Big Pharma Performance in 2023
Analyzing performance of 4 big pharmaceutical companies in 2023
Today, let's take a stroll through the fascinating world of pharmaceuticals, where we'll be delving into the performance reports of four major players from the previous year. We're kicking things off with none other than Novartis!
Don't worry, we're not going to dive into complex jargon or labyrinthine financial statements. Instead, we'll take a breezy, easy-to-understand approach, making sure we all stay on the same page.
Ready to uncover the secrets behind Novartis' success (or perhaps any challenges they faced)? Well, buckle up, because we're about to embark on an adventure into the world of pharmaceuticals!
Novartis:
To understand how Novartis performed in 2023 and which were its key drivers, we will analyze its financial report for Q4 2023 and the yearly report for 2023. In the process, we will attempt to answer four key questions. This is the link to the report we will analyze.
https://www.novartis.com/sites/novartis_com/files/q4-2023-media-release-en.pdf
1. Executive Summary
Novartis International AG, a Switzerland-based pharmaceutical company, has announced its strong financial results for the full year 2023. The company reported a 10% growth in net sales and an 18% increase in core operating income, contributing to a margin expansion. The growth was primarily driven by the strong performance of key products such as Entresto, Kesimpta, Kisqali, Pluvicto, and Scemblix. The fourth quarter also saw positive Ph3 readouts for various assets, including Fabhalta, Cosentyx, and Iptacopan. Novartis updated its mid-term guidance, expecting net sales to grow at a 5% compound annual growth rate (CAGR) from 2023 to 2028, with core operating income margin expanding to over 40% by 2027. The CEO, Vas Narasimhan, highlighted the company's strategic transformation into a pure-play innovative medicines company and its relentless pursuit of sustainable shareholder value creation.
Novartis' focus during 2023 centered on completing its transformation into a pure-play innovative medicines business, emphasizing four core therapeutic areas and investing in technology platforms such as gene & cell therapy, radioligand therapy, and xRNA. The company also outlined its priorities, including accelerating growth, delivering returns, and strengthening foundations. In terms of financials, Novartis reported on its continuing and discontinued operations, with a focus on key growth drivers, R&D updates, and its capital structure. Furthermore, the company outlined its 2024 outlook, with expectations for mid-single-digit growth in net sales and high-single-digit growth in core operating income. Additionally, the Board of Directors proposed a dividend payment increase and a reduction of share capital, which will be voted on at the Annual General Meeting on March 5, 2024.
In conclusion, Novartis' strong financial performance in 2023 reflects its focus on innovation and strategic transformation into a pure-play innovative medicines company. The company's robust operational performance, strong double-digit top and bottom-line growth, and positive Ph3 readouts indicate confidence in its mid-term growth and margin guidance. Novartis' emphasis on accelerating growth, delivering returns, and strengthening foundations underscores its commitment to sustainable value creation for its shareholders and continued investment in R&D capabilities and manufacturing scale. The proposed dividend increase and reduction of share capital further reflect the company's commitment to enhancing shareholder value.
Let’s now dive a bit deeper into the report and ask some key questions:
1. What are the company's revenues, expenses, and net income?
Revenues:
Novartis AG’s revenue for the quarter ending December 31, 2023 was $7.424 billion, which represents a 9.51% increase year-over-year.
The annual revenue for 2023 was $46.66 billion, showing a 7.36% increase from the previous year.
Net Income:
Novartis AG reported a net income of nearly $15 billion in 2023.
Two years before that, in 2021, the net income was even higher, reaching a record high of $24 billion.
2. Is the company experiencing revenue and sales growth year over year? What are the main drivers of this growth?
Novartis attributes its revenue growth to several key factors:
Strong Portfolio: Novartis maintains a robust portfolio of drugs across various therapeutic areas, including oncology, cardiology, neuroscience, immunology, and respiratory diseases.
Innovative Medicines: The company consistently brings new drugs to market, driving sales growth. Notable products include:
Entresto: A heart failure medication with strong growth (+34% cc).
Zolgensma: A gene therapy for spinal muscular atrophy (+81% cc).
Cosentyx: Used for psoriasis and other autoimmune conditions (+11% cc).
Kesimpta: A treatment for multiple sclerosis.
Oncology Focus: Novartis has a broad portfolio of oncology drugs, including Kymriah, Promacta/Revolade, Kisqali, and Jakavi.
Global Expansion: The company’s growth markets, especially China, contribute significantly to overall revenue.
Research and Development: Novartis invests in research and development, leading to breakthrough treatments and expanding its product pipeline.
In summary, Novartis’s strategic focus on innovation, strong product portfolio, and global presence have been instrumental in driving revenue growth.
3. How is the company allocating capital for growth, R&D, and expansion?
Novartis AG has a well-defined strategy for allocating capital to drive growth, research and development (R&D), and expansion. Here are the key aspects:
R&D Investment:
Novartis allocates approximately 19%-20% of Innovative Medicines (IM) sales to research and development.
This investment aims to deliver an average of 2-3 new molecular entities (NMEs) per year.
Value-Creating Bolt-Ons:
Novartis actively pursues M&A opportunities to enhance its portfolio and long-term growth potential.
They have completed 10+ deals, with a mean deal size of approximately $2 billion since 2018.
Share Buybacks:
Novartis has initiated a share buyback program of up to $15 billion consistent with its capital allocation priorities.
This demonstrates their commitment to returning value to shareholders.
Innovation Milestones:
Novartis continues to achieve significant innovation milestones, including approvals and positive data for various drugs.
Examples include the approval of Leqvio in the US, positive phase 3 studies for Cosentyx, and licensing agreements for promising therapies.
In summary, Novartis focuses on R&D, strategic acquisitions, share buybacks, and dividends to drive growth and enhance shareholder value. Their commitment to innovation and portfolio optimization remains central to their capital allocation decisions.
4. Does the company provide information on its various business segments, and how are they performing?
Pharmaceuticals (Innovative Medicines):
Net Sales (2023): $45.44 billion, representing an 8% increase year-over-year (10% in constant currency).
Operating Income (2023): $16.37 billion, showing an 11% increase year-over-year (18% in constant currency).
Key Drivers: Strong performance from drugs like Entresto, Kesimpta, Kisqali, Pluvicto, and Scemblix.
Sandoz (Generics and Biosimilars):
Net Sales (2023): $4.02 billion, with a 1% decrease year-over-year (3% decrease in constant currency).
Operating Income (2023): $1.59 billion, showing a 5% decrease year-over-year (3% decrease in constant currency) 1.
Alcon (Eye Care):
Net Sales (2023): $4.98 billion, indicating a 6% increase year-over-year (8% in constant currency).
Operating Income (2023): $1.79 billion, demonstrating a 7% increase year-over-year (9% in constant currency).
Corporate:
Net Sales (2023): $0.02 billion.
Operating Income (2023): -$0.34 billion.