In its first-quarter earnings press release, Novartis (NVS) guided for YoY (year-over-year) mid-single-digit revenue growth on a constant currency basis for its Innovative Medicines segment in 2019.
The company also guided for a stable revenue performance on a YoY basis for its Sandoz segment in 2019. The company, however, didn’t assume the generic erosion of Gilenya in 2019.
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Innovative Medicines segment trends
In the first quarter, the Innovative Medicines segment reported net sales of $8.8 billion, a YoY rise of 5% on a reported basis and a rise of 10% on a constant currency basis. According to Novartis’s first-quarter earnings press release, this performance was driven by 11% YoY revenue growth of the pharmaceutical business unit and 9% YoY revenue growth of the oncology business unit. In the pharmaceutical business, Cosentyx and Entresto were the company’s key revenue drivers, while Lutathera, Kisqali, and Promacta drove revenues in its oncology business unit.
In the first quarter, the Innovative Medicines segment reported a core margin of 33.3%. According to the company’s first-quarter earnings investor presentation, the segment reported core margins of 31% in 2017 and 32% in 2018. The company expects the segment to report a core margin percentage of close to the mid-30s by 2022.
According to the company’s first-quarter earnings conference call, the growth in its margin was partly associated with the rapid revenue growth across its businesses and the fact that the majority of the company’s investments for new product launches were in existing therapeutic areas. Its ability to leverage its existing scale and infrastructure has helped it control its expenses, thereby resulting in improved margins. The company has also managed to control its core research and development-to-sales percentage at close to 20%. Novartis has also consistently improved the productivity of Novartis Technical Operations and Novartis Business Services.