Novartis stock jumped to a record high Tuesday after a trio of drugs — including blockbuster heart failure drug Entresto — led to a beat-and-raise report for the first quarter.
Chief Executive Vas Narasimhan credited Entresto, Kisqali and Kesimpta for helping drive March-quarter growth. Entresto reduces the risk of cardiovascular outcomes in patients whose hearts are failing. Kisqali treats breast cancer, and Kesimpta is a multiple sclerosis medicine.
During the quarter, Entresto sales surged 32%, excluding the impact of exchange rates. Meanwhile, Kesimpta revenue doubled and Kisqali sales rocketed 81%.
Edward Jones analyst John Boylan says it was a "surprisingly strong quarter." But he kept his hold rating on Novartis stock, noting sales of immunology drug Cosentyx came in light. Further, Novartis could struggle to find acquisition targets against more financially secure rivals.
Still, on today's stock market, Novartis stock advanced 3.4% and closed at 104.04. Shares recently broke out of a flat base with a buy point at 93.41, according to MarketSmith.com.
Novartis Stock: Entresto's Reign
In total, Novartis reported core earnings of $1.71 per share and $12.95 billion in first-quarter sales.
Earnings jumped 17% on a strict, as-reported basis and topped forecasts for $1.53 a share, according to FactSet. In constant currency, earnings popped 25%. Sales rose 3% to beat projections for $12.72 billion. Excluding the impact of foreign currency, sales increased 8%.
Entresto generated a whopping $1.4 billion in sales, continuing its reign as Novartis' bestselling drug. But Cosentyx sales slipped 7% in constant currency to $1.08 billion. Edward Jones' Boylan notes Cosentyx competes against newer drugs and generic knockoffs of a similar drug.
Rivalries like this — and competition for acquisitions — could undercut Novartis stock, he said.
"We also expect strong competition for acquisitions given the strong cash position of some of its large peers," he said. "This is important, as many drug companies rely on acquiring companies or new, promising drugs for a good part of their growth."
Novartis Raises Its Outlook
Both Novartis' innovative medicines and its generics business, the latter of which is known as Sandoz, beat first-quarter expectations. Sales in its innovative medicines segment grew 3% to $10.6 billion, while Sandoz sales moved 4% ahead to $2.4 billion.
Novartis confirmed its plan to spin off the Sandoz division in the second half of the year.
For the year, Novartis now expect sales to grow by a mid-single-digit percentage, up from its prior forecast for a low-to-mid single-digit percentage. Novartis stock analysts had predicted earnings of $6.57 per share and $52.91 billion in sales.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
