Yahoo Finance Factors Setting the Tone for Novartis' (NVS) Q1 Earnings
Swiss pharma giant Novartis AG NVS is scheduled to report first-quarter 2020 results on Apr 28.
The company has a decent track record, beating earnings expectations thrice in the trailing four quarters and missing in the remaining one by 6.25%, on average. In the last reported quarter, the company missed expectations by 0.76%.
Let's see how things are shaping up for this announcement.
Novartis AG Price, Consensus and EPS Surprise
Novartis AG price-consensus-eps-surprise-chart | Novartis AG Quote
Factors Driving Growth
Novartis operates under two segments — Innovative Medicines (Pharmaceuticals and Oncology) and Sandoz (generics).
The company did not provide any quarterly guidance. The Innovative Medicines division is likely to have maintained momentum in the first quarter on the back of strong performance by legacy drugs and incremental contributions from new drugs. However, the outbreak of the COVID-19 pandemic might have dented sales in the latter half of the quarter due to the global lockdown.
The Pharmaceuticals business unit grew 14% in the previous quarter, driven by continued momentum in Entresto and Cosentyx and the uptake of Zolgensma, a trend that most likely continued in the first quarter. Psoriasis drug, Cosentyx, continues to gain traction. Entresto sales have most likely been driven by increased worldwide uptake in hospital and ambulatory settings. Higher contributions from Zolgensma (gene therapy for pediatric patients with spinal muscular atrophy) and Xiidra might have resulted in incremental sales for this business unit.
Kisqali and Kymriah and the launch uptake of Piqray boosted the oncology unit in the previous quarter and have most likely fueled the top line in the first quarter as well. Promacta and Luthatera too are likely to have driven growth in this unit.
Price erosion in the United States will continue to reflect in Sandoz’s sales in the first quarter. Nevertheless, a strong biopharmaceutical business, driven by continued strong growth in Europe from Hyrimoz (adalimumab), Rixathon (rituximab) and Erelzi (etanercept), is likely to have offset the decline in the United States. Meanwhile, the company has decided not to sell its Sandoz US generic oral solids and dermatology businesses to Aurobindo Pharma USA Inc.
Apart from the top and bottom-line numbers, we expect investors to focus on the company’s outlook and pipeline updates. The coronavirus pandemic has delayed drug approvals and halted ongoing clinical studies in most countries. Moreover, sales of key drugs will be impacted since routine testing and checkups were put on hold. These factors along with supply-chain disruptions will adversely impact performance and outlook for the remainder of the year.
Investors will also be keen on updates on new drug approvals. During the quarter, Mayzent (siponimod) was approved in the EU for the treatment of adult patients with active secondary progressive multiple sclerosis (SPMS). The European Commission approved Beovu (brolucizumab) injection for the treatment of wet age-related macular degeneration.
Key Recent Developments
Novartis recently announced that it has reached an agreement with the FDA to initiate a phase III study to evaluate efficacy and safety of malaria drug, hydroxychloroquine, in hospitalized COVID-19 patients. Meanwhile, Sandoz, the generic unit of Novartis, has committed to donate up to 130 million tablets of hydroxychloroquine globally, if the drug is proved to be beneficial.
Novartis is also planning to repurpose some of its approved drugs, which are likely to be potent against COVID-19. These include multiple sclerosis drug, Gilenya, and fever drug, Ilaris. The company is also evaluating Jakafi (ruxolitinib) in collaboration with partner Incyte INCY in a phase III study in patients aged 12 years or older with COVID-19-associated cytokine storm.
Share Price Performance
The stock has lost 6.3% in the year so far compared with the industry's decline of 1.8%.
Earnings Whisper
Our proven model does not conclusively predict an earnings beat for Novartis this season. 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. Unfortunately, that is not the case here, as you will see below. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
Earnings ESP: Earnings ESP for Novartis is 0.00%.
Zacks Rank: It currently carries a Zacks Rank #3.
Stock to Consider
Here are some stocks you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter.
Alexion ALXN has an Earnings ESP of +0.83% and a Zacks Rank #2. The company is scheduled to release results on May 6. You can see the complete list of today’s Zacks #1 Rank stocks here.
Glaxo GSK has an Earnings ESP of +3.19% and a Zacks Rank #3. The company is scheduled to release results on Apr 29.
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