Novartis (NVS) to Report Q3 Earnings: What's in the Offing?
Novartis AG NVS is scheduled to post third-quarter 2023 results on Oct 24.
The Swiss pharma giant has an impressive record, beating earnings expectations in the trailing four quarters. It delivered a four-quarter average earnings surprise of 6.56%. In the last reported quarter, the company beat earnings estimates by 8.93%.
Novartis AG Price, Consensus and EPS Surprise
Novartis AG price-consensus-eps-surprise-chart | Novartis AG Quote
Let's see how things are shaping up for this announcement.
Factors Driving Growth
Novartis operated under two segments — Innovative Medicines and Sandoz (generics). However, earlier in the month, Novartis completed the spin-off of its generic and biosimilar unit, Sandoz, following which Sandoz became an independent company. Hence, Sandoz division and selected portions of corporate activities attributable to Sandoz’s business, as well as certain expenses related to the distribution, will be reported as discontinued operations.
Sales have most likely been boosted in the Innovative Medicines division on the back of Entresto, Pluvicto, Kesimpta, Scemblix and Kisqali’s continued strong performance in the third quarter. The Zacks Consensus Estimate for the Innovative Medicines unit is $11.4 billion and our estimate for the same is $11.3 billion.
Entresto sales witnessed a solid surge of 35%, boosted by sustained robust demand-led growth benefiting from adopting guideline-directed medical therapy across all geographies in the second quarter. The momentum has likely continued in the third quarter. The Zacks Consensus Estimate for Entresto and our model estimate are $1.5 billion.
Pluvicto is also likely to have reported robust growth, driven by strong demand in the United States as the first and only radioligand therapy approved by the FDA for treating adult patients with progressive, PSMA-positive metastatic castration-resistant prostate cancer. Our model estimate for Pluvicto sales is $278 million.
Other growth drivers, like Kesimpta and Kisqali, are likely to have maintained momentum for Novartis. Breast cancer drug Kisqali’s sales surged in the first half across all regions, based on increasing recognition of its consistently reported overall survival and quality of life benefits in HR+/HER2- advanced breast cancer. Its stellar performance has most likely prevailed in the third quarter. The Zacks Consensus Estimate for Kisqali and our model estimate are $530 million and $528 million, respectively.
Increased demand and robust access have likely boosted Kesimpta's sales in the third quarter. Our model estimate for Kesimpta sales is $530.8 million.
Sales of Cosentyx, too, were under pressure due to revenue deduction adjustments in the United States, but demand growth across other key regions remains strong. The trend has most likely continued in the third quarter. In May 2023, the European Commission approved Cosentyx as the first and only IL-17A inhibitor for hidradenitis suppurativa (“HS”) and the first new biologic therapy for HS in nearly a decade. Sales are likely to have boosted with expanded label. The Zacks Consensus Estimate and our model estimate for Cosentyx is $1.3 billion.
However, generic competition for Gilenya in the United States is most likely to have hurt the top line, as in the previous quarter. Generic competition for Gilenya and Lucentis have likely impacted sales in Europe as well.
Recent Events
Novartis received an unfavorable ruling from the U.S. District Court for the District of Delaware regarding the validity of a patent covering Entresto. This patent, which includes the combination of sacubitril and valsartan, is set to expire in 2025 with its pediatric exclusivity. Novartis will appeal to the U.S. Court of Appeals for the Federal Circuit to uphold the validity of Novartis’ patent covering Entresto and combinations of sacubitril and valsartan.
Novartis acquired Seattle-based clinical-stage biopharmaceutical company Chinook Therapeutics for $3.5 billion to strengthen its renal pipeline. The acquisition added Chinook’s pipeline, which includes two late-stage candidates, atrasentan and zigakibart, for immunoglobulin A nephropathy to Novartis’ pipeline.
Share Price Performance
The stock has gained 4.3% year to date compared with the industry's growth of 6.9%.
Image Source: Zacks Investment Research
What Our Model Predicts
Our proven model does not conclusively predict an earnings beat for Novartis this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is not the case here, as you will see below.
Earnings ESP: Earnings ESP for NVS is 0.00% as both the Zacks Consensus Estimate and the Most Accurate Estimate are currently pegged at $1.71 per share. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
Zacks Rank: The company currently carries a Zacks Rank #3.
Stocks to Consider
Here are some drug/biotech stocks that have the right combination of elements to beat on earnings this time around:
Biogen BIIB has an Earnings ESP of +4.58% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
BIIB beat earnings estimates in each of the last four quarters, the average earnings surprise being 10.53%.
GSK PLC GSK has an Earnings ESP of +6.79% and a Zacks Rank #3.
GSK topped earnings estimates in all the last four quarters and has a four-quarter earnings surprise of 12.40%, on average.
AstraZeneca AZN has an Earnings ESP of +5.13% and a Zacks Rank #3.
AstraZeneca topped earnings estimates in the last four quarters and has a four-quarter earnings surprise of 8.38%, on average.
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