Novartis Sees Sharp Decline in Generic Drug Sales During First Quarter

Shares of Novartis are down nearly 3 percent this morning after the company reported a sharp decline in generic drugs and sales results from key branded medicines that missed analysts’ projections for the first quarter.

Novartis said key drugs including heart drug Entresto and psoriasis treatment Cosentyx helped drive sales for the company. Sales of Cosentyx grew 35 percent to hit $580 million in all of the indications for which it has been approved, the company said. Despite that growth though, Reutersnoted that analysts expected more and investors seem to agree given the drop in stock price today. In its report Reuters said that the first quarter growth in the two key drugs lags behind the same numbers in the most previous quarter. Cosentyx generated $615 million in the fourth quarter of 2017 – a $35 million difference to today’s numbers.

What might be more concerning for Switzerland-based Novartis though is the steep decline in U.S. sales for Sandoz, its generics pharmaceutical business. The company reported that sales fell 18 percent during the first quarter. Novartis said the sales fell primarily due to increased competition. While sales fell in the United States, which is the largest drug market, globally Sandoz saw a 5 percent increase in net sales, the company said. There has been some talk that Novartis could put Sandoz’ generic pills business on the auction block primarily due to stiff competition in the United States.

Novartis isn’t the only company to see its generics business struggle in the United States. Israel-based Teva Pharmaceuticals has also been challenged by increased generic competition. In February the struggling pharmaceutical company said it is still facing challenges in the U.S. generic market and anticipates a further erosion of sales through 2018. That loss could result in a decline of about 18 percent to $18.3 billion.

Still, for Novartis, there was good news this quarter. Overall the company saw net sales grow 4 percent

 According to Novartis’ data, sales of Entresto were at $200 million for the quarter, which was more than double the same time last year. The company also pointed to its efforts in becoming a more focused medicines company. During the first quarter Novartis made key moves including the $13 billion sales of its 36.5 percent stake in a joint consumer health venture to GlaxoSmithKline, as well as its $8.7 billion acquisition of gene therapy company AveXis. Novartis said that deal gives it a leadership position in the treatment for spinal muscular atrophy and gene therapy. Novartis noted that the AveXis gene therapy platform has broad applicability, including potential use with its own pipeline assets.

The deal with AveXis was Novartis’ second gene therapy deal of the year. In January it struck a deal with Spark Therapeutics for that company’s gene therapy treatment Luxturna (voretigene neparvovec) outside the United States.

Vas Narasimhan, Novartis’ new chief executive officer, said the quarter was important for the company as it continued that transformation into a more focused medicines company. He said the moves the company made during the quarter are expected to provide significant sales, return on capital, and innovative R&D platforms that will strengthen our pipeline.

One part of Novartis’ business that many insiders and analysts are watching is Alcon. Novartis has considered spinning the business off and a deal could happen by early next year, the company noted.

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