Novartis delivered solid 2016 performance, with Growth Products[1] absorbing Gleevec US LOE; innovation momentum continued; announces share buyback
(Thomson Reuters ONE) -
Novartis International AG /
Novartis delivered solid 2016 performance, with Growth Products[1] absorbing
Gleevec US LOE; innovation momentum continued; announces share buyback
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The issuer is solely responsible for the content of this announcement.
* FY net sales (0% cc[2]) in line with prior year due to strong Growth
Products performance
* Cosentyx (USD 1.1 billion) reached blockbuster status
* Entresto (USD 170 million) continued to grow steadily, following
positive treatment guidelines in US and Europe and ongoing US field
force expansion
* Gilenya (USD 3.1 billion, +14% cc) delivered double-digit growth
* Oncology grew 12% (cc) excluding Gleevec/Glivec, driven by new assets
and Jakavi
* Sandoz Biopharmaceuticals[1] grew 31% (cc) to reach USD 1.0 billion
* FY core[2] operating income down 2% (cc) due to generic erosion and growth
investments
* Core operating income margin declined 0.7 percentage points (cc)
* Core EPS was USD 4.75 (-2% cc)
* Free cash flow[2] was USD 9.5 billion (+2% USD)
* FY net income up 1% (cc), benefitting from higher income from associated
companies
* Continued innovation momentum in Q4, including bolt-on deals to further
strengthen pipeline
* LEE011 granted FDA Priority Review
* AMG 334 met primary endpoint in second Phase III episodic migraine study
* Exercised right to acquire Selexys following positive SUSTAIN study in
sickle cell disease
* Acquired Ziarco (atopic dermatitis) and Encore (presbyopia); signed
option agreements with Conatus (NASH) and Ionis and Akcea
(cardiovascular risk)
* Alcon Division continued to make progress toward turnaround; options to
maximize shareholder value of the division under consideration
* Q4 division sales were flat (cc); contact lenses delivered third
consecutive quarter of growth
* Supply levels and customer service improved in Surgical, laying
foundation for return to growth
* Options being considered range from retaining the business to separation
via a capital markets transaction; review to take place during the
course of 2017
* Dividend of CHF 2.75 per share, an increase of 2%, proposed for 2016
* Initiating share buyback of up to USD 5.0 billion in 2017 under existing
shareholder authority, reinforcing confidence in growth prospects
* 2017 Outlook
* Net sales expected to be broadly in line with the prior year (cc), after
absorbing the impact of generic competition
* Core operating income expected to be broadly in line with prior year to
low single digit decline (cc)
Key figures[2] Continuing operations[3]
------------------------------------------------
% %
Q4 2016 Q4 2015 change FY 2016 FY 2015 change
USD m USD m USD cc USD m USD m USD cc
----------------------------------------- -----------------------
Net sales 12 322 12 520 -2 0 48 518 49 414 -2 0
Operating income 1 455 1 677 -13 -9 8 268 8 977 -8 -3
Net income 936 1 054 -11 0 6 698 7 028 -5 1
EPS (USD) 0.40 0.44 -9 2 2.82 2.92 -3 2
Free cash flow 2 976 2 942 1 9 455 9 259 2
Core
Operating income 3 013 3 057 -1 1 12 987 13 790 -6 -2
Net income 2 658 2 707 -2 1 11 314 12 041 -6 -3
EPS (USD) 1.12 1.14 -2 1 4.75 5.01 -5 -2
----------------------------------------- -----------------------
[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 50 of the
Condensed Financial Report. Unless otherwise noted, all growth rates in this
Release refer to same period in prior year.
[3] Refers to continuing operations, defined on page 41 of the Condensed
Financial Report.
Basel, January 25, 2017 - Commenting on the results, Joseph Jimenez, CEO of
Novartis, said:
"Novartis delivered a solid performance in 2016, absorbing Gleevec US loss of
exclusivity while investing in key launches and the Alcon Division turnaround.
Cosentyx reached blockbuster status in 2016, and the conditions are now in place
for Entresto sales to accelerate in 2017. We made major strides in advancing our
pipeline, executing our bolt-on M&A strategy and implementing our new focused
organization. Today we are proposing an increase in our dividend and initiating
a share buyback of up to USD 5 billion. Additionally, we are reviewing options
for the Alcon Division to maximize shareholder value."
GROUP REVIEW
Novartis laid out five priorities for 2016: deliver strong financial results;
strengthen innovation; improve Alcon Division performance; capture cross-
divisional synergies; and build a higher-performing organization. We are also
considering options to maximize shareholder value of the Alcon Division (some
additional details on page 8 below).
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 41 of the
Condensed Financial Report for a full explanation.
Fourth quarter
Continuing operations
Net sales were USD 12.3 billion (-2%, 0% cc) in the fourth quarter, as volume
growth of 6 percentage points was offset by the negative impact of generic
competition (-4 percentage points) and pricing (-2 percentage points). Growth
Products[1] contributed USD 4.6 billion or 37% of net sales, up 19% (USD) over
the prior-year quarter.
Operating income was USD 1.5 billion (-13%, -9% cc). Core adjustments amounted
to USD 1.5 billion (2015: USD 1.4 billion), broadly in line with the prior-year
quarter.
Core operating income was USD 3.0 billion (-1%, +1% cc). Core operating income
margin in constant currencies increased 0.2 percentage points, as investments
behind new launches and the Alcon Division growth plan were more than offset by
resource allocation. Currency had a negative impact of 0.1 percentage points,
resulting in a net increase of 0.1 percentage points in US dollar terms to
24.5% of net sales.
Net income was USD 0.9 billion (-11%, 0% cc), flat despite the decline in
operating income due to higher income from associated companies.
EPS was USD 0.40 (-9%, +2% cc), up more than net income due to a reduction in
the average number of shares outstanding.
Core net income was USD 2.7 billion (-2%, +1% cc), broadly in line with core
operating income.
Core EPS was USD 1.12 (-2%, +1% cc), in line with core net income.
Free cash flow in the fourth quarter was USD 3.0 billion (+1% USD), broadly in
line with the prior-year quarter as lower cash flows from operating activities
were offset by lower net investments in property, plant and equipment and
intangible assets.
[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 8.3 billion (-3%, -1% cc) in the fourth quarter. Volume contributed 6
percentage points to sales growth. 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. Growth Products
grew 20% (cc) to USD 4.0 billion, or 48% of division net sales.
Operating income was USD 1.4 billion (-9%, -4% cc), down mainly due to higher
impairment charges, which offset underlying operating income growth. Core
operating income was USD 2.4 billion (0%, +4% cc). Core operating income margin
in constant currencies increased by 1.2 percentage points; currency had a
negative impact of 0.5 percentage points, resulting in a net increase of 0.7
percentage points to 29.1% of net sales.
Sandoz net sales were USD 2.6 billion (+2%, +3% cc) in the fourth quarter, as
volume growth of 9 percentage points was offset by 6 percentage points of price
erosion. Global sales of Biopharmaceuticals[1] grew 28% (cc) to USD 277 million.
Operating income was USD 365 million (+25%, +22% cc), driven by strong operating
performance in the quarter and legal provisions in the prior-year quarter. Core
operating income was USD 521 million (+5%, +4% cc). Core operating income margin
in constant currencies increased by 0.1 percentage points; currency had a
positive impact of 0.4 percentage points, resulting in a net increase of 0.5
percentage points to 20.0% of net sales.
Alcon Division net sales were USD 1.4 billion (-2%, 0% cc) in the fourth
quarter. Surgical sales (-4% cc) were down, mainly due to lower sales of
Cataract and Refractive equipment, as well as competitive pressures in IOLs.
Vision Care sales (+5% cc) returned to growth, driven by strong performance of
the daily contact lens portfolio, including continued double-digit growth of
Dailies Total1 globally.
Operating loss was USD 120 million, compared to an income of USD 29 million in
the prior-year quarter. Core operating income was USD 163 million (-38%, -36%
cc), impacted by increased investments in M&S and R&D behind the growth plan.
Core operating income margin in constant currencies decreased by 6.3 percentage
points; currency had a negative impact of 0.4 percentage points, resulting in a
net decrease of 6.7 percentage points to 11.3% of net sales.
Total Group
For the total Group, net income amounted to USD 0.9 billion, compared to USD
1.1 billion the prior-year quarter, and basic earnings per share was USD 0.40.
Total Group free cash flow amounted to USD 3.0 billion, in line with the prior-
year quarter.
[1] Biopharmaceuticals include biosimilars, biopharmaceutical contract
manufacturing and Glatopa.
Full year
Continuing operations
Net sales were USD 48.5 billion (-2%, 0% cc) in the full year, as volume growth
of 6 percentage points was offset by the negative impact of generic competition
(-4 percentage points) and pricing (-2 percentage points). Growth Products
contributed USD 17.1 billion or 35% of net sales, up 20% (USD) over the prior
year.
Operating income was USD 8.3 billion (-8%, -3% cc). Core adjustments amounted to
USD 4.7 billion (2015: USD 4.8 billion), broadly in line with the prior year.
Core operating income was USD 13.0 billion (-6%, -2% cc). Core operating income
margin in constant currencies decreased 0.7 percentage points, mainly due to the
loss of exclusivity on Gleevec, as investments behind new launches and the Alcon
Division growth plan were partially offset by resource allocation and
productivity programs. Currency had a negative impact of 0.4 percentage points,
resulting in a net decrease of 1.1 percentage points to 26.8% of net sales.
Net income was USD 6.7 billion (-5%, +1% cc), with the increase relative to the
operating income decline due to higher income from associated companies.
EPS was USD 2.82 (-3%, +2% cc), up more than net income due to a reduction in
the average number of shares outstanding.
Core net income was USD 11.3 billion (-6%, -3% cc), broadly in line with core
operating income.
Core EPS was USD 4.75 (-5%, -2% cc), down less than core net income due to a
reduction in the average number of shares outstanding.
Free cash flow was USD 9.5 billion (+2% USD) compared to USD 9.3 billion in
2015. The increase of USD 0.2 billion was mainly driven by lower net investments
in property, plant and equipment.
Innovative Medicines net sales were USD 32.6 billion (-2%, 0% cc) for the full
year, as volume growth (+7 percentage points) was offset by the impact of
generic competition (-6 percentage points) and pricing (-1 percentage point).
Operating income was USD 7.4 billion (-5%, 0% cc). Core operating income was USD
10.4 billion (-5%, -1% cc). Core operating income margin in constant currencies
decreased by 0.2 percentage points, mainly due to launch investments for
Entresto and Cosentyx, partially offset by resource allocation and productivity
improvements; currency had a negative impact of 0.6 percentage points, resulting
in a net decrease of 0.8 percentage points to 31.8% of net sales.
Sandoz net sales were USD 10.1 billion (+1%, +2% cc) for the full year, as
volume growth of 8 percentage points more than offset 6 percentage points of
price erosion. Global sales of Biopharmaceuticals grew 31% (cc) to reach USD
1.0 billion, benefitting from the performance of prior-year launches in the US
(Glatopa in June 2015 and Zarxio in September 2015).
Operating income was USD 1.4 billion (+11%, +14% cc). Core operating income was
USD 2.1 billion (+1%, +4% cc). Core operating income margin in constant
currencies increased by 0.2 percentage points; currency had a negative impact of
0.1 percentage points, resulting in a net increase of 0.1 percentage points to
20.4% of net sales.
Alcon Division net sales were USD 5.8 billion (-3%, -2% cc) for the full year.
Surgical sales (-3% cc) reflected lower sales of Cataract and Refractive
equipment, as well as competitive pressures in IOLs, partially offset by
continued solid growth of cataract consumables. Vision Care sales were flat (0%
cc), with growth in contact lenses offsetting a decline in contact lens care.
Operating loss was USD 132 million, compared to an income of USD 281 million in
the prior year. Core operating income was USD 850 million (-31%, -27% cc),
impacted by increased investments in M&S and R&D behind the growth plan and the
decline in sales. Core operating income margin in constant currencies decreased
by 5.3 percentage points; currency had a negative impact of 0.7 percentage
points, resulting in a net decrease of 6.0 percentage points to 14.6% of net
sales.
Total Group
For the total Group, net income amounted to USD 6.7 billion compared to USD
17.8 billion in the prior year, and basic earnings per share decreased to USD
2.82 from USD 7.40. The prior year benefitted from the net income from
discontinued operations, which included USD 12.7 billion of exceptional pre-tax
divestment gains from the portfolio transformation transactions and USD 0.6
billion of additional pre-tax transaction related expenses.
Total Group free cash flow amounted to USD 9.5 billion in 2016 compared to USD
9.0 billion in 2015. The prior year included a negative free cash flow of
approximately USD 0.3 billion from discontinued operations.
Key growth drivers
Underpinning our financial results in the fourth quarter is a continued focus on
key growth drivers, including Gilenya, Tasigna, Cosentyx, Tafinlar + Mekinist,
Promacta/Revolade, Jakavi and Entresto, as well as Biopharmaceuticals and
Emerging Growth Markets.
Growth Products
* Growth Products, an indicator of the ongoing rejuvenation of our portfolio,
contributed 37% of Group net sales in the fourth quarter, and were up 19%
(USD). In Innovative Medicines, Growth Products contributed 48% of division
net sales in the quarter, and sales for these products were up 20% (cc).
* Gilenya (USD 810 million, +11% cc), a once-daily oral medicine for relapsing
forms of multiple sclerosis, continued to grow double-digit.
* Tasigna (USD 458 million, +9% cc) showed solid growth in the quarter,
despite the entry of multiple generic versions of Gleevec in the US.
* Cosentyx (USD 391 million) continued its strong launch trajectory in the
fourth quarter. Across its three approved indications, Cosentyx has been
used to treat more than 60,000 patients in a post-marketing setting to date.
* Tafinlar + Mekinist (USD 178 million, +24% 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 178 million, +35% 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 162 million, +40% 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 68 million) continued to grow steadily with approvals in more
than 70 countries to date and continued progress with reimbursement around
the world. With positive treatment guidelines, ongoing field force expansion
and removal of access restrictions in the US, we are well placed to triple
TRx volume for Entresto in the US by Q4 2017.
* Sandoz Biopharmaceuticals (USD 277 million, +28% cc), including Glatopa and
Zarxio, delivered another quarter of strong growth to reach USD 1.0 billion
in sales for the full year.
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 4% (cc)
in the fourth quarter, led by China (+9% cc), Russia (+11% cc) and Turkey
(+16% cc).
Strengthen innovation
The fourth quarter saw pipeline progress with positive regulatory decisions,
significant clinical trial data and business development activity announced. Key
developments are included below.
New approvals and regulatory opinions
* Lucentis (ranibizumab) received EU approval to treat patients with visual
impairment due to rare conditions causing choroidal neovascularization
(CNV).
* The EC approved Arzerra (ofatumumab) in combination with fludarabine and
cyclophosphamide for the treatment of adult patients with relapsed chronic
lymphocytic leukemia.
* Votubia (everolimus) was recommended by CHMP for approval as an adjunctive
treatment for patients aged two years and older whose refractory partial-
onset seizures, with or without secondary generalization, are associated
with tuberous sclerosis complex (TSC).
* The CHMP recommended the approval of Ilaris (canakinumab) to treat three
rare and distinct Periodic Fever Syndromes. The Japanese Ministry of Health,
Labour and Welfare (MHLW) approved Ilaris for the same indications.
* Alcon Division's AcrySof IQ ReSTOR +3.0D Multifocal Toric IOL was approved
in the US.
* Alcon Division's AcrySof IQ PanOptix Toric IOL received EU approval to
provide improved near, intermediate and distance vision for cataract
patients with astigmatism.
Regulatory submissions and filings
* The FDA granted Priority Review to LEE011 (ribociclib) in combination with
letrozole as first-line treatment for postmenopausal women with HR+/HER2-
advanced or metastatic breast cancer. The EMA also accepted for review our
application for LEE011 plus letrozole in the same patient population.
* The FDA granted Priority Review to Tafinlar + Mekinist (dabrafenib +
trametinib) combination therapy for the treatment of BRAF mutant non-small
cell lung cancer (NSCLC).
* The FDA granted Priority Review to PKC412 (midostaurin) for the treatment of
newly diagnosed FLT3 mutation-positive acute myeloid leukemia and advanced
systemic mastocytosis.
* Applications were submitted in the US, EU, Japan and other markets to expand
the indication for Zykadia (ceritinib) as a first-line treatment for
patients with ALK+ NSCLC.
* BACE inhibitor CNP520 received FDA Fast Track designation. CNP520 is being
co-developed with Amgen.
Results from important clinical trials and other highlights
* New data showed that Cosentyx (secukinumab) delivered sustained improvements
in the signs and symptoms of psoriatic arthritis over three years.
* The Phase III STRIVE study in episodic migraine prevention met its primary
endpoint, with AMG 334 (erenumab) demonstrating a statistically significant
reduction from baseline in mean monthly migraine days at six months 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.
* A post-hoc analysis of PARADIGM-HF data showed that Entresto
(sacubitril/valsartan) reduced the risk of first and repeat heart failure
hospitalizations as well as cardiovascular deaths by 20-24% compared to
enalapril.
* Additional analyses from the Phase III MONALEESA-2 study showed that LEE011
plus letrozole significantly prolonged PFS across various pre-planned
patient subgroups with HR+/HER2- advanced or metastatic breast cancer,
including post-menopausal women diagnosed de novo, those with visceral
metastases, and those with bone-only disease.
* Two Phase III studies of pegpleranib, sponsored by Ophthotech, did not meet
their primary endpoints. The studies showed that the proven efficacy of
Lucentis (ranibizumab) monotherapy was not improved by the addition of
pegpleranib.
* Results from the pivotal global Phase II ELIANA trial of CTL019 in
relapsed/refractory pediatric and young adult patients with B-cell acute
lymphoblastic leukemia found that 82% of infused patients achieved complete
remission or complete remission with incomplete blood count recovery at
three months post CTL019 infusion.
* Results from the Phase III ASCEND-4 study showed patients with ALK+ NSCLC
treated with first-line Zykadia had a median PFS of 16.6 months, compared to
8.1 months in patients treated with standard first-line chemotherapy with
maintenance.
* Novartis exercised its right to acquire Selexys following the positive Phase
II SUSTAIN study, which showed that SEG101 (crizanlizumab) reduced the
median annual rate of sickle cell-related pain crises compared to placebo in
patients with or without hydroxyurea therapy.
* The Global Initiative for Chronic Lung Disease (GOLD) released updated
guidelines for the management of COPD, recommending first-line treatment
with a LABA/LAMA drug, such as Ultibro Breezhaler
(indacaterol/glycopyrronium), for the majority of symptomatic COPD patients
regardless of exacerbation risk.
* New data from two head-to-head studies showed Utibron Neohaler provided
clinically meaningful and comparable bronchodilation to Anoro® Ellipta® in
US patients with COPD, though the primary endpoint of non-inferiority was
not met. Novartis out-licensed US commercialization rights for Utibron
Neohaler, as well as Seebri Neohaler and Arcapta Neohaler, to Sunovion.
* Novartis acquired Ziarco, adding a once-daily oral H4 receptor antagonist in
development for atopic dermatitis to our growing dermatology portfolio and
pipeline.
* Novartis signed an exclusive option, collaboration and license agreement
with Conatus, which will allow the companies to jointly develop emricasan
for the treatment of non-alcoholic steatohepatitis (NASH) with advanced
fibrosis and cirrhosis.
* Novartis acquired Encore Vision, adding a first-in-class disease modifying
topical treatment for presbyopia to our ophthalmology pipeline.
* In January, Novartis entered into an exclusive option agreement with Ionis
and Akcea to license two investigational treatments expected to
significantly reduce cardiovascular risk in patients living with elevated
levels of lipoprotein Lp(a) or ApoCIII. This transaction is subject to
customary closing conditions, including regulatory approval.
* The ASSIST-FL trial met its primary endpoint, with Sandoz biosimilar
rituximab demonstrating equivalent efficacy in addition to safety,
pharmacokinetics and pharmacodynamics to the reference product, MabThera®.
* Data from the EGALITY trial showed that there are no clinically meaningful
differences between Sandoz biosimilar etanercept and the reference product
Enbrel® in safety and efficacy over 52 weeks.
Improve Alcon Division performance
The Alcon Division continued to execute against its growth plan in the fourth
quarter, taking actions to accelerate innovation and sales, strengthen customer
relationships and improve basic operations.
In Vision Care (Q4 sales growth of 5% cc), the Alcon Division continued
investments in DTC advertising behind key brands in Europe and the US, which
helped drive growth in contact lenses for the third consecutive quarter.
In Surgical (Q4 sales decline of 4% cc), the Alcon Division continued to
strengthen its basic operations and improve supply levels, which led to improved
customer service. With its supply issues largely resolved, the division is in a
better position to defend against competitive pressure and drive a return to
growth. The Alcon Division continued to advance its pipeline in the fourth
quarter, with two new approvals for IOLs: the AcrySof IQ ReSTOR +3.0D Multifocal
Toric in the US and AcrySof IQ PanOptix Toric in the EU. The division also
invested in expanding its new product launches, including CyPass and NGENUITY
3D.
Options to Maximize Shareholder Value of the Alcon Division under Consideration
Novartis is considering options for the Alcon Division. The review will explore
all options, ranging from retaining the business to separation via a capital
markets transaction (e.g. IPO or spin-off), in order to determine how to best
maximize value for our shareholders. The review will be conducted during the
course of 2017 and in a manner such that Alcon Division associates can fully
focus on the unit's return to growth.
The Alcon Division comprises leading surgical and vision care (contact lens and
lens care solution) businesses, both of which are leaders in their respective
segments. Novartis believes that the Alcon Division is a highly attractive
business, with a strong customer base and led by a strong management team.
Novartis is exploring whether there are additional value-maximizing
opportunities for the Alcon Division as an independent company or otherwise.
The ophthalmic pharmaceutical portfolio is now fully integrated into our
Innovative Medicines Division and will not be part of the review announced
today.
Novartis expects to provide a status update on the review towards the end of
2017.
Capture cross-divisional synergies
We continued to advance our productivity programs in the fourth quarter, helping
to support margins for the Group.
* Novartis Business Services (NBS), our cross-divisional services
organization, continued to leverage the global scale of Novartis to
streamline and consolidate our operations. The costs within the scope of NBS
decreased compared to the prior year, while the quality of services
improved. For example, we initiated the standardization of infrastructure
services at selected manufacturing sites and continued to consolidate
facilities services from more than 100 suppliers to just three as well as
reduce the number of information technology applications we use, among other
steps. In addition, NBS continued to optimize its geographical footprint to
our five global service centers.
* Novartis Technical Operations completed the organizational integration of
the six technology platforms, including a more efficient utilization of
functional capabilities and resources. A synergy and savings roadmap has
been established with a five-year time horizon based on three pillars:
optimization of capacity utilization, external spend and operational
excellence.
* In the fourth quarter of 2016, Novartis completed the creation of its new
Global Drug Development (GDD) organization to oversee drug development
across the innovative medicines and biosimilars portfolio. The enterprise-
wide approach to portfolio management - a core tenet of GDD - has already
enabled us to fund several new confirmatory development projects without
increasing the total development spend. Additionally, the integration of all
global development functions has enabled more flexible use of resources
across the portfolio and provided a strong platform for accelerated
implementation of major technology projects designed to further improve the
quality and efficiency of our development operations.
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 206 global
health authority inspections were completed in 2016 (79 in Q4), 26 of which were
conducted by the FDA (9 in Q4). All but four out of 206 inspections were deemed
good or acceptable. We received the outcome of the fourth inspection not deemed
good or acceptable in the fourth quarter. It pertained to an EMA inspection of a
Sandoz site in Germany as the sponsor of a clinical trial. Corrective and
preventative actions to address all observations have been defined and are being
implemented.
Capital structure and net debt
Retaining a good balance between investment in the business, a strong capital
structure and attractive shareholder returns remains a priority.
As a sign of confidence in the growth prospects of Novartis, we are initiating a
share buyback of up to USD 5.0 billion under the existing authority of the
seventh share buyback framework granted by the AGM in February 2016. Novartis
aims to execute the buyback during 2017 and plans to finance it through new
debt, demonstrating its willingness to actively use its strong balance sheet in
the current environment of historically low interest rates.
During 2016, 13.1 million treasury shares were delivered as a result of options
exercised and share deliveries related to equity-based participation plans of
associates. To offset the dilutive impact of such transactions, 12.9 million
Novartis shares were repurchased on the SIX Swiss Exchange second trading line
and from employees.
Also, during 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.
Net debt decreased to USD 16.0 billion at December 31, 2016 from USD 16.5
billion at December 31, 2015, as the free cash flow of USD 9.5 billion was
mainly used for the annual dividend payment of USD 6.5 billion, acquisition and
divestments related payments of USD 1.5 billion and net purchases of treasury
shares of USD 0.9 billion.
The long-term credit rating for the company continues to be double-A (Moody's
Aa3; Standard & Poor's AA-; Fitch AA).
2017 Outlook
Barring unforeseen events
Group net sales in 2017 are expected to be broadly in line with the prior year
(cc), after absorbing the impact of generic competition, including the continued
genericization of Gleevec/Glivec in the US and Europe. The impact of generic
competition on sales is expected to be approximately USD 2.5 billion in 2017.
From a divisional perspective, we expect net sales performance (cc) in 2017 to
be as follows:
* Innovative Medicines: broadly in line with prior year
* Sandoz: low single digit growth
* Alcon Division: broadly in line with prior year to low single digit growth
Group core operating income in 2017 is expected to be broadly in line with prior
year to a low single digit decline (cc).
If mid-January exchange rates prevail for the remainder of 2017, the currency
impact for the year would be negative 2 percentage points on sales and negative
3 percentage points on core operating income. The estimated impact of exchange
rates on our results is provided monthly on our website.
Annual General Meeting
Dividend proposal
The Novartis Board of Directors proposes a dividend payment of CHF 2.75 per
share for 2016, up 2% from CHF 2.70 per share in 2015, representing the 20th
consecutive dividend increase since the creation of Novartis in December 1996.
Shareholders will vote on this proposal at the 2017 Annual General Meeting of
Shareholders to be held on February 28, 2017.
Nomination for election to the Board of Directors
The Novartis Board of Directors announced today that it is nominating Mr. Frans
van Houten for election to the Board at the 2017 Annual General Meeting.
Mr. van Houten is CEO and Chairman of the Executive Committee and the Board of
Management of health technology leader Royal Philips, a position he took up in
2011. He held multiple senior global leadership positions across Philips on
three continents, including co-CEO of the Consumer Electronics division and CEO
of the successful Philips spin-off NXP Semiconductors. With his many years as a
leader in the IT, consumer health and medical technology industries, Mr. van
Houten will deepen the Board's expertise in digital health solutions.
Re-elections of the Chairman and the members of the Board of Directors
The Novartis Board of Directors proposes the re-election of Joerg Reinhardt,
Ph.D. (also as Chairman of the Board of Directors), Nancy C. Andrews, M.D.,
Ph.D., Dimitri Azar, M.D., MBA, Ton Buechner, Srikant Datar, Ph.D., Elizabeth
Doherty, Ann Fudge, Pierre Landolt, Ph.D., Andreas von Planta, Ph.D., Charles L.
Sawyers, M.D., Enrico Vanni, Ph.D., and William T. Winters as member of the
Board of Directors, each until the 2018 Annual General Meeting.
Re-elections and election to the Compensation Committee
The Novartis Board of Directors proposes the re-election of Srikant Datar,
Ph.D., Ann Fudge, Enrico Vanni, Ph.D., and William T. Winters as members of the
Compensation Committee, each until the 2018 Annual General Meeting.
Summary Financial Performance
Continuing % %
operations[1] Q4 2016 Q4 2015 change FY 2016 FY 2015 change
USD m USD m USD cc USD m USD m USD cc
--------------------------------------------------- ---------------------------
Net sales 12 322 12 520 -2 0 48 518 49 414 -2 0
Operating income 1 455 1 677 -13 -9 8 268 8 977 -8 -3
As a % of sales 11.8 13.4 17.0 18.2
Core operating income 3 013 3 057 -1 1 12 987 13 790 -6 -2
As a % of sales 24.5 24.4 26.8 27.9
Net income 936 1 054 -11 0 6 698 7 028 -5 1
EPS (USD) 0.40 0.44 -9 2 2.82 2.92 -3 2
Free cash flow 2 976 2 942 1 9 455 9 259 2
--------------------------------------------------- ---------------------------
% %
Innovative Medicines Q4 2016 Q4 2015[2] change FY 2016 FY 2015[2] change
USD m USD m USD cc USD m USD m USD cc
--------------------------------------------------- ---------------------------
Net sales 8 273 8 498 -3 -1 32 562 33 345 -2 0
Operating income 1 360 1 499 -9 -4 7 426 7 815 -5 0
As a % of sales 16.4 17.6 22.8 23.4
Core operating income 2 407 2 411 0 4 10 354 10 862 -5 -1
As a % of sales 29.1 28.4 31.8 32.6
--------------------------------------------------- ---------------------------
% %
Sandoz Q4 2016 Q4 2015[2] change FY 2016 FY 2015[2] change
USD m USD m USD cc USD m USD m USD cc
--------------------------------------------------- ---------------------------
Net sales 2 605 2 554 2 3 10 144 10 070 1 2
Operating income 365 291 25 22 1 445 1 300 11 14
As a % of sales 14.0 11.4 14.2 12.9
Core operating income 521 497 5 4 2 071 2 045 1 4
As a % of sales 20.0 19.5 20.4 20.3
--------------------------------------------------- ---------------------------
% %
Alcon Q4 2016 Q4 2015[2] change FY 2016 FY 2015[2] change
USD m USD m USD cc USD m USD m USD cc
--------------------------------------------------- ---------------------------
Net sales 1 444 1 468 -2 0 5 812 5 999 -3 -2
Operating loss/income -120 29 nm nm -132 281 nm nm
As a % of sales -8.3 2.0 -2.3 4.7
Core operating income 163 264 -38 -36 850 1 235 -31 -27
As a % of sales 11.3 18.0 14.6 20.6
--------------------------------------------------- ---------------------------
% %
Corporate Q4 2016 Q4 2015 change FY 2016 FY 2015 change
USD m USD m USD cc USD m USD m USD cc
--------------------------------------------------- ---------------------------
Operating loss -150 -142 -6 -14 -471 -419 -12 -25
Core operating loss -78 -115 32 22 -288 -352 18 4
--------------------------------------------------- ---------------------------
Discontinued % %
operations Q4 2016 Q4 2015 change FY 2016 FY 2015 change
USD m USD m USD cc USD m USD m USD cc
--------------------------------------------------- ---------------------------
Net sales 0 601
Operating loss/income -94 12 477
As a % of sales nm nm
Core operating loss -2 -225
As a % of sales nm nm
--------------------------------------------------- ---------------------------
% %
Total Group[3] Q4 2016 Q4 2015 change FY 2016 FYM 2015 change
USD m USD m USD cc USD m USD m USD cc
--------------------------------------------------- ---------------------------
Net income 936 1 056 -11 -1 6 698 17 794 -62 -59
EPS (USD) 0.40 0.44 -9 2 2.82 7.40 -62 -59
Free cash flow 2 976 3 002 -1 9 455 9 029 5
-------------------------------------------------------------------------------
nm= not meaningful
[1] Continuing operations include the businesses of Innovative Medicines
(formerly named the Pharmaceuticals Division), the Alcon Division, 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 41 of the Condensed 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 financial report with the information listed in the index below can
be found on our website at http://hugin.info/134323/R/2073212/779220.pdf.
Novartis Q4 and FY 2016 Condensed Financial Report - Supplementary Data
INDEX Page
-------------------------------------------------------------------------------
GROUP AND DIVISIONAL OPERATING PERFORMANCE Q4 and FY 2016
Group 2
Innovative Medicines 6
Sandoz 15
Alcon 17
-------------------------------------------------------------------------------
CASH FLOW AND GROUP BALANCE SHEET 20
-------------------------------------------------------------------------------
INNOVATION REVIEW 23
-------------------------------------------------------------------------------
CONDENSED 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 consolidated financial statements, including update on 38
legal proceedings
-------------------------------------------------------------------------------
SUPPLEMENTARY INFORMATION 50
CORE RESULTS
Reconciliation from IFRS to core results 52
Group 54
Innovative Medicines 56
Sandoz 58
Alcon 60
Corporate 62
Discontinued operations 64
ADDITIONAL INFORMATION
Condensed consolidated changes in net debt / Share information 65
Free cash flow 66
Net sales of the top 20 Innovative Medicines products 67
Innovative Medicines sales by business franchise 69
Net sales by region 71
Currency translation rates 73
Income from associated companies 74
-------------------------------------------------------------------------------
DISCLAIMER 75
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Disclaimer
These materials contain forward-looking statements that can be identified by
words such as "ongoing," "momentum," "to further strengthen," "pipeline,"
"Priority Review," "option," "to maximize," "under consideration," "being
considered," "to take place," "initiating," "confidence," "prospects,"
"proposing," "reviewing," "considering," "subject to," "exploring,"
"confidence," "aims," "toward," "laying foundation for," "proposed," "outlook,"
"expected," "launches," "to accelerate," "continued," "launch trajectory,"
"launch," "well placed," "recommended," "Fast Track," "being co-developed,"
"recommending," "growing," "will," "plan," "initiated," "roadmap," "time
horizon," "platform," "designed to," "remains," "expect," "estimated,"
"contingent," "underway," "filed," "may," "potential," "submitted," "should,"
"can," "on track," "planned," 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 the
potential outcome of the announced review of options being undertaken to
maximize shareholder value of the Alcon Division; or regarding the potential
financial or other impact on Novartis or any of our divisions of the significant
reorganizations of recent years, including the creation of the Pharmaceuticals
and Oncology business units to form the Innovative Medicines Division, the
creation of the Global Drug Development organization and Novartis Operations
(including Novartis Technical Operations and Novartis Business Services), the
transfer of the Ophthalmic Pharmaceuticals products of our Alcon Division to the
Innovative Medicines Division, the transfer of selected mature, non-promoted
pharmaceutical products from the Innovative Medicines Division to the Sandoz
Division, and the transactions with GSK, Lilly and CSL; or regarding the
potential impact of the share buyback plan; 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 the
review of options being undertaken to maximize shareholder value of the Alcon
Division will reach any particular results, or at any particular time. 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
significant reorganizations of recent years, including the creation of the
Pharmaceuticals and Oncology business units to form the Innovative Medicines
Division, the creation of the Global Drug Development organization and Novartis
Operations (including Novartis Technical Operations and Novartis Business
Services), the transfer of the Ophthalmic Pharmaceuticals products of our Alcon
Division to the Innovative Medicines Division, the transfer of selected mature,
non-promoted pharmaceutical products from the Innovative Medicines Division to
the Sandoz Division, and the transactions with GSK, Lilly and CSL. 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 or financial results. In particular, management's
expectations could be affected by, among other things: regulatory actions or
delays or government regulation generally; the potential that the strategic
benefits, synergies or opportunities expected from the significant
reorganizations of recent years, including the creation of the Pharmaceuticals
and Oncology business units to form the Innovative Medicines Division, the
creation of the Global Drug Development organization and Novartis Operations
(including Novartis Technical Operations and Novartis Business Services), the
transfer of the Ophthalmic Pharmaceuticals products of our Alcon Division to the
Innovative Medicines Division, the transfer of selected mature, non-promoted
pharmaceutical products from the Innovative Medicines Division to the Sandoz
Division, and 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
the research and development of new healthcare products, including 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 will continue
this year; safety, quality or manufacturing issues; global trends toward health
care cost containment, including ongoing pricing and reimbursement pressures,
such as from increased publicity on pharmaceuticals pricing, including in
certain large markets; 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; uncertainties regarding future demand for our products; and uncertainties
regarding potential significant breaches of data security or data privacy, 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 these
materials 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. Anoro(®) Ellipta(®) are registered trademarks of
GlaxoSmithKline Ltd. MabThera(®) is a registered trademark of F. Hoffmann-la
Roche AG. Jakafi(®) is a registered trademark of Incyte Corporation. Enbrel(®)
is a registered trademark of Amgen 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 2016, the Group achieved net
sales of USD 48.5 billion, while R&D throughout the Group amounted to
approximately USD 9.0 billion (USD 8.4 billion excluding impairment and
amortization charges). Novartis Group companies employ approximately 118,000
full-time-equivalent associates. Novartis products are sold in approximately
155 countries around the world. For more information, please visit
http://www.novartis.com.
Novartis issued its 2016 Annual Report today, and it is available at
www.novartis.com. Novartis will also file its 2016 Annual Report on Form 20-F
with the US Securities and Exchange Commission today, and will post this
document on www.novartis.com. Novartis shareholders may receive a hard copy of
either of these documents, each of which contains our complete audited financial
statements, free of charge, upon request. Novartis also issued its 2016
Corporate Responsibility Performance Report today, and it is available at
www.novartis.com.
Important dates
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/2073212/779283.pdf
Further language versions are available through the following links:
German version is available through the following link:
http://hugin.info/134323/R/2073214/779286.pdf
French version is available through the following link:
http://hugin.info/134323/R/2073213/779284.pdf
Media release (PDF):
https://hugin.info/134323/R/2073212/779283.pdf
IFR (PDF):
https://hugin.info/134323/R/2073212/779220.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: 25.01.2017 - 07:00 Uhr
Sprache: Deutsch
News-ID 519706
Anzahl Zeichen: 60863
contact information:
Town:
Basel
Kategorie:
Business News
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"Novartis delivered solid 2016 performance, with Growth Products[1] absorbing Gleevec US LOE; innovation momentum continued; announces share buyback"
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