Novartis Feels the Effect Of Drop in Gleevec Sales -- WSJ
April 22 2016 - 3:03AM
Dow Jones News
By Denise Roland
Novartis AG's earnings fell in the first quarter as it plowed
investment into drug launches to offset lower sales of Gleevec,
after a cheaper version of the cancer drug was launched in
February.
Basel, Switzerland-based Novartis is leaning on new drugs to
offset Gleevec's declining revenue, which fell 22% to $834 million.
That decline, though less sharp than feared, weighed on total
revenue, which slipped 3% to $11.6 billion from $11.9 billion a
year earlier.
The company said it increased spending on marketing by 1.1
percentage point to 23.6% of sales to promote its newer drugs. It
said revenue from those so-called growth products increased 24% in
the quarter to $3.9 billion. That extra investment contributed to a
13% fall in core net income, a measure which strips out one-time
impairments and gains, to $2.8 billion. Stripping out the effect of
the strong dollar, sales were up 1% and core net income fell
6%.
Net income for the three months ended March 31 was $2 billion, a
fraction of the $13 billion reported a year earlier, when profit
was boosted by a $12.8 billion gain from the sale of businesses to
GlaxoSmithKline PLC and Eli Lilly & Co.
Sales of one of Novartis's most important drug launches,
Entresto for heart failure, were still "modest" in the first
quarter, at $17 million. The drug has so far proved a
disappointment, as a result of doctors' hesitation to switch stable
patients onto a new medicine and delays in securing reimbursement
from health insurers in the U.S. But the company said it expected
the drug to generate $200 million in revenue this year, now that it
has broader insurance coverage in the U.S. and Novartis has
deployed a larger sales force.
Chief Executive Joe Jimenez said Novartis had increased its U.S.
sales force for Entresto by 50% to make more frequent visits to
cardiologists, a strategy he said had already "unlocked that
resistance to prescribe."
Another key drug, Cosentyx for psoriasis, has had a stronger
start. Revenue from that drug was $176 million. Novartis said
growth accelerated in the first quarter due to additional approvals
in rheumatic conditions. Mr. Jimenez said he expected that drug, as
well as Tafinlar and Mekinist, two drugs for advanced melanoma, to
help offset sales lost from Gleevec this year.
Novartis's earnings also took a hit from increased investment in
its ailing eye-care unit Alcon, which is in the early stages of a
turnaround announced earlier this year.
The company said its growth plan for Alcon, which sells items
such as contact lenses and lens implants, was on track. Revenue
from the unit fell 3% to $1.4 billion at constant currencies, due
to competition for its contact lenses and a slowdown in sales of
cataract equipment. Mr. Jimenez said he expected Alcon to have a
slow first half but to "turn" in the next six months of the
year.
Sandoz, the company's generic drug unit, notched revenue of $2.4
billion in the first quarter, up 4% at constant currencies, as
volume growth of 11 percentage points more than offset 7 percentage
points of price erosion.
The company confirmed its outlook for 2016 growth, saying it
still expected revenue and core operating income to be broadly in
line with 2015.
Write to Denise Roland at Denise.Roland@wsj.com
(END) Dow Jones Newswires
April 22, 2016 02:48 ET (06:48 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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