Novartis Raises Outlook, Plans Buyback of Up to $15 Billion

Novartis AG raised its profit outlook and announced plans to buy back as much as $15 billion in shares as it prepares to spin off its Sandoz generics unit.

(Bloomberg) — Novartis AG raised its profit outlook and announced plans to buy back as much as $15 billion in shares as it prepares to spin off its Sandoz generics unit. 

Operating profit excluding some items will likely grow by low double digits this year, the Swiss drugmaker said in a statement, raising its forecast for a second time from a prior estimate of high single-digits gains. The stock rose as much as 4% in Zurich trading. 

Novartis has worked on severing itself from Sandoz for almost a year to hone its focus on more lucrative innovative medicines. The spinoff will take place in the fourth quarter if shareholders endorse it at a meeting on Sept. 15, the company said. 

The drugmaker is in flux as Chief Executive Officer Vas Narasimhan sheds its less profitable projects and divisions to boost growth. The CEO has wrestled with research setbacks even as he reorganized the drugmaker and slashed jobs. 

After seeing Novartis deliver strong results from breast cancer drug Kisqali in a clinical trial, investors are now turning their focus to the company’s operating performance, Barclays Plc analyst Emily Field wrote in a note.

Meanwhile, potential generic competitors are on the horizon for Novartis’s biggest drug, heart medicine Entresto. A US judge ruled a patent invalid this month, but the drug probably won’t face generic competition before mid-2025, Chief Financial Officer Harry Kirsch said in a conference call with reporters.

Sandoz Spinoff

All of Sandoz will get spun off, Novartis said Tuesday. The stock will trade on the Swiss exchange, with an American Depositary Receipt program in the US. 

Earnings per share excluding some items rose to $1.83 last quarter, exceeding analysts’ estimates of $1.70.

What Bloomberg Intelligence Says:

Pharma was the key driver of the beat, with all major franchises exceeding expectations and a 2Q pharma core operating margin of 39%, despite management suggesting that the 38.7% reported in 1Q was unlikely to be repeated. 

— John Murphy, BI pharma analyst

The share buybacks will extend to the end of 2025, Novartis said. An earlier program of about the same size completed last month.

Novartis on Monday agreed to pay as much as $1 billion for the closely held biotech DTx Pharma Inc., which is developing treatments for nervous system disorders, focusing on a protein that can cause the sheath that supports and insulates nerves to malfunction. 

The company is still looking for strategic and bolt-on opportunities for acquisitions, according to Kirsch. Such deals are rare, he said, and the drugmaker finds it difficult to find a good fit.

(Updates with DTX Pharma deal in penultimate paragraph)

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