Why Novartis Is Expected to Report Modest Revenue Growth in 2018



Modest revenue growth

Novartis (NVS) has projected its fiscal 2018 revenues to be higher by low- to mid-single digits on a YoY (year-over-year) basis. The company expects its IM (Innovative Medicines) segment to report a mid-single-digit YoY revenue growth rate in 2018, while the sales reported by the Sandoz segment may remain flat or even drop due to increasing pricing pressures in the US.

Novartis has projected that its Alcon segment revenues could grow by low- to mid-single digits on a YoY basis, despite the shift in the reporting of its ophthalmic OTC (over-the-counter) product portfolio and the shift in a small portion of its surgical diagnostic product portfolio from the IM segment to Alcon.

Wall Street analysts have projected Novartis’s fiscal 2018 revenues to be around $51.8 billion, which would represent a YoY rise of around 5.5%.

Peers Pfizer (PFE), Merck (MRK), and Bristol-Myers Squibb (BMY) are expected to report revenues of close to $54.4 billion, $41.5 billion, and $21.7 billion, respectively, for fiscal 2018.

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Segmental revenue performance in 4Q17

For 4Q17, Novartis’s IM segment reported revenues of ~$8.8 billion, which represents a YoY rise of 6% on a reported basis and a rise of 4% on a CC (constant currency) basis. While the increase in sales volumes of its key drugs resulted in a YoY revenue increase of 9 percentage points for the IM segment, this rise was partly offset by pricing pressures and increasing generic competition—mainly for Gleevec-Glivec in the US and Europe.

For 4Q17, Novartis’s Sandoz segment reported revenues of close to $2.6 billion, which represents flat YoY growth on a reported basis but a decline of 4% on a CC basis. The weak performance of this segment was mainly attributable to increasing pricing pressures and customer consolidation in the wake of increased M&As in the US. This weakness was partially offset by a decent rise in sales volumes for Sandoz’s product portfolio in 4Q17.

In 4Q17, Novartis’s Alcon segment reported revenues of ~$1.6 billion, which represents a YoY rise of 8% on a reported basis and a 6% rise on a CC basis. Alcon’s surgical portfolio witnessed YoY revenue growth of 9% in 4Q17 due to rising demand for IOLs (intraocular lenses) and cataract consumables.

The Vision Care portfolio also reported YoY revenue growth of 2% in 4Q17, mainly driven by rapidly increasing demand for Dailies Total1 contact lenses.

In the next part of this series, we’ll look at the earnings growth prospects for Novartis for fiscal 2018.


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