Novartis Looks To Get Back On Track With Q1 Earnings

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Novartis' Q1 outlook appears stable, with expectations of a rebound from a previous quarterly miss, projecting $11.57 billion in revenue.Key drugs like Fabhalta and Cosentyx may drive short-term ...

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href=https://seekingalpha.com/article/4684711-novartis-looks-to-get-back-on-track-with-q1-earnings><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Novartis' Q1 outlook appears stable, with expectations of a rebound from a previous quarterly miss, projecting $11.57 billion in revenue.Key drugs like Fabhalta and Cosentyx may drive short-term ...</p>\n\n<a href=\"https://seekingalpha.com/article/4684711-novartis-looks-to-get-back-on-track-with-q1-earnings\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"SG9999002232.USD","symbol_name":"Allianz Global High Payout 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ACC","IE00B2B36J28.USD":"JANUS HENDERSON GLOBAL LIFE SCIENCES \"I1\" (USD) INC","LU2023250843.SGD":"Allianz Thematica Cl AT Acc H2-SGD","PFE.AU":"PANTERA MINERALS LTD"},"translate_title":"诺华希望Q1盈利重回正轨","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"AZN":1,"XBI":1,"RHHBY":1,"PFE.AU":1,"PFE":1,"NVS":1,"MRK":1,"03165":0.6},"content_text":"Novartis' Q1 outlook appears stable, with expectations of a rebound from a previous quarterly miss, projecting $11.57 billion in revenue.Key drugs like Fabhalta and Cosentyx may drive short-term growth, counteracting potential losses from generic competition.Financially, Novartis shows robust health with a manageable debt-to-equity ratio and strong gross profit, positioned for stable future growth.Hold recommendation: Fairly priced stock with balanced risks and rewards, suggesting caution until further performance confirmation.   Justin Paget/DigitalVision via Getty ImagesNovartis Q1 Outlook Amid Earnings and Regulatory Updates I last covered Novartis (NYSE:NVS) in February after the firm announced its intention to acquire oncology developer MorphoSys (the deal is now in the process of closing). I believed the acquisition fit nicely into Novartis' offerings and recommended a \"hold\" rating. NVS stock has, essentially, traded flat since my recommendation but is notably off 13.91% within the past three months vs. returns of +5.97% for the S&P 500. The biotechnology sector, in general and as assessed by the SPDR S&P Biotech ETF (XBI), has taken a breather since late February. Back then, XBI was more than $100 per share but has since fallen to $84. Looking forward, Novartis will release Q1 earnings on April 23. Per Seeking Alpha, analysts are anticipating EPS GAAP of $0.99 and $11.57 billion in revenue. Below, I discuss some key developments to watch: Novartis missed on its last earnings (Q4 '23). Its EPS of $1.53 fell short of the consensus estimate of $1.64. Revenue, at $11.42 billion, also fell short of the $11.69 billion estimate. This was attributed to generic competition. This was the only quarterly miss of '23, so investors will be looking for a bounce in Q1. It wasn't all bad news: Novartis lifted its sales growth target to 5% annually through 2028. This is a pretty decent projection for a $200 billion pharmaceutical company, especially amidst the backdrop of industry-changing patent cliffs some big pharmaceutical companies are soon facing. There have been recent regulatory developments that may be reasons to believe a beat is likely in Q1. Novartis' Fabhalta will see its first quarter on the market. The first oral complement inhibitor for paroxysmal nocturnal hemoglobinuria [PNH] was approved in December. The company anticipates that Fabhalta will generate more than $3 billion in peak sales across a few different indications. In October, the FDA approved Novartis' blockbuster drug Cosentyx for the treatment of moderate-to-severe hidradenitis suppurativa [HS]. This is a large indication and Cosentyx, an interleukin-17 inhibitor, is the first of its kind for the disease. So, Novartis anticipates the HS indication to continue to drive growth.   NovartisOther assets, such as the self-administered MS medication Kesimpta and the radioactive therapy Pluvicto for mCRPC, are still in a unique position to grow. With Kesimpta's 73% year-over-year growth in the most recent quarter, Novartis is now projecting at least $4 billion in revenue annually. Pluvicto delivered $980 million in revenue last year, despite supply constraints that are expected to ease in 2024, allowing for faster quarterly growth. Novartis' flagship heart failure drug, Entresto, continues to grow 26% year-over-year but is expected to face generic competition within a year or two. The drug reached $6 billion in 2023 and Novartis expects it to reach $7 billion prior to its patent cliff. This is a double-edged sword. While Entresto should inspire growth in the near term, investors are concerned about what will replace Entresto in the long term. Overall, there's a lot to like about Novartis heading into Q1 earnings. They have a few differentiated assets that are either young blockbusters or on the path to becoming blockbusters. The gains from these assets could offset some of the lost revenue Entresto will likely face in the coming years. Financial Health According to Seeking Alpha, Novartis has $14.07 billion in cash and $26.44 billion in debt. $18.436 billion of that debt is long term. Last year, Novartis generated $45.4 billion in revenue. The cost of revenue was $12 billion. The gross profit was $34.64 billion. After deducting expenses (SG&A, R&D, etc.), operating income was $12.642 billion. Net income in 2023 was $14.85 billion. Overall, Novartis' financial health seems stable. They're comfortably profitable and seemingly able to cover any short-term obligations. Their debt-to-equity ratio of 1.13 indicates that their leverage is manageable (investors typically become concerned when this ratio exceeds 2). Market Sentiment Novartis' market capitalization is $204 billion. Analysts are projecting 5.91% year-over-year revenue growth for 2024, with sales pegged at $48.13 billion. Annual growth is then projected to decline to 3.58% ($49.85 billion) and 0.86% ($50.28 billion) for the years 2025 and 2026, respectively. Novartis' stock has been in the red for the past year, returning -4.87% compared to the S&P 500's 20.98% surge.   StockCharts.comShort interest is only 0.2% of the float. There has been no recent insider activity on Nasdaq. Top institutional investors include Dodge & Cox, Primecap Management, and Morgan Stanley. Institutional activity leans negative, with more than 17 million shares decreasing versus only 8.5 million increasing. Overall, I'd classify Novartis' market sentiment as \"mixed.\" Peer Comparison Relative to peers, Novartis is a bit pricey, but this may be the price of higher growth prospects.   Seeking AlphaNovartis' forward price-to-earnings ratio is 18.09, which is slightly higher than some of its peers. For example, AstraZeneca (AZN) and Merck (MRK) sport P/E's of 17.42 and 16.14, respectively. However, Novartis' year-over-year revenue growth of 7.36% outpaced all its peers, including Pfizer's (PFE) -41.7% and Roche's (OTCQX:RHHBY) -8.16%. Regarding profitability, Novartis' gross profit margin of 74.24% is in line with its peers. Novartis' actually sports the lowest (27.37%) long-term debt/total capital of the bunch (e.g., 33.8%, 40.7%, and 46.83%), further supporting the thought that Novartis' does not appear overly leveraged. The group's positive levered free cash flow enables bountiful dividends. Novartis' current dividend yield of 4.02% lies in the middle of the pack and is in its sixth year of growth. My Analysis and Recommendation In conclusion, Novartis seems favorably positioned for Q1 earnings. Drugs like Fabhalta, Cosentyx, Kesimpta and Pluvicto are uniquely positioned in their respective markets and could curtail any lost growth from presumed Entresto generic competition in the near future. Novartis' raised guidance of 5% growth through 2028 really speaks to their confidence in this regard.  Although Novartis' current products and innovations might outperform the 4.5% risk-free rate (10-year Treasury rate), the stock looks fairly priced, so I'm not inclined to rate Novartis as a \"buy\" just yet. The risks seem to balance the reward, prompting a prudent Hold recommendation. For example, when Novartis issued 2024 guidance of \"mid-single digit\" sales growth, although it did assume \"higher generic impact,\" that impact may be higher than anticipated. If that's the case, Novartis could reasonably miss again when they report Q1 earnings. Moreover, the biopharmaceutical industry is very competitive. For example, although Kesimpta is uniquely positioned in the MS market due to its subcutaneous, at-home administration, Roche (RHHBY) is planning to market a subcutaneous version of the most popular MS drug, Ocrevus, later this year. This may take substantial market share from Novartis' Kesimpta. Other risks include geopolitical concerns (Novartis is based in Switzerland) and macroeconomic woes (e.g., recessions). 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