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Novartis raises core profit outlook despite a drug-asset write-down

Novartis increased third-quarter sales by 4 per cent and raised its full-year core operating income outlook. Reported profit fell after a 1.9 billion dollar impairment related to del-desiran, an experimental medicine whose trial missed its primary endpoint. Core operating income increased, while free cash flow declined and the company maintained its annual sales growth expectation.

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Over the shoulder of an anonymous researcher reviewing a clinical-trial binder in a bright development office, with the pages and monitor screen facing away from the camera.

A drug impairment reduces reported profit

Swiss medicines company Novartis increased third-quarter sales and raised its annual core operating income outlook. Reported net profit declined after a write-down of a drug-development asset. Sales reached 14.522 billion dollars, against 13.909 billion dollars a year earlier, growing 4 per cent both in dollars and at constant currencies.[1], [2]

Research and development expenses included a 1.9 billion dollar partial impairment of del-desiran. Novartis said the experimental medicine missed its primary endpoint in the HARBOR trial. The company was reviewing the full data set and planned discussions with health authorities on the development path. Operating income fell to 1.843 billion dollars from 4.501 billion dollars.[1]

Core operating income grows

Net income dropped from 3.930 billion dollars to 1.196 billion dollars, and earnings per share declined from 2.04 dollars to 0.63 dollars. Core operating income increased from 5.460 billion dollars to 6.036 billion dollars, with a core operating margin of 41.6 per cent. Core earnings per share rose from 2.25 dollars to 2.46 dollars. Core results exclude specified items and sit outside International Financial Reporting Standards.[1]

Annual core outlook improves as cash flow falls

Novartis maintained its full-year forecast for low-single-digit sales growth. For core operating income at constant currencies, it now expects a flat outcome through low-single-digit growth, replacing its earlier forecast of a low-single-digit decline. Quarterly free cash flow fell 18 per cent to 5.111 billion dollars alongside lower operating cash generation. First-nine-month free cash flow was 14.002 billion dollars, down 12 per cent.[1]

References

  1. News sourceNovartisNovartis raises core profit outlook and writes down a drug asset↩1↩2↩3↩4
  2. News sourceAFPNovartis raises its core operating profit outlook↩
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