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Novartis Shares Drop on Weak Prostate Cancer Drug Sales
Novartis AG shares slumped after the drugmaker reported earnings that came short of analysts’ estimates on weak revenue from Pluvicto, a prostate cancer treatment that faced supply constraints.
(Bloomberg) -- Novartis AG shares slumped after the drugmaker reported earnings that came short of analysts’ estimates on weak revenue from Pluvicto, a prostate cancer treatment that faced supply constraints.
Earnings per share last quarter missed the $1.66 average estimate of analysts surveyed by Bloomberg. Pluvicto sales were $273 million, below the $317 million analyst estimate. The stock fell as much as 5.3%, the steepest intraday decline in almost two years.
Novartis is emerging from a reorganization by Chief Executive Officer Vas Narasimhan, who cut jobs and spun off units to focus the company more narrowly on specific diseases with high growth potential. The move has made Novartis the clear investor favorite over Swiss rival Roche Holding AG, Jefferies wrote in a note before the results.
Novartis shares had gained 17% in the year through Tuesday, and some investors are selling after the company gave an outlook for 2024 deemed conservative.
Pluvicto’s growth should improve this year after the company boosted production capacity for the drug, Narasimhan told Bloomberg Television. The drug received regulatory approval in recent years, so it’s a new addition to Novartis’s sales portfolio. Narasimhan said Novartis is trying to get Pluvicto cleared to treat more types of prostate cancer.
Core operating profit will probably rise by a high single digit percentage this year, while sales will probably grow by a mid-single digit percentage, the Basel, Switzerland-based drugmaker said Wednesday.
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Novartis shares have had a 47% return over the past five years, including reinvested dividends. Roche’s gain has been 8.8%.
Novartis is keeping its sights on acquisition targets of $5 billion or less, Narasimhan said in the Bloomberg TV interview. That’s after a mixed record for his largest purchase, the $9.7 billion acquisition of Medicines Co. in 2019. Leqvio, a heart drug Novartis gained through the acquisition, has since struggled to win market share and the company has lowered its ambitions.
Some analysts pointed out that Novartis’s guidance leaves room for improvement, as the company raised its 2023 outlook three times last year.
Another drag on earnings was Argentina’s devaluation of the peso, which stripped 2 percentage points off of earnings growth in the fourth quarter.
Given currency headwinds, Novartis’s guidance suggests that investors will downgrade their 2024 earnings estimates for the company by about 3%, analysts for Intron Health said in a note Wednesday.
--With assistance from Guy Johnson, Kriti Gupta and James Cone.
(Updates with context)
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