Analysts Expect Novartis’s Revenues to Remain Flat in 1Q17
Novartis’s revenue estimates
Analysts expect Novartis’s (NVS) revenues to remain nearly flat at ~$11.7 billion in 1Q17 following the effects of the acquisitions and divestitures of a few of its businesses. These factors will have a long-term effect.
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The above graph shows Novartis’s actual revenues and EPS (earnings per share) and analysts’ estimates for revenues and EPS since 1Q15. There are various factors affecting these expectations for future revenues, which we’ll cover in the other parts of this series.
Segment expectations for 1Q17
Since 2014, Novartis has divested its business segments, including Novartis Animal Health to Eli Lilly (LLY), part of its Vaccines and Consumer Healthcare businesses to GlaxoSmithKline (GSK), and its influenza vaccines business to CSL Group. The company acquired GlaxoSmithKline’s oncology business in March 2015. In the new structure, Novartis’s business is divided into the following three business segments:
- Innovative Medicines, previously Pharmaceuticals, which includes Novartis Pharmaceuticals and Novartis Oncology
- Sandoz, its generics brand
- Alcon, its eye care brand
Revenues for Innovative Medicines have shifted in product performance. For 1Q17, Gilenya, Tasigna, Tafinlar and Mekinist, Jakavi, Afinitor, Xolair, and the COPD (chronic obstructive pulmonary disease) portfolio are expected to offset the fall in sales of Diovan monotherapy, Exforge, and Vivelle-Dot due to generic competition.
Sandoz, Novartis’s generics brand, is expected to be driven in 1Q17 by the strong performance of key products. They include dermatology products, biosimilars, and new products such as Glatopa.
Alcon, the eye care division, is expected to report a fall in revenues across all three franchises, including surgical sales, ophthalmic pharmaceuticals, and vision care products. The fall is mainly due to strong competition from Johnson & Johnson’s (JNJ) Acuvue products and other competitors.
To divest the risk, you can consider ETFs such as the VanEck Vectors Pharmaceutical ETF (PPH), which holds 7.9% of its total assets in Novartis.