faslodex® is a registered trademark of the AstraZeneca
group of companies. Copaxone® is a registered trademark of Teva Pharmaceutical
Industries Ltd. Jakafi® is a registered trademark of Incyte Corporation.
Fovista® is a registered trademark of Ophthotech Corporation.
About Novartis
Novartis provides innovative healthcare solutions that address the evolving
needs of patients and societies. Headquartered in Basel, Switzerland, Novartis
offers a diversified portfolio to best meet these needs: innovative medicines,
eye care and cost-saving generic pharmaceuticals. Novartis is the only global
company with leading positions in these areas. In 2014, the Group achieved net
sales of USD 58.0 billion, while R&D throughout the Group amounted to
approximately USD 9.9 billion (USD 9.6 billion excluding impairment and
amortization charges). Novartis Group companies employ approximately 120,000
full-time-equivalent associates and sell products in more than 150 countries
around the world. For more information, please visit http://www.novartis.com.
Important dates
October 27, 2015 Third quarter results 2015
January 27, 2016 Fourth quarter and full year results 2015
February 23, 2016 Annual General Meeting
Please find full media release in English attached and on the following link:
http://hugin.info/134323/R/1940024/700368.pdf
Further language versions are available through the following links:
German version is available through the following link:
http://hugin.info/134323/R/1940026/700389.pdf
French version is available through the following link:
http://hugin.info/134323/R/1940025/700388.pdf
Media release (PDF):
http://hugin.info/134323/R/1940024/700368.pdf
IFR (PDF):
http://hugin.info/134323/R/1940024/700298.pdf
This announcement is distributed by GlobeNewswire on behalf of
GlobeNewswire clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: Novartis International AG via GlobeNewswire
[HUG#1940024]
Unternehmensinformation / Kurzprofil:
Datum: 21.07.2015 - 07:00 Uhr
Sprache: Deutsch
News-ID 407940
Anzahl Zeichen: 60173
contact information:
Town:
Basel
Kategorie:
Business News
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"Novartis delivered solid performance in the second quarter, with strong innovation and progress on new launches"
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