Novartis Reports Strong Q1 Growth, Raises 2024 Guidance

Overview of Q1 Performance

Novartis has announced an impressive performance in the first quarter of 2024, reporting double-digit sales growth and a substantial increase in core operating income. The company's net sales rose by 11% (cc), with core operating income up by 22% (cc). Key drivers of this growth included robust sales from major products such as Entresto (+36% cc), Cosentyx (+25% cc), Kesimpta (+66% cc), Kisqali (+54% cc), Pluvicto (+47% cc), and Leqvio (+139% cc). The core operating income margin improved to 38.4%, driven primarily by higher net sales.

Financial Performance

Operating income saw a significant increase of 39% (cc), while net income grew by 37% (cc), both mainly due to higher net sales. Core EPS also saw a rise, growing by 23% (cc) to USD 1.80. Free cash flow decreased to USD 2.0 billion, primarily due to a one-time payment in the prior year and timing of payments.

Key Innovation Milestones

Notable developments in the first quarter included the FDA filing acceptance for Fabhalta (iptacopan) for IgAN and a positive CHMP opinion for PNH. The Phase III ASC4FIRST study of Scemblix met primary endpoints in 1L Ph+ CML-CP patients, and updated OS results from the Pluvicto Phase III PSMAfore study were favorable. Additionally, remibrutinib demonstrated sustained efficacy in CSU over 52 weeks.

Updated 2024 Guidance

Given the strong Q1 performance, Novartis has raised its full-year 2024 guidance. The company now expects net sales to grow by high single to low double digits and core operating income to grow by low double digits to mid-teens. CEO Vas Narasimhan expressed confidence in the company's mid- and long-term growth outlook, citing continued business momentum and advancements in the pipeline.

Strategic Focus

Novartis remains committed to its transformation into a pure-play innovative medicines business, focusing on four core therapeutic areas: cardiovascular-renal-metabolic, immunology, neuroscience, and oncology. The company is also prioritizing investment in emerging platforms such as gene & cell therapy, radioligand therapy, and xRNA, alongside its established platforms in chemistry and biotherapeutics. Geographically, Novartis aims to grow in key markets including the US, China, Germany, and Japan.

Capital Structure and Net Debt

In the first quarter of 2024, Novartis repurchased 10.3 million shares for USD 1.0 billion under its share buyback program. As of March 31, 2024, the company's net debt increased to USD 15.8 billion, attributed to the annual net dividend payment, treasury share transactions, and M&A activities. The long-term credit rating for Novartis remains strong, rated Aa3 by Moody’s and AA- by S&P Global Ratings.

Research and Development Highlights

Key developments in Q1 2024 included FDA approval for Xolair to reduce allergic reactions in patients with IgE-mediated food allergies and positive regulatory updates for Fabhalta. Additionally, the Phase III NATALEE study results for Kisqali, published in the New England Journal of Medicine, highlighted significant benefits in reducing recurrence risk in HR+/HER2- early breast cancer patients.

Discontinued Operations

Following the spin-off of Sandoz in October 2023, Novartis no longer reports operating results for the Sandoz division. However, for the first quarter of 2023, discontinued operations included net sales of USD 2.5 billion and an operating income of USD 238 million.

Outlook for 2024

Novartis anticipates continued growth in 2024, projecting net sales to grow by high single to low double digits and core operating income to rise by low double digits to mid-teens. The company assumes no generic competition for Entresto and Promacta in the US for the remainder of the year. Foreign exchange rates could have a negative impact on net sales and core operating income if current rates prevail.

Highlights

• Q1 net sales grew by 11% (cc), driven by strong performance across key products.
• Core operating income increased by 22% (cc), with a margin improvement to 38.4%.
• Significant milestones included FDA filings and positive trial results for several key drugs.
• Full-year 2024 guidance raised, with expectations for significant growth in net sales and core operating income.
• Continued strategic focus on innovative medicines and key therapeutic areas.

Data Source: https://www.novartis.com/sites/novartis_com/files/q1-2024-media-release-en.pdf