Novartis delivered solid Q2 despite full quarter of US Gleevec generic impact; significant positive innovation news strengthens future growth prospects
(Thomson Reuters ONE) -
Novartis International AG /
Novartis delivered solid Q2 despite full quarter of US Gleevec generic impact;
significant positive innovation news strengthens future growth prospects
. Processed and transmitted by NASDAQ OMX Corporate Solutions.
The issuer is solely responsible for the content of this announcement.
* Q2 net sales were flat (0% cc[1]) as Growth Products[2] offset Gleevec
generic impact
* Gilenya (USD 811 million, +17% cc) continued to grow double-digit mainly
due to volume growth
* Cosentyx (USD 260 million) grew strongly driven by its three approved
indications
* Core[1] operating income declined (-4% cc) due to generic erosion and growth
investments
* Core M&S expenses up 0.8 percentage points (cc) to 24.6% of sales,
mainly driven by Cosentyx, Entresto and Alcon investments
* Core operating income margin declined 1.1 percentage points (cc) behind
investments
* Core EPS was USD 1.23 (-1% cc)
* Free cash flow[1] was USD 2.5 billion (+22% USD)
* Significant positive innovation news in Q2
* Entresto given strong Class I recommendation in US and EU heart failure
treatment guidelines
* JAMA Cardiology analysis found Entresto could prevent or postpone
28,000 US deaths per year
* Cosentyx data showed durability of response in AS[2] and PsA[2] patients
after two years; head-to-head trials vs. Humira(®) planned
* Phase III trial of CDK4/6 inhibitor LEE011 in HR+/HER2- advanced breast
cancer stopped early due to positive efficacy results at interim
analysis
* Full results from FLAME study reinforce superiority of Ultibro
Breezhaler to Seretide(®) in COPD
* Positive FDA AdCom[2] for biosimilar etanercept; biosimilar rituximab
submitted in EU
* Entresto (USD 32 million) continued to grow steadily in Q2
* Based on positive treatment guidelines, decision was taken to increase
spending significantly in H2 2016 to build a US primary care field force
and add incremental medical support
* Entresto sales expected to be approximately USD 200 million for full
year 2016
* Alcon growth plan progressing
* Operations: Improved supply stability and reinforcing customer
relationships
* Innovation: CE Mark in Europe for Dailies Total1 Multifocal and PanOptix
with UltraSert
* 2016 Outlook:
* Net sales expected to be broadly in line with prior year (cc)
* Based on the increased spending for Entresto, and depending on Gleevec
erosion curve, core operating income expected to be broadly in line or
decline low single digit (cc)
Key figures[1] Continuing operations[3]
------------------------------------------------
% %
Q2 2016 Q2 2015 change H1 2016 H1 2015 change
USD m USD m USD cc USD m USD m USD cc
----------------------------------------- -----------------------
Net sales 12 470 12 694 -2 0 24 070 24 629 -2 1
Operating income 2 093 2 281 -8 -4 4 544 5 066 -10 -4
Net income 1 806 1 856 -3 0 3 817 4 162 -8 -2
EPS (USD) 0.76 0.77 -1 2 1.60 1.72 -7 -1
Free cash flow 2 526 2 064 22 3 888 3 529 10
Core
Operating income 3 332 3 593 -7 -4 6 593 7 244 -9 -4
Net income 2 930 3 074 -5 -2 5 718 6 273 -9 -4
EPS (USD) 1.23 1.27 -3 -1 2.40 2.60 -8 -3
----------------------------------------- -----------------------
[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 48 of the
Condensed Interim Financial Report. Unless otherwise noted, all growth rates in
this Release refer to same period in prior year.
[2] Growth Products are defined on page 2. AS = ankylosing spondylists; PsA =
psoriatic arthritis; AdCom = advisory committee.
[3] Refers to continuing operations, defined on page 40 of the Condensed Interim
Financial Report.
Basel, July 19, 2016 - Commenting on the results, Joseph Jimenez, CEO of
Novartis, said:
"Performance in Q2 was solid despite a full quarter of Gleevec loss of
exclusivity impact in the US. We have strong innovation momentum from earlier-
than-anticipated Class I Entresto guidelines, positive Cosentyx data showing
durability of response in AS and PsA, the early stop of the LEE011 trial, and
positive FLAME results for Ultibro. We will increase investments behind these
growth opportunities, particularly Entresto, in the second half of 2016 for
long-term growth."
GROUP REVIEW
Novartis laid out five priorities for 2016: deliver strong financial results;
strengthen innovation; improve Alcon performance; capture cross-divisional
synergies; and build a higher-performing organization. We made progress in each
of these areas in the second quarter.
Financial results
On January 27, 2016, Novartis announced plans to further focus its divisions,
integrating businesses that share therapeutic areas to better leverage our
development and marketing capabilities. These plans included a new divisional
structure. In compliance with International Financial Reporting Standards
(IFRS), Novartis updated its segment financials to reflect the new structure,
both for the current and prior year, to aid comparability of year-on-year
results. As a result, all comparisons of divisional results from 2016 to 2015
reflect the new structure.
In addition, as a result of the portfolio transformation transactions completed
in 2015, Novartis reported the Group's financial results in 2015 as "continuing
operations" and "discontinued operations." All comparisons from 2016 to 2015 are
versus continuing operations, unless otherwise noted. See page 40 of the
Condensed Interim Financial Report for a full explanation.
Second quarter
Continuing operations
Net sales were USD 12.5 billion (-2%, 0% cc) in the second quarter, as volume
growth of 5 percentage points offset the negative impact of generic competition
(-4 percentage points) and pricing (-1 percentage points). Growth Products[1]
contributed USD 4.4 billion or 35% of net sales, up 19% (USD) over the prior-
year quarter.
Operating income was USD 2.1 billion (-8%, -4% cc). Core adjustments amounted to
USD 1.2 billion (2015: USD 1.3 billion), broadly in line with the prior-year
quarter.
Core operating income was USD 3.3 billion (-7%, -4% cc). Core operating income
margin in constant currencies decreased 1.1 percentage points, mainly due to
loss of exclusivity on Gleevec, investments behind new launches and the Alcon
growth plan. Currency had a negative impact of 0.5 percentage points, resulting
in a net decrease of 1.6 percentage points in US dollar terms to 26.7% of net
sales.
Net income was USD 1.8 billion (-3%, 0% cc), down less than operating income
mainly due to higher income from associated companies.
EPS was USD 0.76 (-1%, +2% cc), benefitting from a reduction in the number of
shares outstanding.
Core net income was USD 2.9 billion (-5%, -2% cc), down less than core operating
income mainly due to higher income from associated companies.
Core EPS was USD 1.23 (-3%, -1% cc), benefitting from a reduction in the number
of shares outstanding.
Free cash flow was USD 2.5 billion (+22% USD), an increase of USD 0.5 billion
compared to the prior-year quarter. The increase was driven by lower investments
in property, plant, equipment and intangible assets and higher cash flows from
operating activities from continuing operations, which includes lower operating
income and dividends received from GSK Consumer Healthcare Holdings Ltd.
[1] "Growth Products" are an indicator of the rejuvenation of the portfolio, and
comprise products launched in a key market (EU, US, Japan) in 2011 or later, or
products with exclusivity in key markets until at least 2020 (except Sandoz,
which includes only products launched in the last 24 months). They include the
acquisition effect of the GSK oncology assets.
Innovative Medicines (formerly named the Pharmaceuticals Division) net sales
were USD 8.4 billion (-3%, -1% cc) in the second quarter, with volume growth of
6 percentage points. Generic competition had a negative impact of 6 percentage
points and pricing had a negative impact of 1 percentage point, both largely due
to Gleevec/Glivec genericization in the US, which impacted a full quarter for
the first time. Growth Products grew 23% (cc) to USD 3.8 billion, or 45% of
division net sales.
Operating income was USD 1.9 billion (-6%, -3% cc). Core operating income was
USD 2.7 billion (-7%, -4% cc), reflecting generic erosion and launch
investments. Core operating income margin in constant currencies decreased by
1.0 percentage points; currency had a negative impact of 0.5 percentage points,
resulting in a net decrease of 1.5 percentage points to 31.8% of net sales.
Sandoz net sales were USD 2.6 billion (+2%, +3% cc) in the second quarter, as
volume growth of 8 percentage points more than offset 5 percentage points of
price erosion. Global sales of Biopharmaceuticals, which include biosimilars,
biopharmaceutical contract manufacturing and Glatopa, grew 11% (cc) to USD 249
million, despite lapping the Glatopa launch in the prior-year quarter. Anti-
Infectives franchise sales were USD 324 million (-3% cc), reflecting the
discontinuation of low-margin products.
Operating income was USD 380 million (+35%, +43% cc), driven by lower
restructuring charges for site exits compared to the prior-year quarter. Core
operating income was USD 535 million (0%, +4% cc). Core operating income margin
in constant currencies increased 0.2 percentage points; currency had a negative
impact of 0.6 percentage points, resulting in a net decrease of 0.4 percentage
points to 20.8% of net sales.
Alcon net sales were USD 1.5 billion (-2%, -1% cc) in the second quarter.
Surgical sales (-1% cc) were down slightly, as strong performance of cataract
consumables was more than offset by weaker sales of intraocular lenses (IOLs).
Vision Care sales were flat (0% cc), with growth in contact lenses offsetting a
decline in contact lens care.
Operating income was USD 7 million (-87%, -77% cc). Core operating income was
USD 238 million (-17%, -15% cc), primarily impacted by higher investment
spending in M&S and R&D behind the growth plan. Core operating income margin in
constant currencies decreased by 2.6 percentage points; currency had a negative
impact of 0.3 percentage points, resulting in a net decrease of 2.9 percentage
points to 15.8% of net sales.
Total Group
For the total Group, net income amounted to USD 1.8 billion, broadly in line
with the prior-year quarter, and basic earnings per share was USD 0.76.
Total Group free cash flow amounted to USD 2.5 billion, compared to USD 2.0
billion in the prior-year quarter.
First half
Continuing operations
Net sales were USD 24.1 billion (-2%, +1% cc) in the first half. Growth Products
contributed USD 8.2 billion or 34% of net sales, up 21% (USD) over the prior-
year period.
Operating income was USD 4.5 billion (-10%, -4% cc). Core adjustments amounted
to USD 2.0 billion (2015: USD 2.2 billion), slightly below prior year mainly due
to higher divestment gains in the first half of 2016.
Core operating income was USD 6.6 billion (-9%, -4% cc). Core operating income
margin in constant currencies decreased 1.5 percentage points, mainly due to
loss of exclusivity on Gleevec, investments behind new launches and the Alcon
growth plan. Currency had a negative impact of 0.5 percentage points, resulting
in a net decrease of 2.0 percentage points to 27.4% of net sales.
Net income was USD 3.8 billion (-8%, -2% cc), down less than operating income
mainly due to higher income from associated companies.
EPS was USD 1.60 (-7%, -1% cc), broadly in line with net income.
Core net income was USD 5.7 billion (-9%, -4% cc), in line with core operating
income.
Core EPS was USD 2.40 (-8%, -3% cc), broadly in line with core net income.
Free cash flow was USD 3.9 billion (+10% USD), an increase of USD 0.4 billion
compared to the prior-year period. The increase was driven by lower net
investments in property, plant, equipment and intangible assets, partially
offset by lower cash flows from operating activities from continuing operations.
Innovative Medicines net sales were USD 16.1 billion (-3%, 0% cc) in the first
half, as volume growth (+7 percentage points) was fully offset by the impact of
generic competition (-6 percentage points) and pricing (-1 percentage point).
Operating income was USD 4.0 billion (-9%, -4% cc). Core operating income was
USD 5.3 billion (-8%, -3% cc). Core operating income margin in constant
currencies decreased by 1.2 percentage points; currency had a negative impact of
0.6 percentage points, resulting in a net decrease of 1.8 percentage points to
32.7% of net sales.
Sandoz net sales were USD 5.0 billion (+1%, +4% cc) in the first half, as volume
growth of 10 percentage points more than offset 6 percentage points of price
erosion. Global sales of Biopharmaceuticals grew 27% (cc) to USD 462 million,
benefitting from the performance of prior-year launches in the US (Glatopa in
June 2015 and Zarxio in September 2015). Anti-Infectives franchise sales were
USD 684 million (-3% cc), reflecting discontinued low-margin products and the
weak flu season in the first quarter.
Operating income was USD 726 million (+17%, +25% cc), driven by higher
restructuring charges for site exits in the prior-year period. Core operating
income was USD 1.0 billion (0%, +5% cc). Core operating income margin in
constant currencies increased by 0.4 percentage points; currency had a negative
impact of 0.6 percentage points, resulting in a net decrease of 0.2 percentage
points to 20.3% of net sales.
Alcon net sales were USD 2.9 billion (-4%, -2% cc) in the first half. Surgical
sales (-2% cc) declined, driven by a slowdown in cataract equipment placements
and weaker sales of IOLs, partially offset by continued growth in cataract
consumables. Vision Care performance (-2% cc) was impacted by weaker contact
lens sales in the US and a decline in contact lens care.
Operating income was USD 38 million (-81%, -59% cc). Core operating income was
USD 481 million (-28%, -21% cc), primarily impacted by higher spending in M&S
and R&D behind the growth plan. Core operating income margin in constant
currencies decreased by 4.3 percentage points; currency had a negative impact of
1.1 percentage points, resulting in a net decrease of 5.4 percentage points to
16.4% of net sales.
Total Group
For the total Group, net income amounted to USD 3.8 billion compared to USD
14.8 billion in the prior-year period, and basic earnings per share decreased to
USD 1.60 from USD 6.15. The decrease was due to the net income from discontinued
operations, which in the prior-year period included USD 12.8 billion exceptional
pre-tax divestment gains from the portfolio transformation transactions and USD
0.5 billion additional pre-tax transaction related expenses.
Free cash flow was USD 3.9 billion compared to USD 3.2 billion in the first half
of 2015.
Key growth drivers
Underpinning our financial results in the second quarter is a continued focus on
key growth drivers, including Gilenya, Tasigna, Cosentyx, Tafinlar + Mekinist,
Jakavi, Promacta/Revolade and Entresto, as well as Biopharmaceuticals and
Emerging Growth Markets.
Growth Products
* Growth Products, an indicator of the ongoing rejuvenation of our portfolio,
contributed 35% of Group net sales in the second quarter, and were up 19%
(USD). In Innovative Medicines, Growth Products contributed 45% of division
net sales in the quarter, and sales for these products were up 23% (cc).
* Gilenya (USD 811 million, +17% cc) continued to grow double-digit, mainly
due to volume growth.
* Tasigna (USD 458 million, +15% cc) continued to show strong growth,
including in the US, where a generic version of Gleevec launched on February
1, 2016.
* Cosentyx (USD 260 million) continued its strong launch trajectory across all
regions, driven by its three approved indications.
* Tafinlar + Mekinist (USD 172 million, +31% cc) grew strongly as the first
approved combination therapy for patients with BRAF V600 mutation-positive
unresectable or metastatic melanoma.
* Promacta/Revolade (USD 158 million, +36% cc) was mainly driven by continued
uptake in the chronic immune (idiopathic) thrombocytopenic purpura
indication worldwide.
* Jakavi (USD 146 million, +49% cc), growth was driven by patient gains in the
myelofibrosis indication across regions and the launch of the polycythemia
vera indication in key markets.
* Entresto (USD 32 million) continued to grow steadily. The decision was taken
to build a US primary care field force following the earlier-than-expected
publication of strong heart failure treatment guidelines, and increase
medical investments to ensure disease awareness and up-to-date medical
education. Ongoing launch experience in Europe continues to show a more
rapid uptake than in the US. Entresto sales are expected to be approximately
USD 200 million for full year 2016.
* Biopharmaceuticals (USD 249 million, +11% cc) showed solid growth, despite
lapping the launch of Glatopa in the prior-year quarter.
Emerging Growth Markets
* Net sales in Emerging Growth Markets - which comprise all markets except the
US, Canada, Western Europe, Japan, Australia and New Zealand - grew 2% (cc)
in the second quarter, led by Russia (+20% cc) and Brazil (+11% cc). China
grew 2% (cc), while some countries including India (-16% cc) and Venezuela
(-14% cc) declined.
Strengthen innovation
The second quarter saw pipeline progress with positive regulatory decisions and
significant clinical trial data released. Key developments are included below.
New approvals and regulatory opinions
* The EC approved Afinitor (everolimus) for the treatment of unresectable or
metastatic, well-differentiated nonfunctional neuroendocrine tumors of
gastrointestinal or lung origin in adults with progressive disease.
* The FDA approved an expanded age range for Xolair (omalizumab) to include
children six to 11 years of age with moderate to severe persistent asthma.
* Alcon achieved CE Mark in Europe for AcrySof IQ PanOptix IOL with UltraSert
and Dailies Total1 Multifocal.
Regulatory submissions and filings
* In July, the FDA's Arthritis Advisory Committee voted unanimously to support
approval of Sandoz proposed biosimilar etanercept for all five indications
of the reference product (Enbrel(®)).
* The FDA granted three separate Breakthrough Therapy designations, as well as
Priority Reviews, for Ilaris (canakinumab) to treat three rare types of
Periodic Fever Syndromes.
* Sandoz biosimilar rituximab candidate (for Roche's EU-licensed MabThera(®))
was accepted by the EMA for regulatory review.
Results from important clinical trials and other highlights
* Entresto (sacubitril/valsartan) was given a strong Class I recommendation in
both US and European heart failure treatment guidelines. The US guidelines
position Entresto as the standard of care for symptomatic patients with
heart failure with reduced ejection fraction (HFrEF).
* According to an analysis in JAMA Cardiology, more than 28,000 deaths in the
US alone could be prevented or postponed by optimal use of Entresto. The
analysis supports the need for rapid and broad uptake in patients with
HFrEF.
* Novartis announced FortiHFy, a global clinical umbrella program comprising
more than 40 active or planned trials, which will generate additional data
on symptom reduction, efficacy, safety, quality of life benefits and real
world evidence with Entresto and increase understanding of heart failure.
* An independent Data Monitoring Committee recommended stopping the pivotal
Phase III trial of CDK 4/6 inhibitor LEE011 (ribociclib) early, as a pre-
planned interim analysis showed that it met the primary endpoint of a
clinically meaningful improvement in progression free survival (PFS) in
postmenopausal women who had received no prior therapy for their HR+/HER2-
advanced breast cancer.
* Data presented at EULAR showed that up to 80% of ankylosing spondylitis and
84% of psoriatic arthritis patients treated with Cosentyx (secukinumab) at
two years had no radiographic progression in the spine or joints,
respectively. New head-to-head clinical trials are planned to compare
Cosentyx versus Humira(®).
* Three-year follow-up data from a Phase III study of Tafinlar + Mekinist
(dabrafenib + trametinib) showed a significant survival benefit for patients
with BRAF V600E/K+ advanced melanoma on combination therapy versus Tafinlar
monotherapy.
* A Phase II study of Tafinlar + Mekinist in patients with BRAF V600E+ non-
small cell lung cancer demonstrated a 63% confirmed overall response rate
for the combination therapy.
* Data from the investigational ENESTfreedom and ENESTop treatment-free
remission (TFR) trials of Tasigna (nilotinib) showed that more than 50% of
eligible Ph+ CML patients were able to maintain TFR after stopping Tasigna
both in the first-line setting and after switching from Glivec (imatinib).
ENESTop met its primary endpoint, though ENESTfreedom did not.
* Full study results from the head-to-head FLAME trial demonstrated
superiority of Ultibro Breezhaler (indacaterol/glycopyrronium) to
Seretide(®) across exacerbation outcomes, lung function and health-related
quality of life in COPD patients with a prior history of exacerbations.
* A Phase II study of AMG 334 (erenumab) in chronic migraine prevention met
its primary endpoint of a statistically significant reduction in the number
of monthly migraine days versus placebo.
* Phase III RESPONSE-2 data showed that Jakavi (ruxolitinib) helped patients
with less advanced polycythemia vera achieve superior hematocrit control
compared to best available therapy.
* The New England Journal of Medicine published pivotal data for PKC412
(midostaurin) showing an overall response rate of 60% in patients with
advanced systemic mastocytosis.
* Novartis entered into a collaboration and licensing agreement with Xencor,
adding bispecific antibodies to its growing immuno-oncology portfolio.
* In two key studies, Sandoz biosimilar etanercept and rituximab candidates
showed pharmacokinetic bioequivalence to their originator products
(Enbrel(®) and MabThera(®), respectively).
* A confirmatory clinical study comparing Sandoz biosimilar etanercept
candidate to Enbrel(®) met its primary endpoint of achieving equivalence in
PASI75 response rates at week 12.
* Sandoz received a complete response letter from the FDA for biosimilar
pegfilgrastim candidate (Neulasta(®)). We are working with the agency to
address remaining questions.
Improve Alcon performance
Alcon continued to make investments in the second quarter to accelerate
innovation and sales, strengthen customer relationships and improve basic
operations.
In operations, Alcon upgraded order and inventory management, which has resulted
in improved supply stability. To further reinforce customer relationships, Alcon
has redefined and launched new customer experience standards, and created a
global organization focused on delivering customer excellence. At the same time,
Alcon has increased M&S investment behind key products in both Surgical and
Vision Care to accelerate sales. These investments have depressed margins in Q2,
but are expected to accelerate sales and result in higher margins longer term.
The division is expected to return to top-line growth later in the year.
Alcon also made significant progress on innovation in the second quarter,
strengthening future growth prospects. Alcon received CE Mark in Europe for
Dailies Total1 Multifocal as well as PanOptix with UltraSert. Pivotal data on
CyPass, the minimally invasive glaucoma surgery device, was also presented at
the American Society of Cataract and Refractive Surgery annual meeting in the
second quarter.
Capture cross-divisional synergies
We continued to advance our productivity programs in the second quarter, helping
to support margins for the Group.
* As of July 1, 2016, the new centralized Technical Operations and integrated
Drug Development organizations are operational.
* Novartis Business Services (NBS) continued the selective offshoring of
transactional services to our five Global Service Centers. The cost within
the scope of NBS continues to be stable versus prior year.
* In Procurement, we generated approximately USD 0.5 billion in savings by
leveraging our scale.
In total, our productivity initiatives generated gross savings of approximately
USD 0.7 billion in the second quarter.
Build a higher-performing organization
Novartis continues to proactively drive compliance, reliable product quality and
sustainable efficiency as part of the quality strategy. The company's focus on
quality continued to yield results in the second quarter of 2016. A total of 74
global health authority inspections were completed and closed in the first half
of the year (42 in Q2), 13 of which were conducted by the FDA (4 in Q2). All but
one were deemed good or acceptable. The inspection of the UK country
organization by the UK Medicines & Healthcare Products Regulatory Agency (MHRA),
which was still pending as of Q1, resulted in an unsatisfactory outcome. The
main finding of the MHRA related to ease of access for health authorities to
trial data in the current systems, which is being addressed through an existing
project.
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. 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 2016, 12.3 million treasury shares were delivered
as a result of options exercised and share deliveries related to equity-based
participation plans of associates. To partially offset the dilutive impact
related to such transactions, 5.0 million Novartis shares were repurchased on
the SIX Swiss Exchange second trading line and from employees. Despite these
transactions, the total number of shares outstanding increased by 7.3 million
versus December 31, 2015. Novartis aims to further offset the dilutive impact
from equity-based participation plans of associates that occurred in the first
quarter over the remainder of the year through additional share purchases.
As of June 30, 2016, the net debt increased by USD 4.1 billion to USD 20.6
billion, compared to USD 16.5 billion at December 31, 2015. The net debt
increase was mainly driven by the USD 6.5 billion annual dividend payment,
acquisition of businesses, and share repurchases, partly offset by USD 3.9
billion free cash flow generation in the first half of 2016.
The long-term credit rating for the company continues to be double-A (Moody's
Aa3; Standard & Poor's AA-; Fitch AA).
2016 Outlook
Barring unforeseen events
Group net sales are expected to be broadly in line with the prior year (cc),
with Growth Products offsetting the impact of generic competition.
Based on the positive treatment guidelines on Entresto, we have made the
decision to increase spending significantly in the second half of 2016 to build
a US primary care field force, and add incremental medical support. We expect
this to accelerate the uptake of Entresto and maximize future peak sales.
As a consequence of this additional investment, and depending on the erosion
curve of Gleevec, core operating income is expected to be broadly in line with
the prior year or decline low-single digit (cc).
These comparisons are versus 2015 continuing operations.
If early July exchange rates prevail for the remainder of 2016, the currency
impact for the year would be negative 1 percentage point on sales and negative
3 percentage points on core operating income.
Summary Financial Performance
Continuing %
operations[1] Q2 2016 Q2 2015 % change H1 2016 H1 2015 change
USD m USD m USD cc USD m USD m USD cc
--------------------------------------------------- ---------------------------
Net sales 12 470 12 694 -2 0 24 070 24 629 -2 1
Operating income 2 093 2 281 -8 -4 4 544 5 066 -10 -4
As a % of sales 16.8 18.0 18.9 20.6
Core operating
income 3 332 3 593 -7 -4 6 593 7 244 -9 -4
As a % of sales 26.7 28.3 27.4 29.4
Net income 1 806 1 856 -3 0 3 817 4 162 -8 -2
EPS (USD) 0.76 0.77 -1 2 1.60 1.72 -7 -1
Free cash flow 2 526 2 064 22 3 888 3 529 10
--------------------------------------------------- ---------------------------
%
Innovative Medicines Q2 2016 Q2 2015[2] % change H1 2016 H1 2015[2] change
USD m USD m USD cc USD m USD m USD cc
--------------------------------------------------- ---------------------------
Net sales 8 387 8 633 -3 -1 16 116 16 593 -3 0
Operating income 1 866 1 994 -6 -3 4 046 4 444 -9 -4
As a % of sales 22.2 23.1 25.1 26.8
Core operating
income 2 669 2 872 -7 -4 5 271 5 727 -8 -3
As a % of sales 31.8 33.3 32.7 34.5
--------------------------------------------------- ---------------------------
%
Sandoz Q2 2016 Q2 2015[2] % change H1 2016 H1 2015[2] change
USD m USD m USD cc USD m USD m USD cc
--------------------------------------------------- ---------------------------
Net sales 2 577 2 530 2 3 5 022 4 974 1 4
Operating income 380 281 35 43 726 621 17 25
As a % of sales 14.7 11.1 14.5 12.5
Core operating
income 535 537 0 4 1 020 1 020 0 5
As a % of sales 20.8 21.2 20.3 20.5
--------------------------------------------------- ---------------------------
%
Alcon Q2 2016 Q2 2015[2] % change H1 2016 H1 2015[2] change
USD m USD m USD cc USD m USD m USD cc
--------------------------------------------------- ---------------------------
Net sales 1 506 1 531 -2 -1 2 932 3 062 -4 -2
Operating income 7 54 -87 -77 38 195 -81 -59
As a % of sales 0.5 3.5 1.3 6.4
Core operating
income 238 287 -17 -15 481 669 -28 -21
As a % of sales 15.8 18.7 16.4 21.8
--------------------------------------------------- ---------------------------
%
Corporate Q2 2016 Q2 2015 % change H1 2016 H1 2015 change
USD m USD m USD cc USD m USD m USD cc
--------------------------------------------------- ---------------------------
Operating loss -160 -48 -233 -250 -266 -194 -37 -47
Core operating loss -110 -103 -7 -15 -179 -172 -4 -16
--------------------------------------------------- ---------------------------
Discontinued %
operations Q2 2016 Q2 2015 % change H1 2016 H1 2015 change
USD m USD m USD cc USD m USD m USD cc
--------------------------------------------------- ---------------------------
Net sales 39 587
Operating
loss/income -96 12 526
As a % of sales nm nm
Core operating loss -72 -174
As a % of sales nm -29.6
--------------------------------------------------- ---------------------------
%
Total Group[3] Q2 2016 Q2 2015 % change H1 2016 H1 2015 change
USD m USD m USD cc USD m USD m USD cc
--------------------------------------------------- ---------------------------
Net income 1 806 1 838 -2 1 3 817 14 843 -74 -73
EPS (USD) 0.76 0.76 0 3 1.60 6.15 -74 -72
Free cash flow 2 526 2 013 25 3 888 3 239 20
-------------------------------------------------------------------------------
nm= not meaningful
[1] Continuing operations include the businesses of Innovative Medicines
(formerly named the Pharmaceuticals Division), Alcon, Sandoz and Corporate
activities, and starting on March 2, 2015, the results from the new oncology
assets acquired from GSK and the 36.5% interest in the GSK Consumer Healthcare
Holdings Ltd. (the latter reported as part of income from associated companies).
See page 40 of the Condensed Interim Financial Report for full explanation.
[2] In compliance with IFRS, Novartis updated its segment financials to reflect
the new divisional structure announced on January 27, 2016, to aid comparability
of year-on-year results.
[3] Total Group net income and EPS include in the prior year the impact of the
exceptional divestment gains and the operating results of the discontinued
operations. 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/2029257/754504.pdf.
Novartis Q2 and H1 2016 Condensed Interim Financial Report - Supplementary Data
INDEX Page
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GROUP AND DIVISIONAL OPERATING PERFORMANCE Q2 and H1 2016
Group 2
Innovative Medicines 6
Sandoz 14
Alcon 16
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CASH FLOW AND GROUP BALANCE SHEET 19
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INNOVATION REVIEW 22
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CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Condensed consolidated income statements 31
Condensed consolidated statements of comprehensive income 33
Condensed consolidated balance sheets 34
Condensed consolidated changes in equity 35
Condensed consolidated cash flow statements 36
Notes to condensed interim consolidated financial statements, including
update on legal proceedings 38
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SUPPLEMENTARY INFORMATION 48
CORE RESULTS
Reconciliation from IFRS to core results 50
Group 52
Innovative Medicines 54
Sandoz 56
Alcon 58
Corporate 60
Discontinued operations 62
ADDITIONAL INFORMATION
Condensed consolidated changes in net debt / Share information 63
Free cash flow 64
Net sales of the top 20 Innovative Medicines products 65
Innovative Medicines sales by business franchise 67
Net sales by region 69
Currency translation rates 71
Income from associated companies 72
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DISCLAIMER 73
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Disclaimer
This press release contains forward-looking statements that can be identified by
words such as "innovation," "prospects," "growth products," "building,"
"increasing," "growth investments," "recommendation," "planned," "submitted,"
"will," "growth plan," "progressing," "expected," "momentum," "long-term,"
"priorities," "progress," "plans," "launches," "launch," "growth drivers,"
"focus," "ongoing," "launched," "continues," "pipeline," "Breakthrough Therapy,"
"Priority Review," "could," "investigational," "growing," "continued,"
"accelerate," "longer term," "later in the year," "initiatives," "priority," "to
focus," "aims," "outlook," "plan," "opportunities," "would," "guidance,"
"contingent," "underway," "encouraging," "potential," "seeking," "upcoming,"
"pending," 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; potential
shareholder returns or credit ratings; or regarding any potential financial or
other impact on Novartis or any of our divisions of the strategic actions
announced in January 2016 to focus our divisions, integrate certain functions
and leverage our scale; or regarding any potential financial or other impact on
Novartis from the creation of the Pharmaceuticals business unit and Oncology
business unit to form the Innovative Medicines Division; or regarding any
potential financial or other impact on Novartis as a result of the creation and
operation of NBS; or regarding the potential financial or other impact on
Novartis of the transactions with GSK, Lilly or CSL; or regarding potential
future sales or earnings of the Novartis Group or any of its divisions; 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 Novartis will be able to realize any of the potential strategic
benefits, synergies or opportunities as a result of the creation of the
Pharmaceuticals business unit and Oncology business unit to form the Innovative
Medicines Division, the strategic actions announced in January 2016, the
creation and operation of NBS, or the transactions with GSK, Lilly and CSL.
Neither can there be any guarantee that Novartis or any of the businesses
involved in the transactions will achieve any particular financial results in
the future. Neither can there be any guarantee that shareholders will achieve
any particular level of shareholder returns. Nor can there be any guarantee that
the Group, or any of its divisions, will be commercially successful in the
future, or achieve any particular credit rating. In particular, management's
expectations could be affected by, among other things: unexpected regulatory
actions or delays or government regulation generally; the potential that the
strategic benefits, synergies or opportunities expected from the creation of the
Pharmaceuticals business unit and Oncology business unit to form the Innovative
Medicines Division, the strategic actions announced in January 2016, the
creation and operation of NBS, or the transactions with GSK, Lilly and 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; our
ability to obtain or maintain proprietary intellectual property protection,
including the ultimate extent of the impact on Novartis of the loss of patent
protection and exclusivity on key products which commenced in prior years and
continues this year; unexpected safety, quality or manufacturing issues; global
trends toward health care cost containment, including ongoing pricing pressures,
in particular from increased publicity on pharmaceuticals pricing; uncertainties
regarding actual or potential legal proceedings, including, among others, actual
or potential product liability litigation, litigation and investigations
regarding sales and marketing practices, intellectual property disputes, and
government investigations generally; 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, including the continued increases in value of the US
dollar, our reporting currency, against a number of currencies; 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 our 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. Seretide(®) is a registered trademark of
GlaxoSmithKline Ltd. Humira(®) is a registered trademark of AbbVie Inc.
Enbrel(®) and Neulasta(®) are registered trademarks of Amgen Inc. MabThera(®) is
a registered trademark of F. Hoffmann-La Roche Ltd. Jakafi(®) is a registered
trademark of Incyte Corporation. Stelara(®) is a registered trademark of Janssen
Biotech, Inc. FluidCrystal(®) is a registered trademark of Camurus AB.
Lenvima(®) is a registered trademark of Eisai Inc.
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 2015, the Group achieved net
sales of USD 49.4 billion, while R&D throughout the Group amounted to
approximately USD 8.9 billion (USD 8.7 billion excluding impairment and
amortization charges). Novartis Group companies employ approximately 118,000
full-time-equivalent associates. Novartis products are available in more than
180 countries around the world. For more information, please visit
http://www.novartis.com.
Important dates
October 25, 2016 Third quarter results 2016
January 25, 2017 Fourth quarter and full year results 2016
February 28, 2017 Annual General Meeting
Please find full media release in English attached and on the following link:
http://hugin.info/134323/R/2029257/754517.pdf
Further language versions are available through the following links:
German version is available through the following link:
http://hugin.info/134323/R/2029259/754519.pdf
French version is available through the following link:
http://hugin.info/134323/R/2029258/754518.pdf
Media release (PDF):
http://hugin.info/134323/R/2029257/754517.pdf
IFR (PDF):
http://hugin.info/134323/R/2029257/754504.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#2029257]
Unternehmensinformation / Kurzprofil:
Datum: 19.07.2016 - 07:01 Uhr
Sprache: Deutsch
News-ID 483898
Anzahl Zeichen: 52959
contact information:
Town:
Basel
Kategorie:
Business News
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