) reported third quarter 2013 earnings per share of 91 cents,
down 8% (flat in constant currency) from the year-ago period.
Third quarter 2013 core earnings per share came in at $1.26, down
4% from the year-ago period, (up 1% in constant currency),
missing the Zacks Consensus Estimate of $1.32.
All growth rates mentioned below are on a year-on-year basis
and at constant exchange rates (CER).
Third quarter revenues of $14.3 billion were up 6% year over
year, marginally missing the Zacks Consensus Estimate of $14.4
Quarter in Detail
Novartis operates in five divisions: Pharmaceuticals, Alcon,
Generics (Sandoz), Vaccines & Diagnostics and Consumer
The Pharmaceuticals division recorded sales of $7.9 billion in
the reported quarter, up 4% driven by strong volume growth and a
favorable pricing, which more than offset the impact of
Key drugs at Novartis such as Gilenya, Afinitor, Tasigna,
Galvus, Xolair, Arcapta Neohaler/Onbrez Breezhaler, Seebri
Breezhaler and Jakavi contributed 39% to total sales in the third
quarter of 2013, up 28%.
The Alcon Division recorded revenues of $2.5 billion in the
third quarter, up 6% driven by growth in the Surgical Franchise.
The growth in the Surgical Franchise was driven by the cataract
segment due to continued rebound in markets and demand for laser
technology. Additionally, vision care business also showed solid
growth driven by strong sales in contact lenses. Sales in
Ophthalmic Pharmaceuticals were driven by market share gains
across fixed dose combination glaucoma and infection/inflammation
products, offset by U.S. generic prostaglandin competition.
Sales from the Sandoz division increased 11% to $2.3 billion
primarily driven by strong volume growth, attributable to Fougera
acquisition, which more than offset the price erosion. Retail
generics and biosimilars sales in the U.S., Western Europe
(excluding Germany) and the emerging markets also positively
Sales at the Vaccines and Diagnostics division were up 1% to
$594 million. The growth in this division was driven by Menveo
sales. During the reported quarter, the U.S. Food and Drug
Administration (FDA) approved an indication expansion for Menveo
to include infants and toddlers from two months.
Consumer Health sales at Novartis were up 12% to $1.0 billion
driven by strong growth in key brands along with re-launches of
several products that were adversely impacted by supply issues in
2013 Outlook Upped Again
Novartis upped its 2013 guidance once again based on solid
performance from the pharmaceuticals division in the first nine
months of 2013 and lower-than-expected generic erosion. The
delayed entry of generic Diovan Mono in the U.S. continues to
positively impact results at Novartis.
Novartis now expects sales to increase in low to mid single
digits in 2013 as compared to the earlier expectation of low
single digit growth as the company now expects generic
competition to impact sales by $2.3 billion in 2013, down from
the previous estimate of $2.7 billion.
We note that Novartis received EU approval for Ultibro
Breezhaler for the chronic obstructive pulmonary disease (COPD)
during the third quarter. Novartis plans to file both Seebri
Breezhaler and Ultibro Breezhaler for approval in the U.S. in
Moreover, the FDA granted Breakthrough Therapy designation to
pipeline candidate BYM338. The designation was granted for
sporadic inclusion body myositis (sIBM). This designation should
speed up the development and review process for the
Novartis also reported encouraging phase III data on its
psoriasis candidate, secukinumab (AIN457).
Investors reacted positively as shares increased 3.27% after
the earnings release.
Although we are encouraged by the consecutive increase in
guidance, we expect the delayed entry of generics to impact 2014
Novartis currently carries a Zacks Rank #3 (Hold). Right now,
) look well-positioned.
While Roche is a Zacks Rank #1 (Strong Buy) stock, Glaxo and
Bayer are Zacks Rank #2 (Buy) stocks.
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