Novartis’s Brightened Outlook Pushes Shares to All-Time High

(Bloomberg) -- Novartis AG raised its earnings outlook for the second time this year, driving the shares to an all-time high, and said the launch of its $2.1 million gene therapy is on track despite concerns over coverage barriers.

Earnings excluding some items are expected to increase by a low double-digit to mid-teens percentage this year, the Basel, Switzerland-based company said. Novartis previously forecast a high single-digit percentage increase. The stock climbed as much as 3.4% in Zurich.

The Swiss drugmaker also boosted its outlook for sales, new medicines and the Sandoz generics unit as Chief Executive Officer Vas Narasimhan work to reshape the company’s strategy begins to pay off. Narasimhan has spun off the Alcon eye-care division, ditched a stake in a consumer-health venture and unveiled a series of acquisitions after taking the helm early last year.

Novartis at the same time has sought to sharpen its focus on cutting-edge drugs for cancer and rare illnesses, rolling out products like gene therapy Zolgensma aimed at a devastating muscle disease. Approved in the U.S. in May, the treatment has experienced “strong uptake,” Narasimhan told reporters.

While analysts have flagged restrictions with U.S. health-care providers, the CEO said on a call that the launch is progressing in line with expectations. Novartis has contracts with insurers covering about 40% of patients with commercial health plans, Narasimhan said. The company said in May it expected to have 30% coverage in the first month after approval. He added that four state Medicaid plans have Zolgensma coverage in place.

Nearly all patients who have sought the therapy and are eligible based on the drug’s label “have achieved an approval to be treated with the medicine after the appropriate steps are taken,” he said. “We’re continuing to advance our efforts, both getting medical policies in place and contracts in place with key payers.”

Novartis shares have climbed about 24% this year, doubling the gain in the Bloomberg index that tracks European pharma companies.

Novartis also has set aside about $700 million for a potential settlement in a U.S. case involving allegations it paid kickbacks to doctors who prescribed its drugs. A letter made public last month said the parties had made “significant progress” on reaching a deal.

Psoriasis treatment Cosentyx, poised to become the company’s top seller this year after a 25% sales boost last quarter, is also in focus amid rising competition in the immunology field.

Novartis already raised its profit forecast in April, saying it expected earnings excluding some items to increase by a high single-digit percentage. At the time it left its sales outlook unchanged. Sales are now expected to grow by a mid to high-single digit percentage.

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, John Lauerman

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