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Novartis’s Revenue Trend in 3Q16

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Novartis’s revenue trend

Novartis’s (NVS) revenues fell 1.0% on a constant currency basis in 3Q16 compared to 3Q15, according to the company’s earnings release on October 25, 2016. Its revenues missed analyst estimates of $12.2 billion with reported revenues of $12.1 billion.

The above graph shows the revenue trend for Novartis in each quarter since 4Q14. Nearly 50.0% of the company’s revenues are reported from sales outside the United States.

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Revenues by segment

Novartis has divested its business segments since 2014. The Animal Health business was divested to Eli Lilly (LLY). Part of its Vaccines business and Consumer Healthcare business was divested to GlaxoSmithKline (GSK). Its Influenza Vaccines business was divested to the CSL Group, which also acquired GlaxoSmithKline’s oncology business in March 2015.

Novartis has also restructured its segments. A few products from Alcon have been included in Innovative Medicines, and a few mature pharmaceutical products have been reported under Sandoz since January 27, 2016. Let’s take a look now at segment performances for 3Q16.

Innovative Medicines segment

The Innovative Medicines segment, formerly the Pharmaceuticals segment, includes two business units: Novartis Pharmaceuticals and Novartis Oncology. The segment reported a fall of 1.0% to $8.2 billion in 3Q16 compared to $8.3 billion in 3Q15. This included an operational fall of 1.0%.

In 3Q16, products such as Gilenya, Tasigna, Tafinlar + Mekinist, Jakavi, Promacta/Revolade, Cosentyx, Entresto, and biopharmaceuticals generated 46.0% of the segment’s sales. There was a negative impact of lower sales for products such as Diovan monotherapy, Exforge, and Vivelle-Dot, which lost their share to generic competition. Further details on these products and therapeutic areas will be covered later in this series.

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Sandoz for generic pharmaceuticals

Sandoz, the generic pharmaceuticals business of Novartis, reported a 1.0% fall in revenues at $2.52 billion for 3Q16 compared to $2.54 billion for 3Q15. Operationally, the volume growth of 5.0% was offset by a fall of 6.0% due to price erosion.

Alcon, the eye care division

Alcon, the eye care division, reported a fall of 2.0% in its 3Q16 revenues, including a 3.0% fall in operations with a 1.0% positive impact of foreign exchange. The segment reported revenues of $1.4 billion in 3Q16 compared to $1.5 billion in 3Q15.

Surgical and vision care products reported a fall in revenues for 3Q16, mainly due to strong competition from Johnson & Johnson’s (JNJ) Acuvue products and products from Bausch + Lomb.

To divest risk, you can consider ETFs such as the VanEck Vectors Pharmaceutical ETF (PPH), which holds ~5.0% of its total assets in Novartis.

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