Novartis shares jumped on Tuesday after the Swiss drugmaker raised its full-year guidance on strong drug sales and announced a $15 billion share buyback.
The company made both announcements as it reported second-quarter earnings, which topped Wall Street’s expectations.
The share buybacks will go to the end of 2025, Novartis said. The company, which is sitting on a large cash pile after selling its stake in Swiss rival Roche in 2021, completed an earlier buyback program of roughly the same size last month.
Novartis expects sales to rise by a high-single-digit percentage in 2023, an increase from a previous expectation of mid-single-digit growth. The company also anticipates group core operating income will grow by a low double-digit percentage, up from a previous expectation of high-single-digit growth.
Novartis said in August that it plans to spin off its generics unit Sandoz to sharpen its focus on its patented prescription medicines.
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Novartis shares rose about 5% on Tuesday. The stock has climbed more than 14% this year, putting the company’s market value at around $236 billion.
Here’s what Novartis reported compared with Wall Street’s expectations, based on a survey of analysts by Refinitiv:
Earnings per share: $1.83 adjusted vs. $1.68 expected Revenue: $13.62 billion vs. $13.19 billion expected
Novartis CEO Vas Narasimhan said in an interview with CNBC’s “Squawk on the Street” that the announcements and quarterly results are a reflection of the “strategic moves we’ve been taking.” Those include a companywide restructuring plan that narrowed Novartis’ research and development programs and led to 10,000 layoffs across the company over the past year.
Narasimhan said the company will be able to “maintain the power to do M&A,” even as it launches the new buyback program.
He highlighted the company’s recent acquisitions, including a $3.5 billion deal to purchase biotech firm Chinook Therapeutics. Novartis on Monday also struck a deal to acquire preclinical biotech company DTx Pharma for $500 million — and potentially more after the deal is completed.
For the second quarter, the company posted a net income of $2.32 billion, or $1.11 per share. That compares with $1.70 billion, or 77 cents per share, for the same period a year ago. Excluding certain items, Novartis’ adjusted earnings per share were $1.83 for the quarter.
Novartis reported total revenue of $13.62 billion for the quarter, up around 7% from $12.78 billion the same period a year ago.
The company’s innovative medicines business, which develops patented medicines, raked in sales of $11.24 billion for the quarter. That also rose 7% from a year ago.
Sales growth was mainly driven by the strong performance of four drugs, including Entresto, which treats adults with long-lasting heart failure, and the prostate cancer treatment Pluvicto.
The company’s generic medicines division, Sandoz, posted sales of $2.38 billion, up 5% from a year ago.
That growth was driven by a rough cough and cold season that boosted demand for some of Sandoz’s generic medicines.
For the past year, Novartis has been preparing to spin off Sandoz to focus more on its innovative medicines business. The spinoff will take place in the fourth quarter if shareholders endorse it at a meeting on Sept. 15, the company said Tuesday.
The stock will trade on the Swiss exchange, with an American Depositary Receipt program in the U.S.
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