Novartis Q4 Net Profit Surges, Operating Income Down; Sees Higher FY22 Results; Stock Dips

Shares of Novartis AG were losing more than 2 percent in the morning trading in Switzerland as well as in pre- market activity on the NYSE after the Swiss drug major reported weak operating income in its fourth quarter, hurt by increased expenses, despite higher revenues. Net profit, however, soared with hefty Roche divestment gain.

Looking ahead for fiscal year 2022, the company expects core operating income as well as sales to grow in mid-single digit. In fiscal 2021, core operating income was $16.6 billion and net sales were $51.6 billion.

For the year, Innovative Medicines segment’s sales are also expected to grow mid single digit, while its core operating income is expected to grow mid to high single digit. Meanwhile, Sandoz’ sales would be broadly in line with prior year, and its core operating income would decline low to mid single digit.

The guidance assumes a continuing return to normal global healthcare systems, including prescription dynamics, and that no Sandostatin LAR generics enter in the US.

Further, the Board of Directors proposed a dividend payment of 3.10 Swiss francs per share for 2021, up 3.3 percent from last year.

In December last year, Novartis announced a share buyback of up to $15 billion to be executed by the end of 2023. To cover the amount exceeding 8.8 billion francs still available under the existing shareholder authority granted in 2021, the Board proposes that shareholders authorize to repurchase shares up to an additional 10 billion francs between the Annual General Meeting 2022 and the Annual General Meeting 2025.

For the fourth quarter, net income climbed to $16.31 billion or $7.29 per share from the prior year’s $2.10 billion or $0.92 per share.

The latest quarter results benefited from the Roche divestment gain of $14.6 billion. Novartis sold its investment in Roche in a single bilateral transaction for $20.7 billion, consistent with its strategy as a focused medicines company.

Core net income for the fourth quarter was $3.14 billion, compared to $3.03 billion a year ago. Core earnings per share were $1.40, compared to $1.34 last year.

Analysts polled by Thomson Reuters expected the company to report earnings of $1.40 per share for the fourth quarter. Analysts’ estimates typically exclude special items.

Meanwhile, operating income fell 3 percent from last year to $2.56 billion as higher sales were more than offset by higher M&S and R&D investments and lower gains from divestments. Core operating income was $3.82 billion, up 9 percent on a reported basis.

Net sales for the fourth-quarter were $13.23 billion, an increase 4 percent from last year’s $12.77 billion. Net sales grew 6 percent at constant currency rates.

Analysts expected revenues of $13.31 billion for the fourth quarter.

Sales were driven by volume growth of 11 percentage points, partly offset by price erosion of 3 percentage points and the negative impact from generic competition of 2 percentage points.

Innovative Medicines net sales were $10.7 billion, up 5 percent with volume contributing 11 percentage points to growth. Sandoz net sales were $2.5 billion, same as last year on a reported basis, but up 2 percent at constant currency rates.

In Switzerland, Novartis shares were trading at 79.14 francs, down 2.42 percent. In pre-market activity on the NYSE, the shares were at $86.26, down 2.18 percent.

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