This photo taken on October 30, 2022 shows the logo of Swiss pharmaceutical and pharmaceutical company Novartis on a building in Basel.
Gabriel Monet | AFP | Getty Images
Novartis Chief Executive Officer Vasu Narasimhan told CNBC that big acquisitions for the division “will never happen” because the company is always looking for the next “great asset.”
To offset the blow from generic competition, Novartis has been on a buying spree, acquiring more than 35 companies last year. The Swiss drugmaker on Sunday announced its biggest deal in a decade, saying it had agreed to buy U.S. biotechnology company Avidity Biosciences for about $12 billion.
The acquisition will give the Basel, Switzerland-based pharmaceutical giant access to Avidity’s vast pipeline of promising experimental drugs. Novartis said two of Avidity’s three major drugs scheduled to be launched by 2030 could generate billions of dollars in sales.
“We are driven by science and technology, and in this case, this was a perfect fit for us…If you look at our free cash flow, it’s approaching $20 billion a year. So we have enough firepower to make a deal like this and strengthen the growth profile of the company,” Narasimhan told CNBC’s “European Early Edition.”
Fixed-currency sales rose 7% to $13.9 billion in the third quarter as Novartis continued to compete for some blockbuster drugs. Net income reached $3.9 billion, an increase of 25% from the same period last year. Analysts had expected net income to be $4.4 billion, according to consensus estimates compiled by LSEG.
Novartis shares were down 3.4% at the start of trading on Tuesday. The stock has risen about 17% since the beginning of the year, outpacing the Swiss market index’s 8% rise.
The company said its results for the quarter were driven by increased sales of drugs such as cancer drugs Kiscali, Purvict and Semblix, and multiple sclerosis drug Kesimpta, all of which posted high-double-digit sales growth.
Novartis has raised its earnings estimates over the past 10 quarters, including twice this year. Analysts at UBS expected the company to raise its forecast again this quarter. However, the company stuck to its guidance for sales to grow at a “high single-digit” rate and adjusted operating profit to grow at a “low-teens percent” rate.
The company’s flagship drugs Entresto, Promacta and Tasigna face loss of exclusivity in the US, resulting in a negative impact of 7 percentage points. Meanwhile, the company said in its earnings call on Tuesday that pricing had a 2 percentage point negative impact, primarily due to adjustments in earnings deductions in the United States.
US drug pricing
Investors are keeping an eye on global updates on tariffs and U.S. President Donald Trump’s efforts to lower drug prices for U.S. consumers.
major pharmaceutical company pfizer and AstraZeneca It recently concluded a Most Favored Nation Agreement (MFN) with the US government. The policy is aimed at lowering drug costs by pegging the prices of some drugs in the United States to significantly lower drug prices overseas. The Pfizer-AstraZeneca partnership will lower the cost of medicines for U.S. consumers while giving both companies three years of tariff exemptions.
Analysts at UBS said: “We expect further announcements across EU and US drug companies in the coming weeks following the PFE and AZN MFN agreement. Investors’ widespread expectation is for a similar agreement to be reached for Novartis. We look forward to confirming Novartis’ view on the expected impact of the agreement on earnings from 2026 onwards.”
In September, Novartis pledged to eliminate price differentials between the U.S. and other developed countries for its drugs.
Novartis stock price since the beginning of the year.
Asked about the Pfizer-AstraZeneca MFN deal, Narasimhan said the company has been in discussions with the White House since the beginning of the year.
“We’re obviously trying to find good solutions to the challenges that they’ve presented, and importantly, we’re also trying to address some of the larger structural issues here… outside of the United States, innovation is not being properly rewarded,” the CEO said.
He added that if an agreement is reached with the U.S. and prices fall in the U.S., it would likely “reduce public market launches in targeted countries outside the U.S.”
“I think U.S. prices will adjust, but the adjustment will be gradual. What’s going to happen is that the foreign countries, especially the administration’s focus on the G7 and Switzerland and Denmark, will lead to a situation where companies in those countries won’t come into the public markets unless they raise prices to reward innovation and bring prices up to par with the U.S.,” Narasimhan told CNBC.
Novartis also said in September that it would not be affected by 100% tariffs on branded drugs announced by the White House, citing its $23 billion investment in U.S.-based infrastructure.
