By John Miller
ZURICH (Reuters) – Novartis reported better-than-expected first-quarter profits on Tuesday with Chief Executive Joe Jimenez saying he remained confident the Swiss drugmaker would return to growth in 2018 as spending to promote new drugs pays off.
First-quarter core net income fell 4 percent to $2.69 billion, ahead of the average forecast of $2.67 billion by analysts in a Reuters poll.
In constant currencies the drop was 1 percent as earnings got a boost from the stakes it owns in rival Roche and a joint venture with GlaxoSmithKline.
Jimenez is now counting on psoriasis treatment Cosentyx, chronic heart failure drug Entresto and newly approved breast cancer drug Kisqali to help counteract generics eating into sales of its once top-selling blood cancer drug Gleevec.
“We’re investing heavily in the growth drivers,” Jimenez said on a call with reporters.
“Particularly in the fourth quarter, we start to lap the heavy investment we were making in Entresto and Cosentyx, so the comparables become a bit easier.”
Novartis took a $200 million hit in the first quarter to discontinue development of its one-time blockbuster hopeful serelaxin following a trial failure in patients suffering from acute heart failure.
Entresto sales quadrupled to $84 million, while Cosentyx’s revenue more than doubled to $410 million, despite increasing competition from Eli Lilly’s Taltz.
Meanwhile, Gleevec’s sales fell by a third to $544 million, largely in line with expectations.
“This was a solid start to the year,” Berenberg analyst Alistair Campbell said in a note. “We’re encouraged by the performance of Entresto.”
Novartis’s shares closed 2.16 percent higher at 75.70 Swiss francs in Zurich.
First-quarter sales fell 1 percent to $11.54 billion, just short of the average of analysts’ forecasts of $11.6 billion.
Novartis reaffirmed its full-year forecast for flat sales, with core operating income in line with or slightly down from last year.
While Novartis is still keeping an eye out for bolt-on targets worth $2-5 billion, Jimenez said rising prices for takeovers have prompted him to also seek smaller deals such as its agreement to buy Ziarco Group in late 2016.
Investments by Novartis in its struggling Alcon eye care business also appeared to be bearing fruit, with first-quarter sales in constant currencies rising 1 percent to $1.4 billion.
While surgical equipment sales have yet to resume growth, products including Alcon’s contact lenses and solutions made up the difference.
“The Alcon growth plan is on track,” wrote David Evans, an analyst at Kepler Cheuvreux. “That should reassure the markets.”
Jimenez said a strategic review of Alcon, begun in January with a possible spin-off in prospect, was on track with an update scheduled for late 2017.
In one pipeline change, Novartis advanced its planned date for seeking regulatory approval for its investigational BAF312 medicine for relapsing multiple sclerosis to 2018 from 2019.
(Reporting by John Miller; Editing by Greg Mahlich and Susan Thomas)