-
Net sales grew 5% (cc[1], +7%
USD) mainly driven by:
-
Cosentyx grew to USD 701
million, (+40% cc) with strong growth in all indications in the US
and EU
-
Entresto sales more than
doubled to USD 239 million, (+113% cc) driven by continued uptake
worldwide
-
Oncology grew 10% (cc) driven by continued
growth from Promacta/Revolade, Tafinlar + Mekinist and
Jakavi, uptake of Kisqali and Kymriah and
contribution from the AAA acquisition
-
Core[1] operating income grew
7% (cc, +9% USD), driven by higher sales and improved gross margin,
partly offset by growth investments
-
Core EPS was USD 1.29 (+4% cc)
as core operating income growth was partly offset by the
discontinuation of income from the GSK consumer healthcare joint
venture
-
Operating income grew 6% (cc,
+9% USD) driving free cash flow[1] +10% to USD 3.6
billion
-
Net income was USD 7.8 billion,
including a USD 5.7 billion net gain from the sale of our stake in
the GSK consumer healthcare joint venture
-
Continued transformation to a
focused medicines company:
-
Announced intention to seek shareholder approval
for 100% spinoff[2] of the Alcon Division
-
GSK consumer healthcare joint venture stake sale
completed for USD 13 billion
-
AveXis acquisition completed; successful pre-BLA
meeting and on track for H2 2018 FDA submission
-
Announced share buyback of up to USD 5 billion,
to be completed by end of 2019
-
Innovation momentum
continued:
-
Kymriah approved by FDA
for second indication, r/r DLBCL; in EU positive CHMP
opinions[3]
-
Aimovig approved by FDA
as the first CGRP treatment for migraine; in EU positive CHMP
opinion
-
Tafinlar + Mekinist approved by FDA for adjuvant treatment of
BRAF V600-mutant melanoma
-
AveXis 24 month data showed 100% of patients
were alive and event-free
-
BAF312 US submission in SPMS was completed, on
track for launch in early 2019
-
Biosimilars continue to advance in Europe with
the approval of Zessly (infliximab) and
positive CHMP opinion for adalimumab
-
Alcon sales grew 5% (cc, +7%
USD) driving core operating income growth of 14% (cc, +16%
USD)
-
2018 Group guidance
re-confirmed: net sales in 2018 are expected to grow low to
mid-single digit and core operating income is expected to grow mid
to high-single digit (cc)
Key figures[1] |
|
|
Q2 2018 |
Q2 2017 |
% change |
|
H1 2018 |
H1 2017 |
% change |
|
USD m |
USD m |
USD |
cc |
|
USD m |
USD m |
USD |
cc |
Net sales |
13 158 |
12 242 |
7 |
5 |
|
25 852 |
23 781 |
9 |
5 |
Operating income |
2 484 |
2 280 |
9 |
6 |
|
4 931 |
4 202 |
17 |
11 |
Net income |
7 768 |
1 979 |
nm |
nm |
|
9 796 |
3 644 |
nm |
nm |
EPS (USD) |
3.34 |
0.84 |
nm |
nm |
|
4.21 |
1.54 |
nm |
nm |
Free cash flow |
3 562 |
3 243 |
10 |
|
|
5 477 |
4 908 |
12 |
|
Core |
|
|
|
|
|
|
|
|
|
Operating income |
3 541 |
3 235 |
9 |
7 |
|
6 881 |
6 245 |
10 |
6 |
Net income |
3 011 |
2 866 |
5 |
3 |
|
5 993 |
5 556 |
8 |
3 |
EPS (USD) |
1.29 |
1.22 |
6 |
4 |
|
2.58 |
2.35 |
10 |
5 |
nm =
not meaningful |
|
|
|
|
|
|
|
|
|
Basel, July 18, 2018 -
Commenting on the results, Vas Narasimhan, CEO of Novartis,
said:
"We made
significant progress this quarter to transform Novartis into a
focused medicines company. We completed the Alcon
strategic review, exited the OTC joint venture, and strengthened
our innovation engine with the acquisition
of AveXis. Operationally we delivered solid growth, with
margins expanding and key growth drivers
including Cosentyx delivering strong
performance. We also advanced our transformational medicines
portfolio as we launched Kymriah in
DLBCL and Aimovig in the US,
completed the regulatory submission of BAF312 to FDA, and
progressed toward a submission of our gene therapy
AVXS-101."
Novartis strategy
to become a focused medicines company
Our long-term strategy is to focus
Novartis as a leading medicines company powered by data and
digital. We reimagine medicine to create transformative treatments
in areas of great medical need and find new ways to deliver them to
people worldwide. We continue to execute this strategy by pursuing
5 priorities: operational execution, breakthrough innovation, data
and digital leadership, restoring our reputation to be a trusted
stakeholder in society, and the transformation of our culture.
During the second quarter, we took
actions that reflect this strategy and our capital allocation
priorities. Novartis concluded the strategic review of Alcon,
determining that a proposed 100% spinoff is in the best interest of
shareholders and consistent with the Novartis strategy of focusing
as a leading medicines company. The planned spinoff would create
the world leading eye care device company. Completion of the
transaction is subject to general market conditions, tax rulings
and opinions, final Board of Directors endorsement and shareholder
approval at the 2019 AGM in line with Swiss corporate law. The
transaction is expected to be tax neutral to Novartis. Mike Ball
has become Chairman-designate, Alcon COO David Endicott took over
as Alcon CEO on July 1st.
During the second quarter we also
completed the sale of our stake in the GSK consumer healthcare
joint venture for USD 13 billion. The proceeds are being deployed
towards the AveXis acquisition, completed in the quarter, and the
announced share buyback of up to USD 5 billion. Novartis intends to
continue paying a strong and growing dividend in Swiss francs, with
no adjustment for the intended 100% spinoff of Alcon. These actions
are consistent with our capital allocation strategy, and the
dividend policy and share buyback highlights our confidence in
topline growth and margin expansion.
Novartis continues its long-term
journey to rebuild trust with society and transform its culture.
Strong actions have been taken this year to strengthen our
organization including adding the Ethics, Risk and Compliance
Officer to the executive committee, rolling out a new professional
practices policy based on principles to help associates take better
decisions and continuing to further leverage data analytics to
become more predictive in identifying risks. The Novartis
leadership team, at all levels of the organization, continues to
reinforce the message of never compromising on ethical standards
and values.
GROUP
REVIEW
Second quarter
financials
Net sales were USD 13.2 billion
(+7%, +5% cc) in the second quarter, as volume growth of 9
percentage points (cc), mainly driven by Innovative Medicines
growth drivers, was partly offset by the negative impacts of
pricing (-2 percentage points) and generic competition (-2
percentage points).
Operating income was USD 2.5
billion (+9%, +6% cc) mainly driven by higher sales and improved
gross margin, partly offset by growth investments. Core adjustments
amounted to USD 1.1 billion (2017: USD 1.0 billion).
Net income was USD 7.8 billion,
compared to USD 2.0 billion in prior year, benefiting from a USD
5.7 billion net gain recognized from the sale of our stake in the
GSK consumer healthcare joint venture.
EPS was USD 3.34, compared to USD
0.84 in prior year, driven by growth in net income and the lower
number of shares outstanding.
Core operating income was USD 3.5
billion (+9%, +7% cc) driven by higher sales and improved gross
margin, partly offset by investments for key growth drivers. Core
operating income margin in constant currencies increased 0.5
percentage points; currency impact was not significant, resulting
in a net increase of 0.5 percentage points to 26.9% of net
sales.
Core net income was USD 3.0
billion (+5%, +3% cc) as growth in core operating income was partly
offset by the discontinuation of core income from the GSK consumer
healthcare joint venture.
Core EPS was USD 1.29 (+6%, +4%
cc), driven by growth in core net income and the lower number of
shares outstanding.
Free cash flow amounted to USD 3.6
billion (+10% USD) compared to USD 3.2 billion in prior year,
driven by higher cash flows from operating activities.
Innovative
Medicines net sales were USD 8.9 billion (+10%, +8% cc) in the
second quarter, as Pharmaceuticals grew 6% (cc) and Oncology grew
10% (cc). Volume contributed 12 percentage points to sales growth.
Generic competition had a negative impact of 3 percentage points
largely due to Gleevec/Glivec in the US and
Europe and certain Ophthalmology products. Pricing had a negative
impact of 1 percentage point.
Operating income was USD 2.3
billion (+11%, +8% cc), mainly driven by higher sales and improved
gross margin, partly offset by higher growth and launch
investments. Core adjustments were USD 0.6 billion (2017: USD 0.5
billion). Core operating income was USD 2.9 billion (+14%, +12%
cc). Core operating income margin in constant currencies increased
by 1.2 percentage points; currency had a positive impact of 0.1
percentage points, resulting in a margin of 32.2% of net sales.
Sandoz net
sales were USD 2.5 billion (0%, -2% cc) in the second quarter, as 9
percentage points of price erosion, mainly in the US, were largely
offset by 7 percentage points of volume growth. Excluding the US,
net sales grew by 5% (cc). Global sales of Biopharmaceuticals grew
34% (cc), mainly driven by Rixathon
(rituximab) and Erelzi (etanercept) in Europe,
and Zarxio (filgrastim) in the US.
Operating income was USD 328
million (-1%, -2% cc) mainly due to lower sales and higher ex-US
M&S investments, partly offset by a legal settlement gain. Core
operating income was USD 480 million (-3%, -5% cc). Core operating
income margin decreased by 0.6 percentage points; currency had a
negative impact of 0.2 percentage points, resulting in a net
decrease of 0.8 percentage points to 19.5% of net sales.
Alcon net
sales were USD 1.8 billion (+7%, +5% cc) in the second quarter.
Surgical growth of 8% (cc) was mainly driven by double-digit growth
of implantables, which includes intraocular lenses (IOLs) and
CyPass Micro Stent, and continued strong
growth in consumables. Vision Care sales grew 1% (cc), as double
digit growth of Dailies Total1 was mostly
offset by declines in both weekly/monthly lenses and contact lens
care. Alcon's results reflect the sixth consecutive quarter of net
sales growth as a result of improved operations, innovation, and
customer relationships.
Operating income was USD 65
million compared to USD 29 million in prior year, mainly driven by
higher sales and improved gross margin, partly offset by growth
investments. Core operating income was USD 338 million (+16%, +14%
cc). Core operating income margin in constant currencies increased
by 1.5 percentage points; currency had a positive impact of 0.1
percentage points, resulting in a net increase of 1.6
percentage points to 18.6% of net sales.
First half
financials
Net sales were USD 25.9 billion
(+9%, +5% cc) in the first half, as volume growth of 9 percentage
points (cc), mainly driven by Innovative Medicines growth drivers,
was partly offset by the negative impacts of pricing (-2 percentage
points) and generic competition (-2 percentage points).
Operating income was USD 4.9
billion (+17%, +11% cc) driven by higher sales and improved gross
margin, partly offset by growth investments. Core adjustments
amounted to USD 2.0 billion (2017: USD 2.0 billion).
Net income was USD 9.8 billion,
compared to USD 3.6 billion in prior year, benefiting from a USD
5.7 billion net gain recognized from the sale of our stake in the
GSK consumer healthcare joint venture and the contribution from the
growth in operating income, partly offset by the discontinuation of
income from the GSK consumer healthcare joint venture.
EPS was USD 4.21, compared to USD
1.54 in prior year, driven by growth in net income and the lower
number of shares outstanding.
Core operating income was USD 6.9
billion (+10%, +6% cc) driven by higher sales and improved gross
margin, partly offset by growth investments. Core operating income
margin in constant currencies increased 0.3 percentage points;
currency impact was not significant, resulting in a net increase of
0.3 percentage points to 26.6% of net sales.
Core net income was USD 6.0
billion (+8%, +3% cc) driven by growth in core operating income,
partly offset by the discontinuation of core income from the GSK
consumer healthcare joint venture.
Core EPS was USD 2.58 (+10%, +5%
cc), driven by growth in core net income and the lower number of
shares outstanding.
Free cash flow amounted to USD 5.5
billion (+12% USD) compared to USD 4.9 billion in prior year,
mainly driven by higher cash flows from operating activities,
partly offset by higher investments in intangible assets.
Innovative
Medicines delivered net sales of USD 17.3 billion (+11%, +7%
cc) in the first half, as Pharmaceuticals grew 6% (cc) and Oncology
grew 8% (cc). Volume contributed 12 percentage points to sales
growth. Generic competition had a negative impact of 3 percentage
points largely due to Gleevec/Glivec. Pricing
had a negative impact of 2 percentage points.
Operating income was USD 4.4
billion (+18%, +13% cc) mainly driven by higher sales, partly
offset by higher growth and launch investments. Core adjustments
were USD 1.1 billion (2017: USD 1.1 billion). Core operating income
was USD 5.5 billion (+13%, +8% cc). Core operating income margin in
constant currencies increased by 0.5 percentage points; currency
had a positive impact of 0.2 percentage points, resulting in a net
increase of 0.7 percentage points to 31.8% of net sales.
Sandoz net
sales were USD 5.0 billion (+2%, -3% cc) in the first half, as 8
percentage points of price erosion, mainly in the US, were partly
offset by 5 percentage points of volume growth. Excluding the
US, net sales grew by 5% (cc). Global sales of Biopharmaceuticals
grew 23% (cc) mainly driven by Rixathon
(rituximab) and Erelzi (etanercept) in the
EU.
Operating income was USD 737
million (+10%, +4% cc) mainly driven by strong gross margin
improvements and higher divestment gains, partly offset by lower
sales and higher ex-US M&S investments. Core operating income
was USD 979 million (+2%, -2% cc). Core operating income margin
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 19.7% of net sales.
Alcon net
sales were USD 3.6 billion (+9%, +6% cc) in the first half. Stock
in trade movements accounted for approximately 1% (cc) of growth.
Surgical sales grew 8% (cc) driven mainly by implantables and
consumables. Vision Care sales grew 3% (cc) driven by contact
lenses, including continued double-digit growth of Dailies Total1.
Operating income was USD 155
million in the first half, compared to USD 27 million in prior
year, driven by higher sales and improved gross margin, partly
offset by growth investments. Core operating income was USD 698
million (+27%, +21% cc). Core operating income margin in constant
currencies increased by 2.3 percentage points; currency had a
positive impact of 0.5 percentage points, resulting in a net
increase of 2.8 percentage points to 19.4% of net sales.
Key growth
drivers
Underpinning our financial results
in the second quarter is a continued focus on key growth drivers,
including Cosentyx, Entresto,
Promacta/Revolade, Tafinlar + Mekinist,
Kisqali, Jakavi, Lutathera and Kymriah as well as Biopharmaceuticals and Emerging
Growth Markets.
Growth Drivers
(Q2 performance)
-
Cosentyx (USD 701 million, +40% cc) delivered
strong volume growth across all indications in the US (USD 409
million, +33% cc) and rest of the world (USD 292 million, +53%
cc).
-
Entresto (USD 239 million, +113% cc) more than
doubled sales driven by uptake in all launched markets (US +95% cc,
rest of world +145% cc).
-
Promacta/Revolade (USD 292 million, +38% cc) grew
at a strong double-digit rate across all regions driven by
increased demand and continued uptake of the thrombopoietin class
for chronic immune thrombocytopenia.
-
Tafinlar +
Mekinist (USD 284 million, +28% cc) continued strong
double-digit growth in melanoma and NSCLC across all regions due to
increased demand.
-
Kisqali (USD 59 million) continues to progress with
growth in the US and launches in some EU countries. Additional
markets in the EU are expected to gain reimbursement over the next
12 months and filings are underway with other health authorities
worldwide.
-
Jakavi
(USD 239 million, +24% cc) delivered continued strong double-digit
growth across all regions driven by the myelofibrosis indication
and reimbursement of the second-line polycythemia vera indication
in additional countries.
-
Lutathera (USD 24 million) launch in the US is
progressing well, with over 50 centers actively treating. The
Centers for Medicare & Medicaid Services (CMS) granted
Lutathera Pass-Through status, effective July
1, 2018. Sales from all AAA brands were USD 76 million in the
quarter.
-
Kymriah (USD 16 million) received FDA approval in
May 2018 for the treatment of relapsed or refractory (r/r) adult
DLBCL patients.
-
Biopharmaceuticals (USD 363
million, +34% cc) grew mainly driven by Rixathon (rituximab) and Erelzi
(etanercept) in the EU, and continued growth of Zarxio in the US.
-
Emerging Growth Markets,
which comprise all markets except the US, Canada, Western Europe,
Japan, Australia and New Zealand, grew (+8% USD, +9% cc) mainly
driven by China (+10% cc) and Russia (+14% cc).
Strengthen
R&D
Innovation
Review
Due to our continued focus on
innovation, Novartis has one of the industry's most competitive
pipelines with more than 200 projects in clinical development.
Key developments from the second
quarter of 2018 include:
New approvals and
regulatory opinions (in Q2)
-
Kymriah (tisagenlecleucel), first-in-class CAR-T
therapy, received second FDA approval to treat appropriate
relapsing/refractory (r/r) patients with large B-cell lymphoma.
Kymriah demonstrated an overall response rate
of 50%, with median duration of response not yet reached at the
time of data cut-off. In Europe, Kymriah
received positive CHMP opinions for r/r DLBCL and pediatric
ALL.
-
Aimovig (erenumab) was approved and launched in the
US for the preventive treatment of migraine in adults. Aimovig, is the first and only FDA-approved treatment
to block the calcitonin gene-related peptide receptor (CGRP-R).
Novartis co-commercializes Aimovig with Amgen
in the US and Novartis has the exclusive rights to Aimovig ex-US, except for Japan. In Europe, Aimovig received a positive CHMP opinion during
Q2.
-
Tafinlar +
Mekinist was approved in the US and Japan for adjuvant
treatment of BRAF V600-mutant melanoma. Data showed significant
reduction in the risk of disease recurrence or death compared to
placebo by 53%. The combination was also approved by FDA for the
treatment of patients with locally advanced or metastatic
anaplastic thyroid cancer with BRAF V600E mutation.
-
Gilenya (fingolimod) was approved by FDA as the
first disease-modifying therapy for pediatric relapsing multiple
sclerosis. Gilenya reduced the annualized
relapse rate by approximately 82% vs. interferon beta-1a
injections.
-
Promacta (eltrombopag) received FDA Priority Review
for first-line treatment of SAA based on data showing 52% complete
response rate and 85% overall response rate when added to standard
immunosuppressive therapy. FDA also granted Promacta Breakthrough Therapy designation for treatment
of hematopoietic sub-syndrome of acute radiation
syndrome.
-
Signifor LAR was approved by FDA for the treatment
of Cushing's disease.
-
Cosentyx (secukinumab) received FDA approval on the
PsA efficacy labeling supplement to include radiographic response
data from the FUTURE 5 study.
-
Sandoz biosimilar Zessly (infliximab, Janssen and Merck's
Remicade®) was approved
in Europe. Zessly was the third Sandoz
Biosimilar approved by the EU in the last 12 months.
-
Sandoz proposed biosimilar
adalimumab (AbbVie's Humira®) received a
positive CHMP opinion and is expecting an EU approval decision in
August.
-
Sandoz proposed biosimilar
rituximab received a complete response letter (CRL) from
FDA.
Regulatory
submissions and filings (in Q2)
Results from ongoing trials and
other highlights (in Q2)
-
AVXS-101 data presented at
AAN demonstrated all patients in the SMA Type 1 study were alive
and event-free and with no need for permanent ventilation 24 months
following gene transfer. Patients enrolled in the Long-Term
Follow-Up study continued to achieve new milestones. Initial data
from the pivotal Type 1 study showed that all symptomatic patients
who were enrolled in the study as of April 11, 2018, were alive and
event-free without the need for permanent ventilation. During Q2,
Novartis had a successful pre-BLA meeting with FDA; on track for H2
2018 FDA submission. The Phase I data in SMA Type 1 will be the
basis for the BLA submission with some data from the on-going Phase
III STR1VE study.
-
BAF312 EXPAND study data
presented at AAN showed a reduced risk of disability progression
was sustained at three-months (14-20% compared to placebo), and an
even greater reduction for disability sustained at six-months
(29-33%). Siponimod also had a meaningful benefit on patients'
cognitive processing speed.
-
RTH258 (brolucizumab) data
presented at ARVO showed that patients identified for a 12-week
treatment interval in Phase III HAWK and HARRIER trials had an 87%
and 83% probability of successfully continuing on a 12-week
interval through week 48. On track for filing in Q4
2018.
-
Cosentyx data presented at the Annual European
Congress of Rheumatology advanced the understanding of the role of
IL-17A and reinforced Cosentyx leadership in
spondyloarthritis.
-
Kymriah JULIET trial demonstrated more than
one-year durability of responses in adult patients with relapsed or
refractory DLBCL, with an overall response rate of 52% and median
duration of response not reached at a median 14-month follow-up; as
well as patients' having a 65% chance of being relapse-free one
year after onset of response.
-
Aimovig LIBERTY data at AAN reinforced the robust
and consistent efficacy of Aimovig for
migraine patients with multiple treatment failures. Patients taking
Aimovig had nearly three-fold higher odds of
having their migraine days cut by at least 50%. Long term safety
and efficacy data for chronic migraine demonstrated sustained
reductions in monthly migraine days and long term safety and
tolerability data in episodic migraine showed the safety profile
was consistent with that seen in the pivotal trials.
-
QGE031 (ligelizumab) in a
Phase IIb trial demonstrated rapid onset of action, and improved
and sustained efficacy compared with omalizumab in patients with
chronic spontaneous urticaria who are not adequately controlled by
H1 antihistamines.
-
Lutathera (lutetium Lu 177 dotatate) NETTER-1 study
data in patients with progressive midgut NETs was published in the
Journal of Clinical Oncology showing
significantly longer time to deterioration of key quality of life
measures, 28.8 months vs. 6.1 for global health status and 25.2
months vs. 11.5 for physical functioning.
-
Kisqali (ribociclib) MONALEESA-3 data were
presented at ASCO showing Kisqali plus
fulvestrant demonstrated superior efficacy, with median PFS of 20.5
months vs. 12.8, in first- and second-line postmenopausal patients
with HR+/HER2- advanced breast cancer. Additionally, 70% of
Kisqali patients were estimated to remain
progression-free at median follow-up of 16.5 months.
-
Jakavi
(ruxolitinib) real-world data presented at the European Hematology
Association showed a reduction in risk of death and dangerous blood
clots for patients with rare blood cancer. Patients with lower-risk
MF achieved spleen size reductions when treated with Jakavi, with 82% achieving a >=50%
reduction.
-
Sandoz Biosimilars Zessly (infliximab) and Erelzi (etanercept) data in rheumatoid arthritis
was presented at EULAR. Research from the 54-week REFLECTIONS
B537-02 study of Zessly and the 48-week EQUIRA
study of Erelzi showed that each biosimilar
matched its reference biologic in terms of safety, efficacy and
quality, reinforcing previously-presented findings.
-
FocalView app was launched
providing an opportunity for patients to participate in
ophthalmology clinical trials from their home. Using patients'
self-recorded measurements, FocalView aims to enable more sensitive
trial endpoints and more accurate patient-reported
outcomes.
-
Alcon AcrySof IQ PanOptix intraocular
lens (IOL) data showed significantly improved near and intermediate
distance vision compared to the ZEISS AT LISA®* tri
839MP IOL.
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.
During the first half of 2018,
Novartis repurchased 9.2 million shares (USD 0.7 billion) to
mitigate dilution related to participation plans of associates. In
addition, 1.4 million shares (USD 0.1 billion) were repurchased
from associates, and 14.9 million treasury shares (USD 0.8 billion)
were delivered as a result of options exercised and share
deliveries related to participation plans of associates.
Consequently, the total number of shares outstanding increased by
4.3 million versus December 31, 2017. Novartis aims to offset the
dilutive impact from equity-based participation plans of associates
over the remainder of the year. These treasury share transactions
resulted in a net cash outflow of USD 0.3 billion. On June 29,
2018, Novartis announced a new up-to USD 5 billion share buyback to
be executed by the end of 2019 on the second trading line.
As of June 30, 2018, the net debt
increased by USD 0.2 billion to USD 19.2 billion versus December
31, 2017. The increase was mainly driven by the USD 7.0 billion
annual dividend payment, the acquisition of Advanced Accelerator
Applications S.A. in Q1 and of AveXis, Inc. in Q2 2018, mostly
offset by the inflow from the sale of the stake in the GSK consumer
healthcare joint venture and USD 5.5 billion free cash flow in H1
2018. From July 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.
2018 Outlook
Barring
unforeseen events
We re-confirm our Group outlook as
presented at the beginning of 2018. Group net sales in 2018 are
expected to grow low to mid-single digit (cc). Group core operating
income in 2018 is expected to grow mid to high-single digit
(cc).
From a divisional perspective, we
expect net sales performance (cc) in 2018 to be as follows:
-
Innovative Medicines: grow mid-single
digit
-
Sandoz: revised downwards to decline low-single
digit
-
Alcon: revised upwards to grow mid-single
digit
If mid-July exchange rates prevail
for the remainder of 2018, the currency impact for the year would
be positive 1 percentage point on net sales and positive 1
percentage point on core operating income. The estimated impact of
exchange rates on our results is provided monthly on our
website.
Executive Committee of Novartis
(ECN) changes
-
Shannon Thyme Klinger was
appointed to Group General Counsel. She was previously Chief Ethics
and Compliance Officer and Global Head of Litigation since
2016.
-
Robert Weltevreden was
appointed Head of Novartis Business Services. He was previously
Head of Business Services for Syngenta.
-
Mike Ball was appointed
Chairman-designate of Alcon, where he will focus on preparing
Alcon for the intended spinoff. In order to focus fully on the
Alcon separation, he stepped down from the ECN.
-
David Endicott was
appointed CEO of Alcon. He was previously Chief Operating
Officer (COO) of Alcon since July 2016. In light of the potential
spinoff, he will not become a member of the ECN.
Summary Financial
Performance
Innovative Medicines |
Q2 2018 |
Q2 2017
restated [4] |
% change |
|
H1 2018 |
H1 2017
restated [4] |
% change |
|
USD m |
USD m |
USD |
cc |
|
USD m |
USD m |
USD |
cc |
Net sales |
8 876 |
8 084 |
10 |
8 |
|
17 274 |
15 602 |
11 |
7 |
Operating income |
2 252 |
2 027 |
11 |
8 |
|
4 387 |
3 707 |
18 |
13 |
As a %
of sales |
25.4 |
25.1 |
|
|
|
25.4 |
23.8 |
|
|
Core operating income |
2 854 |
2 496 |
14 |
12 |
|
5 485 |
4 851 |
13 |
8 |
As a % of sales |
32.2 |
30.9 |
|
|
|
31.8 |
31.1 |
|
|
Sandoz |
Q2 2018 |
Q2 2017 |
% change |
|
H1 2018 |
H1 2017 |
% change |
|
USD m |
USD m |
USD |
cc |
|
USD m |
USD m |
USD |
cc |
Net sales |
2 463 |
2 451 |
0 |
-2 |
|
4 980 |
4 881 |
2 |
-3 |
Operating income |
328 |
330 |
-1 |
-2 |
|
737 |
673 |
10 |
4 |
As a %
of sales |
13.3 |
13.5 |
|
|
|
14.8 |
13.8 |
|
|
Core operating income |
480 |
497 |
-3 |
-5 |
|
979 |
957 |
2 |
-2 |
As a % of sales |
19.5 |
20.3 |
|
|
|
19.7 |
19.6 |
|
|
Alcon |
Q2 2018 |
Q2 2017
restated [4] |
% change |
|
H1 2018 |
H1 2017
restated [4] |
% change |
|
USD m |
USD m |
USD |
cc |
|
USD m |
USD m |
USD |
cc |
Net sales |
1 819 |
1 707 |
7 |
5 |
|
3 598 |
3 298 |
9 |
6 |
Operating income |
65 |
29 |
nm |
nm |
|
155 |
27 |
nm |
nm |
As a %
of sales |
3.6 |
1.7 |
|
|
|
4.3 |
0.8 |
|
|
Core operating income |
338 |
291 |
16 |
14 |
|
698 |
549 |
27 |
21 |
As a % of sales |
18.6 |
17.0 |
|
|
|
19.4 |
16.6 |
|
|
nm =
not meaningful
Corporate |
Q2 2018 |
Q2 2017 |
% change |
|
H1 2018 |
H1 2017 |
% change |
|
USD m |
USD m |
USD |
cc |
|
USD m |
USD m |
USD |
cc |
Operating loss |
-161 |
-106 |
-52 |
-45 |
|
-348 |
-205 |
-70 |
-58 |
Core operating loss |
-131 |
-49 |
nm |
nm |
|
-281 |
-112 |
nm |
nm |
nm =
not meaningful |
|
|
|
|
|
|
|
|
|
Total Group |
Q2 2018 |
Q2 2017 |
% change |
|
H1 2018 |
H1 2017 |
% change |
|
USD m |
USD m |
USD |
cc |
|
USD m |
USD m |
USD |
cc |
Net sales |
13 158 |
12 242 |
7 |
5 |
|
25 852 |
23 781 |
9 |
5 |
Operating income |
2 484 |
2 280 |
9 |
6 |
|
4 931 |
4 202 |
17 |
11 |
As a %
of sales |
18.9 |
18.6 |
|
|
|
19.1 |
17.7 |
|
|
Core operating income |
3 541 |
3 235 |
9 |
7 |
|
6 881 |
6 245 |
10 |
6 |
As a %
of sales |
26.9 |
26.4 |
|
|
|
26.6 |
26.3 |
|
|
Net income |
7 768 |
1 979 |
nm |
nm |
|
9 796 |
3 644 |
nm |
nm |
EPS (USD) |
3.34 |
0.84 |
nm |
nm |
|
4.21 |
1.54 |
nm |
nm |
Cash flows from operating activities |
3 942 |
3 582 |
10 |
|
|
6 456 |
5 627 |
15 |
|
Free cash flow |
3 562 |
3 243 |
10 |
|
|
5 477 |
4 908 |
12 |
|
nm =
not meaningful |
|
|
|
|
|
|
|
|
|
|
|
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/2205794/857175.pdf
Novartis Q2 2018 and H1 Condensed
Interim Financial Report - Supplementary Data
INDEX |
Page |
GROUP
AND DIVISIONAL OPERATING PERFORMANCE Q2 and H1 2018 |
|
Group |
2 |
Innovative
Medicines |
6 |
Sandoz |
11 |
Alcon |
13 |
CASH FLOW AND GROUP BALANCE SHEET |
15 |
INNOVATION REVIEW |
18 |
CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS |
|
Consolidated income
statements |
22 |
Consolidated
statements of comprehensive income |
24 |
Consolidated balance
sheets |
25 |
Consolidated
statements of changes in equity |
26 |
Consolidated
statements of cash flows |
28 |
Notes to condensed
interim consolidated financial statements, including update on
legal proceedings |
30 |
SUPPLEMENTARY INFORMATION |
54 |
CORE
RESULTS |
|
Reconciliation from
IFRS to core results |
56 |
Group |
58 |
Innovative
Medicines |
60 |
Sandoz |
62 |
Alcon |
64 |
Corporate |
66 |
ADDITIONAL INFORMATION |
|
Income from associated
companies |
68 |
Condensed consolidated
changes in net debt / Share information |
69 |
Free cash flow |
70 |
Currency translation
rates |
72 |
DISCLAIMER |
73 |
Disclaimer
This press release contains forward-looking statements within the
meaning of the United States Private Securities Litigation Reform
Act of 1995, that can generally be identified by words such as
"continues," "on track," "intention," "to seek," "to become,"
"progress," "strategic review," "proposed," "growth investments,"
"strategic," "launch," "would," "outlook," "momentum," "launched,"
"positive CHMP opinions," "expected," "intends," "confidence,"
"potential," "strategy," "priority," "priorities," "priority
review," "pipelines," "pipeline," "subject to," "expecting,"
"expect," "will," "continued," "continue," "planned," "focus,"
"plans," "plan," "progressing," "growth drivers," "clinical
development," "ongoing," "initiate," "submission," "to advance,"
"aims," "fast track," "Breakthrough Therapy designation," "filing,"
or similar expressions, 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; or regarding the proposed 100% spinoff of the Alcon
Division, including express or implied discussions regarding the
potential financial or other impact on Novartis, and the potential
strategic benefits, synergies or opportunities expected as a result
of the proposed spinoff; or regarding the potential impact on
Novartis of the completed acquisition of AveXis Inc., including
express or implied discussions regarding potential future sales or
earnings of Novartis, and any potential strategic benefits,
synergies or opportunities expected from the acquisition; or
regarding the potential financial or other impact of the other
significant acquisitions and reorganizations of recent years; or
regarding the potential impact of the share buyback; or regarding
potential future sales or earnings of the Novartis Group or any of
its divisions or potential shareholder returns; 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 our current beliefs and expectations
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 the proposed 100% spinoff of the Alcon Division will
be approved by our shareholders, or that it will be completed, or
completed as currently proposed, or at any particular time. Nor can
there be any guarantee that Novartis will be able to realize any of
the potential strategic benefits, synergies or opportunities as a
result of the proposed 100% spinoff of the Alcon Division, or that
the proposed spinoff will in fact maximize shareholder value.
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 acquisitions and
reorganizations of recent years. Nor can there be any guarantee
that shareholders will achieve any particular level of shareholder
returns. Neither 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, our expectations could be affected by, among other
things: global trends toward health care cost containment,
including government, payor and general public pricing and
reimbursement pressures and requirements for increased pricing
transparency; regulatory actions or delays or government regulation
generally, including potential regulatory actions or delays with
respect to the development of the products described in this
release; the potential that the proposed 100% spinoff of the Alcon
Division may not be approved by our shareholders, or that it may
not be completed, or completed as currently proposed, or at any
particular time; the potential that the strategic benefits,
synergies or opportunities expected from the proposed 100% spinoff
of the Alcon Division may not be realized or may take longer to
realize than expected, or that the proposed spinoff may not in fact
maximize shareholder value; the potential that the strategic
benefits, synergies or opportunities expected from the significant
acquisitions and reorganizations of recent years may not be
realized or may take longer to realize than expected; the inherent
uncertainties involved in predicting shareholder returns; 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; 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; uncertainties involved in the development or adoption of
potentially transformational technologies and business models;
general political and economic conditions, including uncertainties
regarding the effects of ongoing instability in various parts of
the world; 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 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. Remicade® is a
registered trademark of Janssen Biotech, Inc. Humira®
is a registered trademark of AbbVie Inc. AT LISA® is a
registered trademark of Carl Zeiss Meditec AG. Stelara®
is a registered trademark 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, cost-saving generic and
biosimilar pharmaceuticals and eye care. Novartis has leading
positions globally in each of these areas. In 2017, the Group
achieved net sales of USD 49.1 billion, while R&D throughout
the Group amounted to approximately USD 9.0 billion. Novartis Group
companies employ approximately 125,000 full-time-equivalent
associates. Novartis products are sold in approximately 155
countries around the world. For more information, please visit
http://www.novartis.com.
Important dates
October 18, 2018
Third
quarter results 2018
November 5, 2018
Novartis R&D update London
November 27, 2018 Alcon capital
markets day New York
December 4, 2018
Alcon capital markets day London
[1] Constant currencies (cc), core
results and free cash flow are non-IFRS measures. An explanation of
non-IFRS measures can be found on page 54 of the Condensed Interim
Financial Report. Unless otherwise noted, all growth rates in this
Release refer to same period in prior year.
[2] Completion of the transaction is subject to general market
conditions, tax rulings and opinions, final Board of Directors
endorsement and shareholder approval at the 2019 AGM in line with
Swiss corporate law.
[3] Positive CHMP opinion for both r/r DLBCL and pediatric ALL
indications.
[4] Restated to reflect the product transfers between divisions,
announced on October 24, 2017 and January 24, 2018.
Please find full media release in
English attached and on the following link:
http://hugin.info/134323/R/2205794/857184.pdf
Further language versions are
available through the following links:
German version is available
through the following link:
http://hugin.info/134323/R/2205796/857186.pdf
French version is available
through the following link:
http://hugin.info/134323/R/2205795/857185.pdf
Media release (PDF)
IFR (PDF)