Novartis reports further operating profit growth ahead of Sandoz spin-off – Stock Market News

Novartis Wednesday predicted that core operating income would grow in a “mid-single-digit” percentage range in 2023 after stagnating last year, as the Swiss drugmaker prepares to divest its Sandoz generics business .

Core operating profit for the full year was broadly flat at $16.7 billion, it said in a statement, slightly below market expectations of $16.8 billion.

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Adjusted for broadly negative currency effects, the group’s 2022 sales rose 4% to $50.5 billion, gains from heart failure drug Entresto and multiple sclerosis (MS) drug Kesimpta having been partly offset by competition from cheap generic copies of the established anti-MS drug Gilenya.

Novartis chief executive Vas Narasimhan told CNBC’s Geoff Cutmore that the company faced challenges in the first half of 2022, including hyperinflation and the continued impact of the coronavirus pandemic.

“Now we see some of these things starting to stabilize. We see healthcare systems stabilizing a bit more, we see China starting to stabilize, and we see a rebound in the second half of China. significant tailwinds for a company like ours,” he said in an interview in Basel, Switzerland.

Novartis said in its statement that it was on track to spin off its Sandoz generics unit in the second half of the year as part of its efforts to focus more on its patented prescription drugs.

Analysts say the stock price has been buoyed by a program unveiled in 2022 to cut costs and cut 8,000 jobs and plans announced later last year to focus on fewer therapeutic areas and drug technologies .

But the market was disappointed by its medium-term growth prospects from new drugs. The shares are down around 11% since January 2020, underperforming most of its rivals.

Market holds hope for future sales growth from wider use of breast cancer drug Kisqali and iptacopan, which is being tested against a rare, possibly difficult genetic blood disorder Astra Zeneca‘s drugs Soliris and Ultomiris.

The MS drug Kesimpta, requiring fewer injections than standard therapies, is expected to become Novartis’ second growth engine in 2023, after Entresto.

Asked by CNBC about the impact of the US Inflation Reduction Act on drug prices, Narasimhan said the company’s guidance for single-digit growth and a margin of more than 40% for 2027 held. account of the law.

“We are fully prepared to offset the impacts of the IRA. They are there, but we believe we can offset them in the short term,” he said. However, he said that in the medium to long term, the company should consider the impact of the law on the drugs it develops.

“We believe there are distortions in this bill that don’t make sense, hopefully we can get lawmakers to address them, but this is going to be a real priority in the United States.”

On legislative changes and drug pricing rules that could impact business in Europe, Narasimhan said: “We are seeing austerity measures coming. We have seen problematic actions in the UK, we see problematic actions on the continent itself”.

“We really need European governments to recommit themselves to healthcare, investing in innovation, we need the European Commission to create a more favorable environment for innovation,” he continued, adding that pushing in that direction would be another focus for the company this year.

CNBC’s Jenni Reid contributed to this report.