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Novartis stock rises on upbeat Q3 results

Novartis AG (NVS) reported a 22% dip in earnings for the third quarter due to charges from the voluntary withdrawal of CyPass, higher restructuring, and discontinuation of GSK consumer healthcare joint venture. The top and bottom line came in ahead of analysts’ expectations. Following this, the stock rose 1.2% in the premarket session.

In a separate release, Novartis said it has agreed to buy all outstanding shares of Endocyte (ECYT) common stock for $24 per share. This offer values Endocyte’s equity at $2.1 billion. Endocyte is a US-based biopharmaceutical company focused on developing cancer treatment.

The transaction, which will be funded through available cash, would be in the form of a merger of Endocyte and a newly formed Novartis subsidiary.

Novartis Q3 2018 Earnings Infographics
Novartis Q3 2018 Earnings Infographics

Net income fell 22% to $1.62 billion and earnings dropped 21% to $0.70 per share. Higher sales, improved gross margin, and lower number of shares outstanding drove core EPS higher by 2% to $1.32.

Net sales rose 3% to $12.78 billion. The top line was driven by strong volume growth of psoriasis treating medicine Cosentyx, continued uptake of chronic heart failure treating drug Entresto and the strong launch of tumor medicine Lutathera.

Related: Glaxo buys Novartis’ consumer healthcare share

The results were also driven by the continued strong double-digit growth from low blood platelet counts treating drug Promacta/Revolade, anaplastic thyroid cancer treating drug Tafinlar + Mekinist and anti-cancer drug Jakavi.

Growth from Pharmaceuticals and Oncology business units drove sales from Innovative Medicines higher by 6%. Sandoz net sales increased 6% helped by price erosion mainly in the US. Alcon net sales, meanwhile, rose 3% driven by double-digit growth of advanced technology IOLs as well as continued growth in consumables and equipment.

Looking ahead into the full year 2018, the company expects net sales to grow in the mid-single-digit range, and core operating income growth in the mid-to-high-single digit range.

Related: Novartis to demerge underperforming eyecare business Alcon

Innovative Medicines sales growth are anticipated to be in the mid-to-high-single digit range and Alcon sales growth is predicted to be in mid-single digit range. Sandoz sales are expected to fall by low-single digit.

As of September 30, 2018, the net debt fell by $1.9 billion to $17.1 billion from December 31, 2017. This was mainly due to the inflow from the sale of the stake in the GSK consumer healthcare joint venture and free cash flow in the first nine months of 2018. The long-term credit rating for the company is A1 with Moody’s Investors Service, AA- with S&P Global Ratings and AA with Fitch Ratings.

Shares of Novartis ended Wednesday’s regular session down 0.51% at $85.28 on the NYSE. The stock has risen over 1% in the year so far, while it has fallen over 1% in the past year.

 

Listen to publicly listed companies earnings conference calls along with the edited closed caption text.

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