Novartis delivers strong sales, double digit income growth in 2nd quarter

LONDON: Novartis has delivered strong sales, double digit core operating income growth and launches Zolgensma and Piqray in second quarter ended June 30, 2019.

Net sales were USD 11.8 billion (+4%, +8% cc) in the second quarter driven by volume growth of 10 percentage points (cc), mainly from Cosentyx, Entresto and Lutathera. Strong volume growth was partly offset by the negative impacts of pricing (-1 percentage point cc) and generic competition (-1 percentage point cc).

Operating income was USD 2.7 billion (+10%, +17% cc) mainly driven by higher sales, improved gross margin, productivity programs and higher divestment gains, partly offset by growth investments and legal provisions.

Net income was USD 2.1 billion, declining compared to prior year which benefited from a USD 5.7 billion net gain recognized from the sale of our stake in the GSK consumer healthcare joint venture. EPS was USD 0.91.

Core operating income was USD 3.6 billion (+14%, +20% cc) mainly driven by higher sales, improved gross margin and productivity programs, partly offset by growth investments. Core operating income margin was 31.0% of net sales, increasing by 2.7 percentage points (+3.2 percentage points cc).

Core net income was USD 3.1 billion (+13%, +19% cc) driven by growth in core operating income. Core EPS was USD 1.34 (+14%, +20% cc) in line with core net income.

Free cash flow from continuing operations amounted to USD 3.6 billion (+11% USD) compared to USD 3.3 billion in prior year, mainly driven by higher operating income adjusted for non-cash items, and higher divestment proceeds, partly offset by higher working capital, increased payments out of provisions and lower dividends received from the OTC JV which was divested in Q2 2018.

Commenting on the results, Vas Narasimhan, CEO of Novartis, said: “Novartis delivered an exceptional first half performance in 2019 as a focused medicines company with strong sales and productivity driving double digit core operating income growth with margin expansion. We increased our full year guidance for both sales and core operating income in light of our strong momentum. We continue to progress our breakthrough medicines pipeline, with the launches of Zolgensma and Piqray, and are on track for the upcoming pivotal trial results of Entresto in preserved ejection fraction heart failure, of atumumab in multiple sclerosis, and fevipiprant in asthma.”

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