Novartis delivered solid third quarter with Growth Products[1] offsetting Gleevec patent expiration; several positive readouts for potential blockbusters
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Novartis International AG /
Novartis delivered solid third quarter with Growth Products[1] offsetting
Gleevec patent expiration; several positive readouts for potential blockbusters
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The issuer is solely responsible for the content of this announcement.
* Q3 net sales (-1% cc[2] and USD) broadly in line with prior year due to
strong performance of Growth Products
* Gilenya (USD 790 million, +15% cc) continued double-digit growth
* Cosentyx (USD 301 million) on track for blockbuster status in first full
year after approval
* Oncology growth drivers including Tafinlar + Mekinist (USD 172 million,
+29% cc), Promacta/Revolade (USD 168 million, +44% cc) and Jakavi (USD
149 million, +47% cc)
* Sandoz Biopharmaceuticals[1] (USD 262 million, +41% cc) delivered strong
growth
* Q3 core[2] operating income down 3% (cc and USD), reflecting generic erosion
and growth investments, partially offset by productivity initiatives
* Core M&S up 0.8 percentage points (cc) to 24.3% of sales, supporting new
launches and Alcon
* Core operating income margin declined 0.6 percentage points (cc)
* Core EPS was USD 1.23 (-3% cc)
* Free cash flow[2] was USD 2.6 billion (-7% USD) in Q3; USD 6.5 billion
(+3% USD) in 9M
* Q3 net income up 7% (cc and USD) from higher operating income and income
from associated companies
* Strong pipeline progress with key data readouts, filings and regulatory
decisions in Q3
* LEE011 plus letrozole demonstrated superior PFS as first-line treatment
of HR+/HER2- advanced breast cancer vs. letrozole alone; granted FDA
Breakthrough Therapy designation
* BAF312 in SPMS[3] met primary endpoint, significantly reducing risk of
disability progression
* AMG 334 met primary endpoint in first Phase III episodic migraine study
* Ilaris received three new FDA approvals for Periodic Fever Syndromes
* Sandoz biosimilar etanercept, Erelzi, received FDA approval
* Entresto (USD 53 million in Q3) grew steadily; FY sales guidance of ~USD
0.2 billion confirmed
* Continuing to invest in Alcon growth plan
* Contact lenses delivered another quarter of growth; Dailies Total1
Multifocal launches in US and EU expected to continue growth trajectory
* Innovation continued to accelerate in Surgical with FDA approvals for
CyPass, UltraSert Toric IOL
* 2016 Outlook confirmed
* Net sales expected to be broadly in line with prior year (cc)
* Core operating income expected to be broadly in line or decline low
single digit (cc)
Key figures[2] Continuing operations[4]
------------------------------------------------
% %
Q3 2016 Q3 2015 change 9M 2016 9M 2015 change
USD m USD m USD cc USD m USD m USD cc
----------------------------------------- -----------------------
Net sales 12 126 12 265 -1 -1 36 196 36 894 -2 0
Operating income 2 269 2 234 2 1 6 813 7 300 -7 -3
Net income 1 945 1 812 7 7 5 762 5 974 -4 1
EPS (USD) 0.81 0.75 8 8 2.42 2.48 -2 2
Free cash flow 2 591 2 788 -7 6 479 6 317 3
Core
Operating income 3 381 3 489 -3 -3 9 974 10 733 -7 -4
Net income 2 938 3 061 -4 -4 8 656 9 334 -7 -4
EPS (USD) 1.23 1.27 -3 -3 3.63 3.87 -6 -3
----------------------------------------- -----------------------
Basel, October 25, 2016 - Commenting on the results, Joseph Jimenez, CEO of
Novartis, said:
"Novartis delivered a solid Q3 despite the Gleevec generic impact in the US, due
to the strong performance of our Growth Products. We continued to drive
innovation, with positive pipeline readouts for LEE011 in advanced breast
cancer, BAF312 in SPMS and AMG 334 in episodic migraine. We are continuing to
invest for the future, as we manage the Gleevec loss of exclusivity in 2016 and
2017."
[1] Growth Products are defined on page 2. Biopharmaceuticals are defined on
page 3.
[2] Constant currencies (cc), core results and free cash flow are non-IFRS
measures. An explanation of non-IFRS measures can be found on page 46 of the
Condensed Interim Financial Report. Unless otherwise noted, all growth rates in
this Release refer to same period in prior year.
[3] SPMS = secondary progressive multiple sclerosis.
[4] Refers to continuing operations, defined on page 38 of the Condensed Interim
Financial Report.
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 third 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 38 of the
Condensed Interim Financial Report for a full explanation.
Third quarter
Continuing operations
Net sales were USD 12.1 billion (-1%, -1% cc) in the third quarter, as volume
growth of 5 percentage points was more than offset by the negative impact of
generic competition (-4 percentage points) and pricing (-2 percentage points).
Growth Products[1] contributed USD 4.3 billion or 36% of net sales, up 20% (USD)
over the prior-year quarter.
Operating income was USD 2.3 billion (+2%, +1% cc). Core adjustments amounted to
USD 1.1 billion (2015: USD 1.3 billion), broadly in line with the prior-year
quarter.
Core operating income was USD 3.4 billion (-3%, -3% cc). Core operating income
margin in constant currencies decreased 0.6 percentage points, mainly due to
investments behind new launches and the Alcon growth plan, partially offset by
productivity improvements. Currency had a positive impact of 0.1 percentage
points, resulting in a net decrease of 0.5 percentage points in US dollar terms
to 27.9% of net sales.
Net income was USD 1.9 billion (+7%, +7% cc), up more than operating income
mainly due to higher income from associated companies.
EPS was USD 0.81 (+8%, +8% cc), up more than net income due to a reduction in
the number of shares outstanding.
Core net income was USD 2.9 billion (-4%, -4% cc), broadly in line with core
operating income.
Core EPS was USD 1.23 (-3%, -3% cc), down less than core net income due to a
reduction in the number of shares outstanding.
Free cash flow was USD 2.6 billion (-7% USD), a decrease of USD 0.2 billion
compared to the prior-year quarter. The decrease was driven by higher net
investments in intangible assets, mainly due to the ofatumumab milestone
payment, which more than offset an increase in cash flows from operating
activities.
[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 8.2 billion (-1%, -1% cc) in the third quarter. Volume contributed 5
percentage points to sales growth. Generic competition had a negative impact of
5 percentage points and pricing had a negative impact of 1 percentage point,
both largely due to Gleevec/Glivec genericization in the US. Growth Products
grew 21% (cc) to USD 3.8 billion, or 46% of division net sales.
Operating income was USD 2.0 billion (+8%, +9% cc). Core operating income was
USD 2.7 billion (-2%, -1% cc). Core operating income margin in constant
currencies was flat; currency had a negative impact of 0.3 percentage points,
resulting in a net decrease of 0.3 percentage points to 32.7% of net sales.
Sandoz net sales were USD 2.5 billion (-1%, -1% cc) in the third quarter, as
volume growth of 5 percentage points was offset by 6 percentage points of price
erosion. Performance was impacted by significantly lower launch activity in the
US compared to a strong prior-year quarter. Global sales of
Biopharmaceuticals[1] grew 41% (cc) to USD 262 million. Anti-Infectives
franchise sales (partner label and finished dosage form sales) were USD 339
million (-2% cc), reflecting discontinuation of low-margin products.
Operating income was USD 354 million (-9%, -9% cc). Core operating income was
USD 530 million (0%, +1% cc). Core operating income margin in constant
currencies increased by 0.2 percentage points; currency had a positive impact of
0.1 percentage points, resulting in a net increase to 21.1% of net sales.
Alcon net sales were USD 1.4 billion (-2%, -3% cc) in the third quarter.
Surgical sales (-4% cc) were down, impacted by lower IOL sales, mainly due to
competitive pressures, and a continued decline in cataract equipment, primarily
LenSx, which has reached high penetration in its market segment. The strong
installed cataract equipment base continued to generate good growth of
consumables (+4% cc). Vision Care sales (0% cc) were flat, as contact lenses
delivered another quarter of growth, benefitting from the continued strong
performance of Dailies Total1, offsetting a slight decline in contact lens care.
Launches of Dailies Total1 Multifocal in the US and EU are expected to continue
the growth trajectory in contact lenses.
Operating loss was USD 50 million, compared to an income of USD 57 million in
the prior-year quarter. Core operating income was USD 206 million (-32%, -35%
cc), primarily impacted by declining sales and increased investments in M&S
behind the growth plan. Core operating income margin in constant currencies
decreased by 6.8 percentage points; currency had a positive impact of 0.5
percentage points, resulting in a net decrease of 6.3 percentage points to
14.3% of net sales.
[1] Biopharmaceuticals include biosimilars, biopharmaceutical contract
manufacturing and Glatopa.
Total Group
For the total Group, net income amounted to USD 1.9 billion, broadly in line
with the prior-year quarter, and basic earnings per share was USD 0.81.
Total Group free cash flow amounted to USD 2.6 billion, compared to USD 2.8
billion in the prior-year quarter.
Nine months
Continuing operations
Net sales were USD 36.2 billion (-2%, 0% cc) in the first nine months. Growth
Products contributed USD 12.5 billion or 35% of net sales, up 21% (USD) over the
prior-year period.
Operating income was USD 6.8 billion (-7%, -3% cc). Core adjustments amounted to
USD 3.2 billion (2015: USD 3.4 billion), broadly in line with the prior-year
period.
Core operating income was USD 10.0 billion (-7%, -4% cc). Core operating income
margin in constant currencies decreased 1.2 percentage points, mainly due to the
loss of exclusivity on Gleevec, investments behind new launches and the Alcon
growth plan. Currency had a negative impact of 0.3 percentage points, resulting
in a net decrease of 1.5 percentage points to 27.6% of net sales.
Net income was USD 5.8 billion (-4%, +1% cc), with the increase relative to the
operating income decline due to higher income from associated companies.
EPS was USD 2.42 (-2%, +2% cc), up more than net income due to a reduction in
the number of shares outstanding.
Core net income was USD 8.7 billion (-7%, -4% cc), in line with core operating
income.
Core EPS was USD 3.63 (-6%, -3% cc), down less than core net income due to a
reduction in the number of shares outstanding.
Free cash flow was USD 6.5 billion (+3% USD), an increase of USD 0.2 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.
Innovative Medicines net sales were USD 24.3 billion (-2%, 0% cc) in the first
nine months, as volume growth (+6 percentage points) was fully offset by the
impact of generic competition (-6 percentage points). Pricing impact was
negligible.
Operating income was USD 6.1 billion (-4%, 0% cc). Core operating income was USD
7.9 billion (-6%, -2% cc). Core operating income margin in constant currencies
decreased by 0.7 percentage points, mainly due to launch investments for
Entresto and Cosentyx, partially offset by productivity improvements; currency
had a negative impact of 0.6 percentage points, resulting in a net decrease of
1.3 percentage points to 32.7% of net sales.
Sandoz net sales were USD 7.5 billion (0%, +2% cc) in the first nine months, as
volume growth of 8 percentage points more than offset 6 percentage points of
price erosion. Global sales of Biopharmaceuticals grew 32% (cc) to USD 724
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 1.0 billion (-2% cc), reflecting discontinued low-margin products
and the weak flu season in the first quarter.
Operating income was USD 1.1 billion (+7%, +12% cc). Core operating income was
USD 1.5 billion (0%, +4% cc). Core operating income margin in constant
currencies increased by 0.3 percentage points; currency had a negative impact of
0.3 percentage points, resulting in flat 20.6% of net sales.
Alcon net sales were USD 4.4 billion (-4%, -2% cc) in the first nine months.
Surgical sales (-3% cc) reflected weaker performance of IOLs, mainly due to
competitive pressures, and the slowdown of equipment sales, primarily LenSx in
Cataract and Wavelight in Refractive, partially offset by continued solid growth
of cataract consumables (+4% cc). Vision Care sales (-1% cc) were impacted by
competitive pressures in the US, partially offset by continued strong global
growth of Dailies Total1.
Operating loss was USD 12 million, compared to an income of USD 252 million in
the prior-year period. Core operating income was USD 687 million (-29%, -25%
cc), primarily impacted by increased investments in M&S and R&D behind the
growth plan and the impact of the decline in sales. Core operating income margin
in constant currencies decreased by 5.1 percentage points; currency had a
negative impact of 0.6 percentage points, resulting in a net decrease of 5.7
percentage points to 15.7% of net sales.
Total Group
For the total Group, net income amounted to USD 5.8 billion compared to USD
16.7 billion in the prior-year period, and basic earnings per share decreased to
USD 2.42 from USD 6.94. The prior-year period benefitted from the net income
from discontinued operations, which included USD 12.8 billion of exceptional
pre-tax divestment gains from the portfolio transformation transactions and USD
0.5 billion of additional pre-tax transaction related expenses.
Total Group free cash flow amounted to USD 6.5 billion, compared to USD 6.0
billion in the first nine months of 2015.
Key growth drivers
Underpinning our financial results in the third 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 36% of Group net sales in the third quarter, and were up 20%
(USD). In Innovative Medicines, Growth Products contributed 46% of division
net sales in the quarter, and sales for these products were up 21% (cc).
* Gilenya (USD 790 million, +15% cc), a once-daily oral medicine for relapsing
forms of multiple sclerosis, continued to grow double-digit, mainly due to
volume growth.
* Tasigna (USD 441 million, +8% cc) showed solid growth in the quarter,
despite the entry of multiple generic versions of Gleevec in the US.
* Cosentyx (USD 301 million) continued its strong launch trajectory in the
third quarter. Across its three approved indications, Cosentyx has been used
to treat more than 50,000 patients in a post-marketing setting to date.
* Tafinlar + Mekinist (USD 172 million, +29% cc) continued to show strong
growth, particularly in Europe, as the first approved combination therapy
for patients with BRAF V600 mutation-positive unresectable or metastatic
melanoma.
* Promacta/Revolade (USD 168 million, +44% cc) grew at a strong double-digit
rate, driven by continued worldwide uptake as well as growth of the
thrombopoietin class for chronic immune (idiopathic) thrombocytopenic
purpura.
* Jakavi (USD 149 million, +47% cc) growth was driven by patient gains in the
myelofibrosis indication globally and the launch of the polycythemia vera
indication in key markets.
* Entresto (USD 53 million) continued to grow steadily with approvals in 64
countries to date and continued progress with reimbursement around the
world. In the US, expansion of the primary care field force is underway, and
in Europe, uptake continues to be faster. Entresto sales are expected to be
approximately USD 0.2 billion for full year 2016.
* Sandoz Biopharmaceuticals (USD 262 million, +41% cc), including Glatopa and
Zarxio, delivered strong growth.
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 6% (cc)
in the third quarter, led by China (+6% cc), Russia (+9% cc) and India (+10%
cc).
Strengthen innovation
The third 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 FDA granted three simultaneous approvals for the expanded use of Ilaris
(canakinumab) to treat three rare and distinct types of Periodic Fever
Syndromes.
* In October, the CHMP recommended approval for Lucentis (ranibizumab) to
treat patients with visual impairment due to choroidal neovascularization
(CNV) associated with causes other than neovascular age-related macular
degeneration or myopic CNV.
* The FDA approved Sandoz biosimilar etanercept, Erelzi (etanercept-szzs), for
all indications included in the reference product label.
* Alcon achieved FDA approval for CyPass Micro-Stent, a minimally invasive
surgical device to treat mild to moderate glaucoma in cataract patients.
* Alcon's AcrySof IQ Toric IOL with UltraSert, a pre-loaded, astigmatism-
correcting IOL for cataract surgery, was approved in the US.
Regulatory submissions and filings
* The FDA granted Breakthrough Therapy designation to LEE011 (ribociclib) in
combination with letrozole as first-line treatment for women with
postmenopausal HR+/HER2- advanced or metastatic breast cancer, based on
positive results of the Phase III MONALEESA-2 trial.
* Tafinlar + Mekinist (dabrafenib + trametinib) combination therapy was filed
with the EMA and Swissmedic for the treatment of patients with BRAF V600E
mutation-positive non-small cell lung cancer (NSCLC). The combination has
also been submitted to the FDA for the same indication.
* PKC412 (midostaurin) was filed with the EMA and Swissmedic for the treatment
of newly diagnosed FLT3 mutation-positive acute myeloid leukemia and
advanced systemic mastocytosis. A rolling submission in the US is ongoing.
Results from important clinical trials and other highlights
* Results from the pivotal Phase III MONALEESA-2 study showed LEE011 plus
letrozole significantly extended progression-free survival (PFS) compared to
a standard of care, letrozole, as a first-line treatment in post-menopausal
women with HR+/HER2- advanced breast cancer. LEE011 plus letrozole reduced
the risk of disease progression or death by 44% over letrozole alone,
significantly extending PFS across all patient subgroups.
* The Phase III EXPAND study of BAF312 (siponimod) in SPMS met its primary
endpoint and reduced the risk of three-month confirmed disability
progression by 21% and six-month confirmed disability progression by 26%
compared with placebo. A consistent reduction in the risk of confirmed
disability progression was seen across subgroups, including patients without
relapses.
* The Phase III ARISE study of the fully human monoclonal antibody AMG 334
(erenumab) in episodic migraine prevention met its primary endpoint of a
statistically significant reduction in the number of monthly migraine days
versus placebo. AMG 334 is being co-developed by Novartis and Amgen.
Novartis has commercial rights to AMG 334 outside of the US, Canada and
Japan.
* Follow-up data from the Phase III SCULPTURE study showed that Cosentyx
(secukinumab) delivers high and long-lasting skin clearance in patients with
moderate-to-severe plaque psoriasis out to four years of treatment.
* The Journal of the American Academy of Dermatology published results from
the head-to-head CLEAR study demonstrating that Cosentyx is superior to
Stelara(®) (ustekinumab) in delivering long-lasting clear or almost clear
skin over one year of treatment in adults with moderate-to-severe psoriasis.
* Post-hoc analyses of data from the PARADIGM-HF study showed that among
patients who had been hospitalized for HF, those on Entresto
(sacubitril/valsartan) reported higher relative health-related quality of
life scores compared to those taking ACE inhibitor enalapril.
* Follow-up data from a Phase III study of the combination of Tafinlar +
Mekinist in patients with BRAF V600E/K mutation-positive advanced melanoma
demonstrated an overall survival benefit at three years.
* The Phase III ASCEND-4 study of Zykadia (ceritinib) in previously untreated
adult patients with ALK+ NSCLC met its primary endpoint, demonstrating
clinically significant improvement in progression free survival (PFS)
compared to standard chemotherapy, including maintenance.
* The results of a Phase II trial of QAW039 (fevipiprant), published in Lancet
Respiratory Medicine, showed fevipiprant significantly decreases sputum
eosinophils compared to placebo in patients with severe asthma.
* Additional analyses of the FLAME trial data showed that, relative to
Seretide(®), Ultibro Breezhaler (indacaterol/glycopyrronium) reduced the
rate of all COPD exacerbations across different patient sub-groups, lowered
patients' need for rescue medication, and demonstrated an improved benefit-
risk profile with less evidence of systemic effects.
* Top-line results for confirmatory Phase III study for Sandoz biosimilar
infliximab demonstrated equivalent efficacy to reference product
Remicade(®), as measured by the American College of Rheumatology 20 (ACR20)
response at Week 14. Sandoz acquired EEA-wide rights from Pfizer in Q1 2016.
Improve Alcon performance
Alcon increased investments in the third quarter to accelerate innovation and
sales, strengthen customer relationships and improve basic operations.
The division made significant progress in innovation, with FDA approvals for the
CyPass Micro-Stent and UltraSert Toric IOL, the launch of NGENUITY 3D
visualization system for vitreoretinal surgery, and US and EU launches of
Dailies Total1 Multifocal contact lenses.
In Vision Care, Alcon continued to invest in DTC behind key brands. Contact
lenses delivered another quarter of growth, benefitting from the continued
strong performance of Dailies Total1.
In Surgical, Alcon continued to invest behind the new IOL launches in Europe
(UltraSert pre-loaded and PanOptix trifocal), while the strong installed
cataract equipment base continued to generate good growth in cataract
consumables.
The division also continued to strengthen its foundation to better serve
customers by expanding its field service organization, improving its supply
chain, and investing in new commercial capabilities and systems.
Capture cross-divisional synergies
We continued to advance our productivity programs in the third quarter, helping
to support margins for the Group.
* Novartis Business Services (NBS) continued to execute on its priorities of
driving efficiency, standardization and simplification across the Group. NBS
cost under management remained stable versus prior year, as it continued the
selective offshoring of services to five Global Service Centers. NBS is also
driving efficiencies through the consolidation of IT suppliers and
contracts, in addition to consolidating facilities services from more than
100 to 3 suppliers globally.
* In Procurement, we generated approximately USD 0.5 billion in savings by
leveraging our scale.
* In the centralized Technical Operations organization, which has been
operational since July 1, transformation planning is progressing for each
manufacturing technology platform. Organizing by technology platform is
expected to enhance our ability to optimize capacity planning and lower
costs through simplification, standardization and external spend
optimization across the network. Technical Operations[1] represents
approximately 28,000 employees and 67 manufacturing sites.
* The Global Drug Development (GDD) organization, which has been operational
since July 1, completed a review of our entire portfolio of medicines, which
has enabled allocation of drug development resources based on the promise of
each asset for the entire Novartis Group versus a single business unit.
Additionally, GDD has completed the integration of the vast majority of its
global functions, which is expected to help strengthen capabilities, enable
more efficient utilization of functional resources and optimize external
spend. The organization is on track to complete integration of the remaining
global functions by the end of 2016. GDD represents approximately 10,000
employees worldwide.
In total, our productivity initiatives generated gross savings of approximately
USD 0.6 billion in the third quarter.
[1] Excluding Alcon, which has additional sites (16) and employees (13,000)
Build a higher-performing organization
Novartis continues to proactively drive compliance, reliable product quality and
sustainable efficiency as part of the quality strategy. A total of 127 global
health authority inspections were completed in the first nine months (53 in Q3),
17 of which were conducted by the FDA (4 in Q3). All but three were deemed good
or acceptable. The three not deemed good or acceptable were as follows: The
inspection of the UK country organization by the UK Medicines & Healthcare
Products Regulatory Agency (MHRA), reported in the first quarter of 2016,
resulted in an unsatisfactory outcome as a result of issues relating to the
accessibility of clinical trial data, which is being addressed through an
existing project. A Sandoz site in Warsaw (Poland) was not immediately granted a
GMP certificate by the Russian Health Authorities due to a registration
discrepancy for one product, which is currently being addressed. Resubmission is
in progress, and a GMP certificate is expected in due course. The outcome of an
EMA inspection of a Sandoz site in Holzkirchen (Germany) is pending.
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. Our target
credit rating is double-A.
During the first nine months of 2016, 12.8 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 of such transactions, 11.2 million Novartis shares were repurchased on
the SIX Swiss Exchange second trading line and from employees. Novartis aims to
further offset the dilutive impact from equity-based participation plans of
associates that occurred in the first nine months over the remainder of the year
through additional share repurchases.
Also, during the third quarter of 2016, Novartis issued two euro denominated
bonds for a total amount of USD 2.0 billion. A euro denominated bond issued in
2009 for a total amount of USD 1.7 billion was repaid in the second quarter at
maturity.
As of September 30, 2016, net debt increased by USD 2.3 billion to USD 18.8
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 and divestment related payments and share repurchases, partly offset
by USD 6.5 billion free cash flow generation in the first nine months 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.
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 October 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] Q3 2016 Q3 2015 change 9M 2016 9M 2015 change
USD m USD m USD cc USD m USD m USD cc
--------------------------------------------------- ---------------------------
Net sales 12 126 12 265 -1 -1 36 196 36 894 -2 0
Operating income 2 269 2 234 2 1 6 813 7 300 -7 -3
As a % of sales 18.7 18.2 18.8 19.8
Core operating income 3 381 3 489 -3 -3 9 974 10 733 -7 -4
As a % of sales 27.9 28.4 27.6 29.1
Net income 1 945 1 812 7 7 5 762 5 974 -4 1
EPS (USD) 0.81 0.75 8 8 2.42 2.48 -2 2
Free cash flow 2 591 2 788 -7 6 479 6 317 3
--------------------------------------------------- ---------------------------
% %
Innovative Medicines Q3 2016 Q3 2015[2] change 9M 2016 9M 2015[2] change
USD m USD m USD cc USD m USD m USD cc
--------------------------------------------------- ---------------------------
Net sales 8 173 8 254 -1 -1 24 289 24 847 -2 0
Operating income 2 020 1 872 8 9 6 066 6 316 -4 0
As a % of sales 24.7 22.7 25.0 25.4
Core operating income 2 676 2 724 -2 -1 7 947 8 451 -6 -2
As a % of sales 32.7 33.0 32.7 34.0
--------------------------------------------------- ---------------------------
% %
Sandoz Q3 2016 Q3 2015[2] change 9M 2016 9M 2015[2] change
USD m USD m USD cc USD m USD m USD cc
--------------------------------------------------- ---------------------------
Net sales 2 517 2 542 -1 -1 7 539 7 516 0 2
Operating income 354 388 -9 -9 1 080 1 009 7 12
As a % of sales 14.1 15.3 14.3 13.4
Core operating income 530 528 0 1 1 550 1 548 0 4
As a % of sales 21.1 20.8 20.6 20.6
--------------------------------------------------- ---------------------------
% %
Alcon Q3 2016 Q3 2015[2] change 9M 2016 9M 2015[2] change
USD m USD m USD cc USD m USD m USD cc
--------------------------------------------------- ---------------------------
Net sales 1 436 1 469 -2 -3 4 368 4 531 -4 -2
Operating loss/income -50 57 nm nm -12 252 nm nm
As a % of sales -3.5 3.9 -0.3 5.6
Core operating income 206 302 -32 -35 687 971 -29 -25
As a % of sales 14.3 20.6 15.7 21.4
--------------------------------------------------- ---------------------------
% %
Corporate Q3 2016 Q3 2015 change 9M 2016 9M 2015 change
USD m USD m USD cc USD m USD m USD cc
--------------------------------------------------- ---------------------------
Operating loss -55 -83 34 9 -321 -277 -16 -34
Core operating loss -31 -65 52 26 -210 -237 11 -8
--------------------------------------------------- ---------------------------
Discontinued % %
operations Q3 2016 Q3 2015 change 9M 2016 9M 2015 change
USD m USD m USD cc USD m USD m USD cc
--------------------------------------------------- ---------------------------
Net sales 14 601
Operating loss/income 45 12 571
As a % of sales nm nm
Core operating loss - 49 - 223
As a % of sales nm nm
--------------------------------------------------- ---------------------------
% %
Total Group[3] Q3 2016 Q3 2015 change 9M 2016 9M 2015 change
USD m USD m USD cc USD m USD m USD cc
--------------------------------------------------- ---------------------------
Net income 1 945 1 895 3 3 5 762 16 738 -66 -64
EPS (USD) 0.81 0.79 3 4 2.42 6.94 -65 -64
Free cash flow 2 591 2 788 -7 6 479 6 027 7
-------------------------------------------------------------------------------
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 38 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/2051043/767329.pdf.
Novartis Q3 and 9M 2016 Condensed Interim Financial Report - Supplementary Data
INDEX Page
-------------------------------------------------------------------------------
GROUP AND DIVISIONAL OPERATING PERFORMANCE Q3 and 9M 2016
Group 2
Innovative Medicines 6
Sandoz 14
Alcon 16
-------------------------------------------------------------------------------
CASH FLOW AND GROUP BALANCE SHEET 19
-------------------------------------------------------------------------------
INNOVATION REVIEW 22
-------------------------------------------------------------------------------
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Condensed consolidated income statements 29
Condensed consolidated statements of comprehensive income 31
Condensed consolidated balance sheets 32
Condensed consolidated changes in equity 33
Condensed consolidated cash flow statements 34
Notes to condensed interim consolidated financial statements, including 36
update on legal proceedings
-------------------------------------------------------------------------------
SUPPLEMENTARY INFORMATION 46
CORE RESULTS
Reconciliation from IFRS to core results 48
Group 50
Innovative Medicines 52
Sandoz 54
Alcon 56
Corporate 58
Discontinued operations 60
ADDITIONAL INFORMATION
Condensed consolidated changes in net debt / Share information 61
Free cash flow 62
Net sales of the top 20 Innovative Medicines products 63
Innovative Medicines sales by business franchise 65
Net sales by region 67
Currency translation rates 69
Income from associated companies 70
-------------------------------------------------------------------------------
DISCLAIMER 71
-------------------------------------------------------------------------------
Disclaimer
This press release contains forward-looking statements that can be identified by
words such as "growth products," "potential," "on track," "growth investments,"
"launches," "pipeline," "Breakthrough Therapy," "guidance," "continuing,"
"growth plan," "progress," "growth drivers," "expected," "innovation,"
"outlook," "invest for the future," "priorities," "plans," "focus," "launch,"
"ongoing," "accelerate," "planning," "progressing," "promise," "continues,"
"drive," "strategy," "being addressed," "in progress," "pending," "will,"
"priority," "target," "aims," "long-term," "would," "recommendation," "planned,"
"submitted," "launched," "Priority Review," "investigating," "growing," "later
this year," "initiatives," "contingent," "underway," 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, our centralized Technical
Operations organization, or GDD; 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. 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 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, our centralized Technical
Operations organization, or GDD, or the transactions with GSK, Lilly and CSL.
Nor 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, our centralized Technical Operations organization, and GDD, 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. Enbrel(®) is a registered trademark of Amgen Inc. Jakafi(®)
is a registered trademark of Incyte Corporation. Stelara(®) and Remicade(®) are
registered trademarks of Janssen Biotech, 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
January 25, 2017 Fourth quarter and full year results 2016, including R&D
Update, Basel, Switzerland, with live video webcast
February 28, 2017 Annual General Meeting
April 25, 2017 First quarter results 2017
May 30-31, 2017 Meet Novartis Management investor event in Boston, MA
July 18, 2017 Second quarter results 2017
October 24, 2017 Third quarter results 2017
Please find full media release in English attached and on the following link:
http://hugin.info/134323/R/2051043/767340.pdf
Further language versions are available through the following links:
German version is available through the following link:
http://hugin.info/134323/R/2051045/767346.pdf
French version is available through the following link:
http://hugin.info/134323/R/2051044/767345.pdf
IFR (PDF):
http://hugin.info/134323/R/2051043/767329.pdf
Media release (PDF):
http://hugin.info/134323/R/2051043/767340.pdf
This announcement is distributed by Nasdaq Corporate Solutions on behalf of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Novartis International AG via GlobeNewswire
Unternehmensinformation / Kurzprofil:
Datum: 25.10.2016 - 07:00 Uhr
Sprache: Deutsch
News-ID 502471
Anzahl Zeichen: 55097
contact information:
Town:
Basel
Kategorie:
Business News
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