Novartis’s 3Q16 Estimates: Innovative Medicines Segment

Novartis’s (NVS) Innovative Medicines segment, formerly referred to as the Pharmaceuticals segment, consists of products for therapeutic areas including oncology, cardio-metabolic, immunology and dermatology, retina, respiratory, neuroscience, and established medicines.

The segment includes research, development, manufacturing, distribution, and the sale of patented prescription drugs throughout the world.

The Innovative Medicines segment contributes ~67% of Novartis’s total revenue.

Products including Gilenya, Tasigna, Afinitor, Galvus, a combination of Mekinist and Tafinlar, Promacta and Revolade, COPD (chronic obstructive pulmonary disease) products such as the Ultibro Breezhaler, and new products such as Cosentyx are expected to report growth in 3Q16.

Gilenya is an oral therapy for multiple sclerosis. Due to increased demand for the drug, its revenue is expected to rise more than 13% to $787 million in 3Q16, compared to $696 million in 3Q15. Gilenya competes with Biogen’s (BIIB) Tecfidera and Sanofi’s (SNY) Aubagio.

Tasigna, used in the treatment of chronic myeloid leukemia, is expected to report a 6% rise in revenue to $442 million in 3Q16, compared to $416 million in 3Q15. Tasigna competes with Pfizer’s (PFE) Bosulif.

Many of the segment’s products are exposed to competition due to patent expiry or better products on the market, and thus are expected to report revenue falls in 3Q16. A few key products whose revenues are expected to fall are Gleevec, Afinitor, Lucentis, Exelon Patch, and Exforge.

Gleevec, Novartis’s blockbuster drug, is used in the treatment of chronic myeloid leukemia. Gleevec is expected to report a fall of ~38% in its 3Q16 revenue to $743 million, compared to $1.2 billion in 3Q15.

Afinitor is an mTOR (mechanistic target of rapamycin) inhibitor used for the treatment of various types of cancer, including breast cancer and kidney cancer. Analysts’ estimates show a fall of over 12% in Afinitor’s revenue to $365 million in 3Q16, compared to $414 million in 3Q15, due to new treatment options for advanced breast cancer and renal cell carcinoma. Afinitor competes with Bristol-Myers Squibb’s (BMY) Opdivo.

Lucentis is expected to report a ~7.5% fall in revenue to $448 million in 3Q16, compared to $485 million in 3Q15, mainly due to competition. Lucentis is a Genentech (DNA) product, while Novartis holds its ex-US commercial rights.

Investors may want to consider ETFs such as the PowerShares International Dividend Achievers ETF (PID), which holds 1.1% in Novartis, in order to divest risk.