Novartis braces for cuts after mixed 2015 performance
pharmafile | January 28, 2016 | News story | Sales and Marketing | Novartis, financial results, revenue, sales
Net sales at Novartis fell by 5% in 2015 – prompting the company to make billion-dollar changes to its business and management structure, to “drive even greater efficiency and innovation.”
The fall in sales still represented a 5% increase on 2014 sales at a constant currency, which accounts for international currency fluctuation.
Sales were $49.4 billion in 2015, down from $52.2 billion in the previous year. The sales were largely driven by the company’s ‘growth products’, in particular in the pharmaceuticals division – which offset ‘weak’ sales in the company’s eye care company Alcon. There was also growth in emerging markets, led by Turkey (up 16% at constant currency), Brazil (+14%) and China (+5%).
Pharmaceuticals net sales reached $30.4 billion in the full year 2015, (+6% cc), including the new oncology assets acquired from GSK, which earned sales of $1.8 billion. The division was took a $578 million hit in “legal-related items, including $400 million for a settlement of the specialty pharmacies case in the Southern District of New York.”
Growth products, which the company says are “an indicator of the rejuvenation of the portfolio,” contributed $16.6 billion, or 34% of net sales – up 17% compared with 2014. This includes products like Entresto (sacubitril/valsartan), which Novartis launched in the UK this month. However David Epstein, head of Novartis Pharmaceuticals, says sales of the high cholesterol drug “were quite below what we anticipated,” but added the company expect sales to be “back on track by mid-2016.”
Alcon net sales were down 1% at $9.8 billion for the full year. Ophthalmic pharmaceuticals sales (-5% cc) declined, “driven by increased generic competition in the US.” Net sales at Sandoz, the company’s generics and biosimilars arm, were up 7% to $9.2 billion for the full year. Global sales of biopharmaceuticals grew 39% to $772 million, “benefitting from the performance of recent launches,” including the first FDA-approved biosimilar, Zarxio (filgrastim).
In its 2016 outlook, Novartis flagged up the threat of generic competition and warned that cheaper rival products would erode sales in the coming year. In 2015 generic competition had a negative impact of 5 percentage points, “largely for Exelon Patch, Diovan monotherapy and Vivelle-Dot in the US.”
Generic competition is expected to cost Novartis as much as $3.2 billion, compared to $2.2 billion in 2015, with the company expecting to be hit hardest by losses to generic versions of Glivec (imatinib). Overall the pharmaceuticals division is expected to decline to mid-single digit growth (excluding the generic impact of Glivec), while Alcon is anticipating low single digit growth and Sandoz is targeting low to mid-single digit growth.
As it braces for increased competition and the effect on its bottom line, Novartis announced it will ‘ramp-up’ a series of corporate changes and restructures. The changes are “expected to generate over $1 billion in annual cost savings by 2020… [with] one-time restructuring costs of approximately $1.4 billion spread over 5 years.”
Effective February 1, 2016, former Hospira chief executive Mike Ball will join the company as division head and Alcon chief executive, succeeding Jeff George. Dr Vas Narasimhan is appointed global head drug development and chief medical officer, and Andre Wyss becomes president of Novartis operations.
The corporate restructure will see Alcon’s pharmaceutical products transferred to the pharmaceuticals division, “creating the world’s leading ophthalmology business with approximately $6 billion in sales.” At the same time, Novartis will shift older, non-promoted pharmaceutical products – totaling approximately $0.9 billion in 2015 sales – into Sandoz. There are also plans to “drive greater efficiency by centralising our manufacturing operations across divisions within a single technical operations unit.”
Commenting on the results, chief executive Joseph Jimenez, says: “In 2015, we completed our portfolio transformation, delivered solid financial results and improved core margin despite a very strong currency impact. With the plan we announced today, we intend to return the Alcon business to growth and strengthen our leading competitive position.
“Across the group we will further focus our divisions, create even greater innovation by integrating drug development, and lower our costs by centralising our manufacturing across divisions. This will position the company well for the future.”
Lilian Anekwe
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