Novartis Pharma K.K.
Novartis achieved strong sales growth and improved core operating profit margin in the second quarter; revised full-year 2024 core operating profit forecast upward
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This material is a Japanese translation (summary) of the announcement made by Novartis (Basel, Switzerland) on July 18, 2024 (local time), and is provided as a reference material. For the content and interpretation of the material, English language prevails. For the English version, please visit https://www.novartis.com.
Q2 2024 sales increased 11% (cc1, USD 9%), core operating profit increased 19% (cc, USD 17%)
o Enrest (+28% cc), Kesimpta (+65% cc), Cosentyx (+28% cc)
(up 22%), Kisqali (up 50% on a real basis), Rekvio (up 134% on an actual basis), Pluvicto (up 44% on a real basis)
Products such as
o Core operating profit margin increased by 2.7 points (in real terms) to 39.6%, mainly due to sales growth
Q2 2024 operating profit increased by 47% (cc, USD 43%), net profit increased 49% (cc, USD 43%)
Core EPS for Q2 2024 is USD 1.97, up 21% (cc, +17% in USD)
Free cash flow1 for the second quarter of 2024 was USD 4.6 billion (up 40% on a USD basis), contributed by an increase in net cash flow from operating activities.
In the first half of 2024, sales will increase by 11% (cc, +9% in USD), core operating profit will increase by 21% (cc, +16% in USD) Key R&D milestones for Q2 2024:
o Fabiharta (iptacopan) – approved for paroxysmal nocturnal
hemoglobinuria (PNH) in EU, Japan and China
o Lutatera – Approved by FDA for pediatric (12 years and older) patients with pancreatic gastrointestinal neuroendocrine tumors (GEP-NET)
o Sembrix – Breakthrough treatment approved by FDA for indication as first-line treatment for chronic myeloid leukemia (CML)
Designated as a medicine (Breakthrough Therapy)
o Atrasentan – FDA accepts application for indication in adult patients with IgA nephropathy
o Latest data from Kisqali-NATALEE study continues to demonstrate clinical efficacy at median time of 4 years from treatment initiation Core operating profit forecast for full year 2024 has been revised upward 2 due to strong performance
o Sales are expected to grow in the high single digits to low 10% range (no change)
o Core operating income is expected to grow at a mid- to high-teens growth rate (upwardly revised from a low-to-mid-teens growth rate) Basel, Switzerland, July 18, 2024 – Commenting on Novartis’ second quarter 2024 results, Vasu Narasimhan, CEO of Novartis, said: “Novartis delivered strong results in the second quarter, with revenue growth of 11% and core operating margin of nearly 40%. , reflecting the continued strength of our key growth products, we were also able to raise our full-year 2024 guidance in the second quarter. Latest data from the NATALEE study supports FDA filings for Cembrix as a first-line treatment for chronic myeloid leukemia (CML) and atrasentan for IgA nephropathy, as well as Kisqali’s strong product profile for early breast cancer (eBC) Novartis has made progress in its pipeline, including the acquisition of radioligand therapy (RLT) and multiple deals to expand the pipeline in prostate cancer. We are on track to achieve our forecasts for average annual growth rate of ~5% in 2028) and core operating profit margin (over 40% by 2027).”
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business concentration
In 2023, Novartis completed its transformation into a pharmaceutical company focused on innovative medicines. Novartis has a clear focus on four core disease areas (cardiovascular/nephrology/metabolism, immunology, central nervous system, and oncology), and in each of these four disease areas, we aim to provide treatments for high-burden diseases and significant We have multiple products on the market and in development with growth potential. Additionally, in addition to two existing technology platforms (small molecule drugs and antibody drugs), Novartis will expand its R&D capabilities and production scale for three new platforms (gene/cell therapy, radioligand therapy, and nucleic acid drugs). , we invest on a priority and ongoing basis. Geographically, we are focused on growth in our priority regions: the US, China, Germany and Japan.
Priority issues
Accelerate growth: Renew our focus on supplying high-value-added medicines (new compounds) and focus on superior launch activity backed by a rich pipeline in all core disease areas
Returns to shareholders: Continued operational excellence and improved financial performance. Continued discipline and shareholder focus in capital allocation, as well as a strong capital structure that supports cash generation and capital flexibility.
Strengthening our foundation: Maximizing the capabilities of our employees, scaling up our data science and technology, and continuing to build a relationship of trust with society.
financial performance
Following the shareholders’ approval of Sandoz’s independence on September 15, 2023, Novartis has reported its consolidated results for the current and prior fiscal years separately in “continuing operations” and “discontinued operations.”
Continuing operations include what remains of Novartis, consisting of the Innovative Medicines business and continuing corporate activities. Discontinued operations include certain corporate activities related to the Sandoz division and Sandoz operations, as well as certain spin-off costs.
The explanation that follows focuses on continuing operations, but also provides information on discontinued operations.
Continuing business
Second quarter of 2024 (April-June)
Sales in the second quarter of 2024 were USD 12.5 billion (+9%, +11% cc), driven by a 15 percentage point increase in sales volume. The negative impact from competition with generic drugs was 2 points, and the negative impact from price declines was 2 points.
Operating income was $4.0 billion (+43%, +47% cc), primarily due to higher sales and lower impairment charges, partially offset by higher research and development expenses.
Net income was US$3.2 billion (+43%, +49% cc), primarily due to an increase in operating income. Earnings per share (EPS) were US$1.60 (+47%, +52% cc) due to a decrease in the weighted average number of shares outstanding.
Core operating income was $5.0 billion (+17%, +19% cc), primarily due to higher sales partially offset by higher research and development expenses. Core operating income margin increased by 2.5 points (2.7 points on an actual basis) to 39.6%.
Core net income was USD 4.0 billion (+14%, +18% cc), primarily due to an increase in core operating income. Core EPS was $1.97 (+17%, +21% cc) due to a decrease in the weighted average number of shares outstanding.
Free cash flow from continuing operations increased to US$4.6 billion (up 40% on a US dollar basis) from US$3.3 billion in the same period last year, due to an increase in net cash flow from operating activities related to continuing operations.
First half of 2024 (January to June)
Revenues were USD 24.3 billion (+9%, +11% cc) as volume growth of 15 percentage points was partially offset by a negative impact of 2 percentage points from generic competition and 2 percentage points from lower prices. have become.
Operating income was USD 7.4 billion ($7.4 billion), as the positive effects of increased sales and lower impairment and restructuring costs were partially offset by the negative impact of one-time litigation-related income in the same period last year. (up 36% on a real basis, up 43% on a real basis).
Net income amounted to US$5.9 billion (+34%, +43% cc), primarily due to an increase in operating income. Earnings per share (EPS) were $2.91 (+37%, +47% cc), driven by a decrease in the weighted average number of shares outstanding.
Core operating income was US$9.5 billion (up 16%, 21% cc), primarily due to the positive impact of increased sales, partially offset by increased research and development expenses. Core operating income margin increased by 2.4 points (3.1 points on an actual basis) to 39.0%.
Core net income was US$7.7 billion (+14%, +19% cc), primarily due to an increase in core operating income. Core EPS was $3.77 (+17%, +22% cc), positively impacted by a decrease in the weighted average number of shares outstanding.
Free cash flow from continuing operations increased to US$6.7 billion (up 11% on a US dollar basis) from US$6.0 billion in the same period last year, due to an increase in net cash flow from operating activities related to continuing operations.
Discontinued operations
Results of discontinued operations for the first quarter of 2023 include Sandoz’s Generics and Biosimilars business unit, certain corporate activities related to Sandoz, and certain other costs related to the spin-off of Sandoz’s business. included.
Second quarter of 2024 (April-June)
As Sandoz’s independence was completed on October 3, 2023, no results of discontinued operations will be recorded in the second quarter of 2024. In the second quarter of 2023, sales from discontinued operations were $2.4 billion, operating income was $113 million, and net income was $46 million. For more information, please see Note 3 (Significant acquisition of businesses and spin-off of Sandoz business) and Note 11 (Discontinued operations) in the Condensed Financial Report.
First half of 2024 (January to June)
As Sandoz’s independence was completed on October 3, 2023, no results of discontinued operations will be recorded in the first half of 2024. In the first half of 2023, discontinued operations had sales of USD 5 billion, operating income of USD 351 million and net income of USD 190 million. For more information, please see Note 3 (Significant acquisition of businesses and spin-off of Sandoz business) and Note 11 (Discontinued operations) in the Condensed Financial Report. Novartis overall
Second quarter of 2024 (April-June)
Novartis’ overall revenue for the second quarter of 2024 was US$3.2 billion, up from US$2.3 billion in the prior-year period, and underlying EPS increased to US$1.60 from US$1.11 in the prior-year period. Novartis’ overall net cash flow from operating activities was $4.9 billion and free cash flow was $4.6 billion.
First half of 2024 (January to June)
Novartis’ overall revenue for the first half of 2024 was US$5.9 billion, up from US$4.6 billion in the prior-year period, and underlying EPS increased to US$2.91 from US$2.20 in the prior-year period. Novartis’ overall net cash flow from operating activities was $7.1 billion and free cash flow was $6.7 billion.
Key drivers of growth in Q2 2024
Second quarter results were supported by continued focus on key growth products, including (in order of contribution to second quarter sales growth):
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Our priority continues to be to strike the right balance between investment in our business, a strong capital structure and attractive shareholder returns.
During the first half of 2024, Novartis repurchased a total of 26.7 million treasury shares for USD 2.7 billion through the Swiss Exchange’s second trading line. This includes 25.9 million shares (US$2.6 billion) as part of an up to US$15 billion share buyback announced in July 2023 (leaving up to US$10.1 billion in funding). In addition, 800,000 shares ($100 million) were repurchased to mitigate the dilutive impact of the employee stock ownership plan, and the remaining treasury shares are expected to be repurchased for the same purpose in the second half of 2024. Additionally, 1.1 million shares (valued at US$100 million) were repurchased from employees. Also in the first half of 2024, 8.4 million shares (valued at USD 500 million) were delivered in connection with employee stock ownership plans. As a result, the total number of outstanding shares decreased by 19.4 million shares compared to December 31, 2023. These treasury stock transactions resulted in a decrease in stockholders’ equity of US$2.3 billion and a cash outflow of US$2.7 billion.
Net debt as of June 30, 2024 increased to USD 18.8 billion from USD 10.2 billion as of December 31, 2023. The increase was primarily due to the US$7.6 billion annual dividend payment made in March, net cash outflows from M&A and intangible asset transactions of US$5 billion, and US$2.7 billion of treasury stock transactions. net cash outflows, partially offset by free cash flow of $6.7 billion.
As of the second quarter of 2024, Novartis’ long-term credit ratings are Aa3 by Moody’s Ratings and AA- by S&P Global Ratings.
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The above forecasts assume that Enrest and Promacta (Revolade) generic drugs will not be launched in the U.S. in 2024.
Foreign exchange impact
Assuming that the mid-July 2024 exchange rate continues for the remainder of 2024, the full-year 2024 currency impact would be -2 points on sales and -3 points on core operating profit. I predict that it will be. Estimated currency effects on results are provided monthly on the Novartis website.
2025 Ordinary General Meeting of Shareholders
Recommendation to directors
The Novartis Board of Directors today announced the nomination of Elizabeth M. McNally, MD, PhD, to the board of directors. Dr. McNally is Director of the Center for Medical Genetics at Northwestern University Feinberg School of Medicine. As a practicing cardiologist and renowned research leader specializing in gene therapy for cardiovascular and neuromuscular diseases, she believes her clinical and scientific expertise will be of great benefit to the Novartis Board of Directors. Masu. Dr. McNally received his medical degree and doctorate from Albert Einstein College of Medicine and completed his internal medicine and cardiology training at Harvard Medical School’s Brigham and Women’s Hospital. Dr. McNally is a member of the National Academy of Medicine, a board member of the Muscular Dystrophy Society, and founder and CEO of Ikaika Therapeutics.
Board of Directors Announcement
The Board of Directors also announced that Charles L. Sawyers and William T. Winters will not stand for re-election at the 2025 Annual Meeting of Stockholders due to the 12-year term limit. The Novartis Board of Directors and Executive Committee would like to thank both of them for their outstanding contributions and outstanding service. Disclaimer
This release contains current forward-looking statements and expectations. Therefore, please be aware that the content and future results may differ from current expectations due to uncertain factors and unforeseen risks. For further details, please refer to the Form 20-F filed by Novartis with the U.S. Securities and Exchange Commission.
About Novartis
Novartis is a global pharmaceutical company that researches, develops, manufactures and markets innovative medicines. Novartis strives to “Reimagine the future of medicine” so that people can live more fulfilling and healthy lives by confronting diseases together with patients, healthcare professionals, and society as a whole. Novartis medicines reach 250 million patients worldwide. Please see the homepage for details. https://www.novartis.com
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This article has been partially generated with the assistance of AI.