Novartis AG (NVS) delivered strong third-quarter results, exceeding analyst expectations with sales of $12.823 billion, a 9% increase (+10% on a constant currency basis). This outperformance propelled the company to raise its full-year guidance for 2024 once again.
In a statement, Novartis indicated that it expects full-year core operating income to experience a ‘high teens’ percentage growth, surpassing its prior guidance of a ‘mid-to-high teens’ percentage increase. The company forecasts full-year sales growth in the low double digits, a more optimistic projection compared to its previous guidance of high-single to low-double-digit growth.
However, a significant challenge emerged for Novartis with the further delay of the pelabresib filing. This delay triggered an impairment charge of $800 million related to the $2.9 billion acquisition of MorphoSys, a company facing growing safety concerns regarding pelabresib. This event raised questions about Novartis’ M&A strategy, as Goldman Sachs noted the somewhat underwhelming nature of the MorphoSys-related impairment charge.
Despite this setback, Novartis remains focused on its key growth drivers. Truist analysts highlighted the company’s strategic focus on preparing the market for the PSMAFore label, which is expected to triple its addressable market. They also pointed out promising growth opportunities in China and Japan, and in the metastatic hormone-sensitive prostate cancer (mHSPC) and oligometastatic disease areas, which could potentially push Pluvicto’s sales well above the projected $2 billion peak. Novartis is committed to maximizing the potential of Pluvicto and its radioligand therapy (RLT) portfolio.
However, the company faces increasing competition in the radiopharmaceutical market. The emergence of Pluvicto could create challenges for other radiopharmaceutical companies targeting PSMA, as the standards required to compete with more effective radioligand products remain unclear. This context directly impacts companies such as Eli Lilly And Co (LLY) and Bristol Myers Squibb & Co (BMY), which have RLT products in their pipelines, as well as smaller companies like Y-mAbs Therapeutics Inc (YMAB) and Perspective Therapeutics Inc (CATX).
Beyond the radiopharmaceutical landscape, Novartis highlighted continued strong growth and momentum in other areas. The company sees room to grow the market size for B-cell inhibition in multiple sclerosis, a development that could impact Biogen Inc (BIIB).
Truist analysts also praised Novartis’ robust balance sheet, enabling further bolt-on deals and share buybacks. Recent transactions have primarily involved deals in the sub-$1 billion range, alongside a few larger bolt-on acquisitions. The analysts will closely monitor how the adoption of Leqvio may affect Amgen Inc’s (AMGN) Repatha and Regeneron Pharmaceuticals Inc’s (REGN) Praluent. Novartis reported that the launch of Leqvio is progressing smoothly and the drug’s growth is outpacing the overall market, according to management.
Furthermore, Novartis’ Cosentyx has experienced strong uptake and continued brand growth, driven by expansion in the hidradenitis suppurativa market. This market opportunity can accommodate several players, including Abbvie Inc (ABBV), Incyte Corporation (INCY), and Kymera Therapeutics, Inc (KYMR).
Novartis’ stock closed down 0.48% at $110.00 on Wednesday.
