Novartis’s Business Segments in Q2 2018

Novartis AG (NVS) is a holding company providing pharmaceutical solutions. It classifies its business into the following three business segments:

• Innovative Medicines, the prescription medicines business
• Sandoz, the generics business
• Alcon, the eye care business

The above chart compares segment revenues for Novartis since the first quarter of 2017. Let’s look at its segment revenues for Q2 2018.

The Innovative Medicines segment represents revenues from two business units: Novartis Pharmaceuticals and Novartis Oncology.

The segment reported 10% growth YoY (year-over-year) in revenues to ~$8.9 billion in Q2 2018 compared to ~$8.1 billion in Q2 2017. Pharmaceutical products reported a 6% growth in operating revenues. Oncology products reported a 10% growth in operating revenues.

The increase in volumes had a positive impact of 12 percentage points during the quarter, while pricing had a negative impact of 1 percentage point. Generic competition had a negative impact of 3 percentage points on sales growth.

Sandoz, the company’s generic pharmaceuticals business, reported nearly flat revenues at ~$2.46 billion in Q2 2018 compared to $2.45 billion in the second quarter of 2017.

A volume growth of 7 percentage points was more than offset by the impact of price erosion, which impacted sales negatively by 9% during the quarter.

Alcon, Novartis’s eye care business, reported a 7% YoY growth in revenues to ~$1.8 billion in Q2 2018 compared to ~$1.7 billion in the second quarter of 2017. At constant exchange rates, surgical products reported an 8% growth in revenues, while vision care reported a 1% growth.

The First Trust Value Line Dividend ETF (FVD) holds 0.5% of its total investments in Novartis (NVS), 0.5% in Sanofi (SNY), 0.5% in Bristol-Myers Squibb (BMY), and 0.5% in Johnson & Johnson (JNJ).