Novartis on Wednesday predicted that core operating income would grow in a “mid single digit” percentage range in 2023 following stagnation last 12 months, because the Swiss drugmaker prepares to spin off its Sandoz generics business.
Full-year core operating income was broadly flat at $16.7 billion, it said in an announcement, coming in barely below market expectations of $16.8 billion.
Adjusted for overall negative currency effects, group sales in 2022 advanced 4% to $50.5 billion as gains from heart failure drug Entresto and multiple sclerosis (MS) drug Kesimpta were partly offset by competition from low-cost generic copies of established MS drug Gilenya.
Novartis Chief Executive Vas Narasimhan told CNBC’s Geoff Cutmore the corporate had faced challenges in the primary half of 2022 including hyperinflation and the continuing impact of the coronavirus pandemic.
“Now we’re seeing a few of those things begin to stabilize. We’re seeing health care systems stabilize a bit more, we’re seeing China begin to stabilize, and we see a second-half rebound in China. All of those are essential tailwinds for a business like ours,” he said during an interview in Basel, Switzerland.
Novartis said in its statement it’s on course to spin off its generics unit Sandoz within the second half of the 12 months as a part of its effort to sharpen its deal with its patented prescription medicines.
Analysts say the share price has been supported by a programme unveiled in 2022 to trim costs and cut 8,000 jobs and plans announced later last 12 months to deal with fewer therapy areas and drug technologies.
However the market has been underwhelmed by its prospects for medium-term growth from latest drugs. Shares are down about 11% since January 2020, underperforming most of its rivals.
The market has been pinning hopes for future sales growth on wider use of breast cancer drug Kisqali and iptacopan, which is being tested against a rare genetic blood disorder, possibly difficult AstraZeneca‘s drugs Soliris and Ultomiris.
MS drug Kesimpta, requiring fewer injections than standard therapies, is predicted to change into Novartis’ second largest growth driver in 2023, after Entresto.
Asked by CNBC in regards to the impact of the U.S. Inflation Reduction Act on medicines pricing, Narasimhan said the corporate’s guidance of mid-single digit growth and 40% plus margin for 2027 took the act into consideration.
“We’re fully prepared to offset the impacts of IRA. They’re there, but we expect we are able to offset them within the near-term,” he said. Nonetheless, he said within the mid- to long-term the corporate would want to look at how the act would impact the medicines it develops.
“We expect there are some distortions on this bill that do not make sense, we hope we are able to get legislators to repair it, but that is going to be an actual focus within the U.S.”
On legislative changes and drug pricing rules potentially impacting the business in Europe, Narasimhan said: “We do see austerity measures coming in. We saw some problematic actions within the U.K., we see problematic actions within the continent itself.”
“We actually need European governments to rededicate themselves to health care, investing in innovation, we’d like the European Commission to create a more pro-innovation environment,” he continued, adding that pushing for this is able to be one other focus for the corporate this 12 months.
CNBC’s Jenni Reid contributed to this report.