January 29, 2020 / 6:26 AM / a month ago

Novartis predicts rising sales and minimal disruption from coronavirus

BASEL, Switzerland (Reuters) - Novartis (NOVN.S) boss Vas Narasimhan expects higher sales and profitability this year, lifted by its broad range of drugs, and minimal disruption to its supply chain from the coronavirus outbreak in China.

The company's logo is seen at a building of Swiss drugmaker Novartis in Rotkreuz, Switzerland, January 29, 2020. REUTERS/Arnd Wiegmann

The Swiss drugmaker’s upbeat outlook and quarterly results on Wednesday outshone the previous day’s results from Pfizer (PFE.N) and set the bar for rival Roche (ROG.S), which is expected to report higher 2019 sales and profit on Thursday.

Novartis shares were up 1.5% at 1337 GMT after the company said it would raise its dividend 4% to 2.95 Swiss francs per share and as Narasimhan downplayed the threat of coronavirus disruptions.

China is one of Novartis’s fastest-growing markets and has research and development operations there but also obtains supplies of active pharmaceutical ingredients from Chinese suppliers.

After the coronavirus outbreak, Novartis asked Chinese staff to work from home until Feb. 10 while suspending some business travel, but Narasimhan said he expects the company to emerge unscathed thanks to sufficient supplies to ride out interruptions.

The head of generics unit Sandoz, Richard Saynor, said the company has evaluated its stocks of ingredients and concluded that it has an adequate buffer for now.

China accounts for more than $2 billion in annual business for Novartis and last year produced double-digit growth including the launches of Cosentyx and Entresto, a drug Narasimhan predicts could top $1 billion in sales in China.

Novartis’s broad drugs portfolio, including treatments for cancer, arthritis and rare diseases, helped the company post fourth-quarter core net income of $2.99 billion, up 13% in constant currencies, on revenue up 9% at $12.4 billion.

The group is benefiting from a mix of products developed in-house, such as psoriasis medicine Cosentyx and heart failure remedy Entresto, as well as $2.1 million-per-patient gene therapy Zolgensma, acquired through a 2018 acquisition.

“A company of our size, with now approaching $50 billion of revenue ... has to have a diverse approach to therapeutic areas,” CEO Narasimhan told a news conference in Basel.

“We want to cover the unmet needs of humanity, so that ranges from cardiovascular disease and oncology, all the way to rare diseases.”

For 2020, Novartis expects net sales growth of up to high-single-digit percentages, with core operating income potentially rising even faster.

“The overall results, with the focus on the main drugs business and the strong outlook for 2020, is likely to be taken positively by investors,” said Zuercher Kantonalbank analyst Michael Nawrath, who has an “overweight” rating on the stock.

Overall, Cosentyx’s sales for the 12-month period rose 28% to $3.6 billion, Entresto was up 71% at $1.7 billion and Zolgensma hit $361 million after seven months on the market.

Additional reporting by John Revill; Editing by Mark Potter and David Goodman

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