Novartis Raises Annual Profit Outlook

(Bloomberg) -- Swiss drugmaker Novartis AG is plotting a faster course after spinning off its Alcon eye-care business.

Earnings excluding some items are expected to increase by a high single-digit percentage, the Basel, Switzerland-based company said Wednesday, raising its guidance. Adjusted earnings per share beat analysts’ estimates in the first quarter. The stock rose as much as 2.8 percent in Zurich trading, its biggest intraday gain so far this year.

Novartis is shaking up its strategy to spur growth, narrowing its focus on cutting-edge drugs for cancer and rare diseases and betting on treatments such as gene therapies to potentially cure severe illnesses. In his first year at the helm, Chief Executive Officer Vas Narasimhan split with Alcon, ditched a stake in a consumer-health venture and carried out three crucial acquisitions to revamp the Swiss drugmaker.

“This quarter has been all about transformation for us,” Narasimhan said in a Bloomberg TV interview.

Novartis is turning to new drugs like Mayzent, a multiple sclerosis treatment that was cleared in the U.S. last month, as sales of key blockbusters fade. Like crosstown rival Roche Holding AG, the company is at a turning point as it works to replace some stalwarts with a new generation of medicines.

The drugmaker expects two more big approvals in the first half of 2019: one for a new breast cancer drug and one for the gene therapy Zolgensma, which treats a lethal childhood disease called spinal muscular atrophy.

“Very high prices” can be justified for revolutionary medicines like Zolgensma that may cure patients in one infusion but cost millions, Narasimhan said, but the company is looking at ways to mitigate them with staggered payments or even reimbursements if the medicine doesn’t work as well as expected.

Adjusted earnings for the first quarter rose to $1.21 a share, the company said in a statement, beating estimates. The results underscore the significance of psoriasis treatment Cosentyx, which could become the company’s top-selling medicine in 2019. Sales of the drug surged 41 percent to $791 million, exceeding the average analyst prediction of $775 million.

The earnings also highlight pressure on the generics unit Sandoz, which is set to become a standalone business within the broader company and undergo what Novartis has called a “transformation.” Novartis appointed Richard Saynor as the new chief executive for the unit on Wednesday. The division had been run by an interim manager after Richard Francis, its previous CEO, left at the end of March.

Novartis left its sales outlook unchanged for the year. Its prior estimate for adjusted earnings, published in January, was for a mid to high single-digit percentage gain.

--With assistance from Naomi Kresge and Manus Cranny.

To contact the reporter on this story: James Paton in London at jpaton4@bloomberg.net

To contact the editors responsible for this story: Eric Pfanner at epfanner1@bloomberg.net, Marthe Fourcade, John Lauerman

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