The Swiss pharmaceutical company’s stock slipped on Tuesday, as it offered cautious guidance.
Fabrice Coffrini/AFP via Getty ImagesNovartis stock slipped 2.4% in early trading on Tuesday, as the Swiss pharmaceutical company offered cautious guidance and said the Covid-19 pandemic would continue to affect sales through the first half of 2021.
Net sales in the fourth quarter rose 1% to $12.77 billion, below the FactSet consensus of $12.9 billion, as the company said Covid-19 lockdowns continued to negatively impact sales, most notably in dermatology and ophthalmology, while its Sandoz retail business has also been affected during the year. Full-year sales grew 3% to $48.7 billion but also missed the FactSet consensus, driven by the success of cardiac treatment Entresto.
Fourth-quarter net profit grew 93% to $2.1 billion but also missed estimates of $2.66 billion, while core operating income rose 2% to $3.5 billion.
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The coronavirus crisis has hit drug sales and prescriptions, as lockdown measures have largely kept patients away from hospital. The company said it didn’t expect to see a return to normal global health care systems, including prescription dynamics, until mid 2021. They expected net sales to grow by low to mid single digits in 2021, with core operating income seeing better mid single digit growth.
Despite the impact of the virus, Novartis said its operations remain stable, with cash collections continuing to be according to normal trade terms.
Chief Executive Vas Narasimhan said: “Novartis had a solid performance in 2020 across our strategic priorities, despite the challenges of Covid-19. Operationally, we grew sales and continued to improve core operating margins for Innovative Medicines.”
Read:Buy Novartis Stock, Analyst Says. It Should Rise 20%.
Regulatory hurdles are facing two of Novartis’ drugs—cholesterol-lowering Leqvio and spinal muscular atrophy drug Zolgensma—analysts noted. Novartis said that with Leqvio the U.S. Food and Drug Administration (FDA) had asked for answers following an “unresolved facility inspection-related conditions” at a third-party manufacturing facility in Europe. The company will respond in the second or third quarter, it said. Plans to expand Zolgensma for use by older patients have also hit delays. “Largely the timelines are out of our control,” Narasimhan said, according to Reuters.
Looking ahead. The company’s guidance and assertions that the impacts of Covid will last until at least the halfway point of the year have disappointed investors. Jefferies analysts said the outlook was more cautious than expected and that the “lighter” fourth quarter was also weighing on the shares.
UBS analysts noted that while a number of drugs beat expectations in terms of sales, Zolgensma missed by 20% as hospital traffic remains down, while also noting that Leqvio—approved in Europe—won’t be resubmitted to the FDA until the second or third quarter. However, they maintained a buy rating on the stock.
Novartis, as well as investors, will be hoping their outlook proves to be overly cautious and that the Covid-19 impact begins to wane sooner than expected, leading to accelerating growth later in the year.
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