The Swiss drugmaker is navigating its most severe period of patent expiries, led by top seller Entresto which made up 14% of sales last year, which has fuelled a multi-billion dollar dealmaking spree in search of new growth drivers.
Sales of Entresto sank 42% to US$1.31 billion after its US patents expired last year, below analyst forecasts of US$1.37 billion, according to data compiled by Visible Alpha.
The slump in sales underscores a looming challenge for Novartis as Entresto also faces patent expiries in Europe from November, and with other blockbuster drugs Cosentyx, Kesimpta and Kisqali set to come off patent in the early 2030s.
Generic competition for blood disorder drug Promacta and leukaemia treatment Tasigna is adding pressure on Novartis to offset those lost sales with newer drugs or dealmaking.
“Over the last few years we’ve been one of the more active deal makers in the space,” CEO Vas Narasimhan told analysts. “We want to continue to have a healthy acquisition approach to make sure we have enough in our portfolio for long-term growth.”
Generic erosion in US market ‘fiercer than expected’
Vontobel analysts wrote in a note the sales miss was down to “fiercer than expected generic erosion” in the United States.
Novartis shares fell 1.3%, but are up 1.6% so far this year.
Total net sales for the quarter came in at US$13.11 billion, compared with analysts’ expectations for $US13.4 billion. Operating income, adjusted for special items, declined 12% to US$4.9 billion, below expectations for US$5.1 billion.
Chief financial officer Mukul Mehta told reporters the results were in line with the firm’s expectations. He expected a better second half, telling Reuters that in Europe, “the drop-off from branded sales into generics is not as steep a curve as it is in the US.”
The Basel-based firm expects sales to decline by US$4 billion this year due to competition from generics to Entresto.
It is counting on growth of breast cancer drug Kisqali, and multiple sclerosis treatment Kesimpta to offset that hit and achieved a low single-digit overall sales growth.
It also backed its full-year forecast of a low single-digit percentage core operating income drop, excluding currency swings.
Navigating Trump drug pricing policy
CEO Narasimhan said the company was navigating complex a global pricing environment after US President Donald Trump launched a ‘most-favored-nation’ policy last year to bring down US prices by tying them to those agreed in some other markets.
That’s led some companies to delay launches in Europe.
“Critical will be that we can secure pricing that allows us to manage the MFN policy in the US,” he said, adding talks for launching new skin disease drug Rhapsido in Germany and Japan were progressing.
Europe tends to pay less for medicines than the US, which has prompted Trump’s ire. Drugmakers are wary of accepting lower European prices in case it drags down what they can charge in the larger and more lucrative US market.
Narasimhan said Europe needed a “complete rethink” of how governments decide which drugs they will pay for and how much, to keep companies investing in clinical trials and manufacturing.