Novartis delivers mid single digit sales growth, margin expansion and advancement of robust pipeline in 2021
Ad hoc announcement pursuant to Art. 53 LR
- Q4 sales grew +6% (cc1, +4% USD) and core operating income grew +12% (cc, +9% USD)
- IM sales grew +7% (cc, +5% USD) and core operating income +15% (cc, +12% USD)
- Sandoz sales grew +2% (cc, 0% USD) and core operating income in line with prior year (0% cc, 0% USD)
- Full year net sales grew +4% (cc, +6% USD) driven by strong Innovative Medicines performance
- Innovative Medicines (IM) grew +6% (cc, +8% USD), Sandoz declined -2% (cc, 0% USD)
- Strong performance of key growth drivers: Entresto (+40% cc), Cosentyx (+17% cc), Zolgensma (+46% cc), Kesimpta (USD 372 million), Promacta/Revolade (+15% cc) and Kisqali (+36% cc)
- Operating income grew +13% (cc, +15% USD), mainly due to higher sales, productivity, and benefiting from lower legal expenses
- Core operating income grew +6% (cc, +8% USD) with IM margin increasing to 36.2% (+130 bps cc)
- Net income was USD 24.0 billion, benefiting from the gain on the Roche share divestment (USD 14.6 billion)
- Core EPS was USD 6.29 (+7% cc +9% USD), mainly driven by core operating income, slightly impacted by lower core income from Roche following the share divestment
- Free cash flow of USD 13.3 billion (+14% USD)
- Sold Roche bearer shares for USD 20.7bn. Initiated up to USD 15 billion share buyback consistent with capital allocation priorities. Strategic review of Sandoz progressing
- Q4 key innovation milestones:
- Leqvio approved in the US as the first and only siRNA therapy to lower LDL-C
- Cosentyx Ph3 studies met primary endpoint in hidradenitis suppurativa (HS)
- Exercised option to in-license ensovibep following positive Ph2 data in COVID-19 (Jan 2022)
- Positive data for Ianalumab in Sjögren’s (Ph2). Next generation T-Charge™ platform in DLBCL and MM
- License agreement with BeiGene for ociperlimab (late-stage TIGIT inhibitor), co-development and co-commercialization agreement with UCB for disease-modifying therapies in Parkinson’s Disease
- Acquisition of Gyroscope Therapeutics (gene therapy for geographic atrophy)
- Dividend of CHF 3.10 per share, an increase of 3.3%, proposed for 2021
- 2022 guidance2 – Group sales and core operating income expected to grow mid single digit. IM sales expected to grow mid single digit; core operating income expected to grow mid to high single digit, ahead of sales
Basel, February 2, 2022 - commenting on 2021 results, Vas Narasimhan, CEO of Novartis, said: “Novartis delivered another year of solid operational performance with mid-single digit top-line growth, margin expansion, and strong free cash flow. Our in-market growth drivers continue to perform well across geographies, supporting our confidence in our mid and long-term growth outlook. Despite some pipeline setbacks, we delivered important innovation milestones including for: Entresto, 177Lu-PSMA-617, iptacopan, Kisqali, and Leqvio. Looking ahead, we are focused on delivering on our pipeline and key technology platforms, which includes 20+ potential assets with significant sales, to be approved by 2026. We remain balanced in our capital allocation priorities as we continue to invest in innovation alongside returning capital to our shareholders”.
Key figures1
Q4 2021 | Q4 2020 | % change | FY 2021 | FY 2020 | % change | |||
USD m | USD m | USD | cc | USD m | USD m | USD | cc | |
Net sales | 13 229 | 12 770 | 4 | 6 | 51 626 | 48 659 | 6 | 4 |
Operating income | 2 562 | 2 644 | -3 | -1 | 11 689 | 10 152 | 15 | 13 |
Net income | 16 306 | 2 099 | nm | nm | 24 018 | 8 071 | 198 | 195 |
EPS (USD) | 7.29 | 0.92 | nm | nm | 10.71 | 3.55 | 202 | 200 |
Free cash flow | 3 027 | 3 342 | -9 | 13 282 | 11 691 | 14 | ||
Core operating income | 3 819 | 3 501 | 9 | 12 | 16 588 | 15 416 | 8 | 6 |
Core net income | 3 135 | 3 034 | 3 | 6 | 14 094 | 13 158 | 7 | 5 |
Core EPS (USD) | 1.40 | 1.34 | 4 | 7 | 6.29 | 5.78 | 9 | 7 |
nm = not meaningful
Strategy Update
Novartis is a focused medicines company. During 2021 we continued to build depth in five core therapeutic areas (Cardio-Renal, Immunology, Neuroscience, Oncology and Hematology), strength in technology platforms (Targeted Protein Degradation, Cell Therapy, Gene Therapy, Radioligand Therapy, and xRNA), and have a balanced geographic footprint. Our confidence to grow sales in the near-term is driven by multi-billion-dollar sales from: Cosentyx, Entresto, Kesimpta, Zolgensma, Kisqali and Leqvio. To fuel further growth through 2030 and beyond, we have 20+ new assets with at least USD 1 billion sales potential, that could be approved by 2026. Novartis is also pioneering the shift to advanced technology platforms.
Novartis sold its investment in Roche Holding AG (Roche), in a single bilateral transaction for USD 20.7 billion, consistent with our strategy as a focused medicines company.
The strategic review of Sandoz is progressing, we expect to provide an update, at the latest, by the end of 2022. The review will explore all options, ranging from retaining the business to separation, in order to determine how to best maximize value for our shareholders.
We remain disciplined and shareholder focused in our capital allocation as we balance investing in our business, through organic investments and value-creating bolt-ons, with returning capital to shareholders via our growing annual dividend and share buybacks.
Novartis continued to make significant strides in building trust with society. We committed to carbon neutral emissions: Scope 1 and 2 by 2025, Scope 1, 2 and 3 by 2030, and net zero emissions across our value chain by 2040. Novartis ESG efforts have been recognized by upgrades from several third party ESG rating agencies. Our culture journey towards an inspired, curious and unbossed organization continues, in order to drive performance and competitiveness in the long-term.
Financials
Fourth quarter
Net sales were USD 13.2 billion (+4%, +6% cc) in the fourth quarter driven by volume growth of 11 percentage points, including 1 percentage point relating to a reclassification of contract manufacturing from other revenues to sales. Volume growth was partly offset by price erosion of 3 percentage points and the negative impact from generic competition of 2 percentage points.
Operating income was USD 2.6 billion (-3%, -1% cc) as higher sales were more than offset by higher M&S and R&D investments and lower gains from divestments, financial assets, and contingent considerations.
Net income was USD 16.3 billion, benefiting from the Roche divestment gain of USD 14.6 billion. EPS was USD 7.29.
Core operating income was USD 3.8 billion (+9%, +12% cc) driven by higher sales, partly offset by higher investments in M&S and R&D. Core operating income margin was 28.9% of net sales, increasing by 1.5 percentage points (+1.6 percentage points cc).
Core net income was USD 3.1 billion (+3%, +6% cc), mainly driven by growth in core operating income, partly offset by lower income from associated companies due to the divestment of our investment in Roche and a higher tax rate. Core EPS was USD 1.40 (+4%, +7% cc), growing ahead of core net income.
Free cash flow amounted to USD 3.0 billion (-9% USD), compared to USD 3.3 billion in the prior year quarter. Higher operating income adjusted for non-cash items was more than offset by higher income taxes paid and lower divestment proceeds.
Innovative Medicines net sales were USD 10.7 billion (+5%, +7% cc) with volume contributing 11 percentage points to growth, including 1 percentage point relating to contract manufacturing revenue reclassification. Generic competition had a negative impact of 3 percentage points, mainly due to Afinitor, Gleevec/Glivec and Travatan. Pricing had a negative impact of 1 percentage point. Pharmaceuticals BU sales grew +9% (cc), driven by strong growth from Entresto, Cosentyx, Kesimpta and Zolgensma. The USD 108 million reclassification of contract manufacturing revenue recognized in Established Medicines contributed 2 percentage points to Pharmaceuticals BU sales growth. Oncology BU sales grew 3% (cc) with strong performance from Kisqali, Tafinlar + Mekinist, Promacta/Revolade and Jakavi.
Sandoz net sales were USD 2.5 billion (0%, +2% cc) with volume contributing 11 percentage points to growth, including 1 percentage point relating to contract manufacturing revenue reclassification. Pricing had a negative impact of 9 percentage points. Sales in Europe grew +4% (cc), while sales in the US declined -8% (cc). Global sales of Biopharmaceuticals grew to USD 555 million (+8%, +11% cc) across all regions.
Full year
Net sales were USD 51.6 billion (+6%, +4% cc) in the full year. Volume contributed 8 percentage points to sales growth, partly offset by price erosion of 2 percentage points and the negative impact from generic competition of 2 percentage points.
Operating income was USD 11.7 billion (+15%, +13% cc), mainly driven by higher sales and lower legal expenses, partly offset by increased M&S and R&D investments and higher amortization.
Net income was USD 24.0 billion, benefiting from the USD 14.6 billion gain from the divestment of our investment in Roche. EPS was USD 10.71.
Core operating income was USD 16.6 billion (+8%, +6% cc) benefiting from higher sales, partly offset by increased M&S and R&D investments. Core operating income margin was 32.1% of net sales, increasing by 0.4 percentage points (+0.5 percentage points cc).
Core net income was USD 14.1 billion (+7%, +5% cc). Core EPS was USD 6.29 (+9%, +7% cc), growing faster than core net income and benefiting from lower weighted average number of shares outstanding.
Free cash flow increased to USD 13.3 billion (+14% USD). This was mainly driven by higher operating income adjusted for non-cash items and lower payments for legal provisions, partly offset by the USD 650 million upfront payment to in-license tislelizumab from an affiliate of BeiGene, Ltd.
Innovative Medicines net sales were USD 42.0 billion (+8%, +6% cc), with volume contributing 9 percentage points to growth. Generic competition had a negative impact of 3 percentage points, mainly due to Ciprodex, Afinitor, Diovan and Gleevec/Glivec. Pricing had a negligible impact on sales growth. Pharmaceuticals BU grew +7% (cc) driven by Entresto, Cosentyx, Zolgensma and Kesimpta. Oncology BU grew 4% (cc) driven by Promacta/Revolade, Kisqali, Jakavi and Tafinlar + Mekinist.
Sandoz net sales were USD 9.6 billion (0%, -2% cc), with volume contributing 7 percentage points to growth, including 1 percentage point relating to contract manufacturing revenue reclassification. Volume growth was more than offset by a negative price impact of 9 percentage points. Sales in Europe declined -2% (cc), sales in the US declined -15% (cc). Global sales of Biopharmaceuticals grew to USD 2.1 billion (+10%, +7% cc), driven by continued growth ex-US and Ziextenzo (pegfilgrastim) US.
Q4 key growth drivers
Underpinning our financial results in the quarter is a continued focus on key growth drivers (ranked in
order of contribution to Q4 growth) including:
Entresto | (USD 949 million, +34% cc) sustained strong growth with increased patient share across markets, driven by demand as the essential first choice therapy for rEF heart failure |
Cosentyx | (USD 1,243 million, +13% cc) saw strong growth driven by continued underlying demand across indications in the US and Europe and strong volume growth in China |
Kesimpta | (USD 147 million) sales were driven by launch uptake, strong access and increased demand based on a superior benefit-risk profile; now approved in 64 countries |
Kisqali | (USD 285 million, +58% cc) sales grew across all geographies driven by the longest overall survival benefit reported in HR+/HER2- advanced breast cancer |
Zolgensma | (USD 342 million, +36% cc) growth was driven by expanded access in Europe and Emerging Growth Markets |
Tafinlar + Mekinist | (USD 458 million, +14% cc) saw growth driven by adjuvant melanoma and NSCLC indications |
Promacta/Revolade | (USD 518 million, +12% cc) showed growth across all regions, driven by increased use in chronic ITP and as first-line treatment for severe aplastic anemia |
Ilaris | (USD 284 million, +23% cc) strong sales were driven by growth across most regions |
Xolair | (USD 373 million, +15% cc) continued growth, driven by both the chronic spontaneous urticaria and severe allergic asthma indications |
Jakavi | (USD 408 million, +12% cc) growth was driven by strong demand in the myelofibrosis and polycythemia vera indications |
Mayzent | (USD 81 million, +46% cc) continued to grow in MS patients showing signs of progression despite being on other treatments |
Tasigna | (USD 508 million, +1% cc) mainly driven by US and Emerging Growth Markets, partly offset by decline in Europe |
Kymriah | (USD 143 million, +4% cc) sales grew in Japan, US, and Emerging Growth Markets. Coverage continued to expand, with >350 qualified treatment centers in 30 countries |
Sandoz Biopharmaceuticals | (USD 555 million, +11% cc) continued to grow across all regions |
Emerging Growth Markets* | Grew +11% (cc) overall. China declined (-3% cc) to USD 659 million. Demand continues to increase, sales impacted by stock compensation in anticipation of NRDL price reductions, and COVID-19 related regional lockdowns *All markets except the US, Canada, Western Europe, Japan, Australia, and New Zealand |
Net sales of the top 20 Innovative Medicines products in 2021
Q4 2021 | % change | FY 2021 | % change | |||
USD m | USD | cc | USD m | USD | cc | |
Cosentyx | 1 243 | 12 | 13 | 4 718 | 18 | 17 |
Entresto | 949 | 33 | 34 | 3 548 | 42 | 40 |
Gilenya | 656 | -14 | -12 | 2 787 | -7 | -9 |
Lucentis | 508 | -4 | -2 | 2 160 | 12 | 8 |
Tasigna | 508 | -1 | 1 | 2 060 | 5 | 4 |
Promacta/Revolade | 518 | 10 | 12 | 2 016 | 16 | 15 |
Tafinlar + Mekinist | 458 | 12 | 14 | 1 693 | 10 | 8 |
Jakavi | 408 | 9 | 12 | 1 595 | 19 | 16 |
Xolair | 373 | 11 | 15 | 1 428 | 14 | 12 |
Sandostatin | 345 | -5 | -4 | 1 413 | -2 | -3 |
Zolgensma | 342 | 35 | 36 | 1 351 | 47 | 46 |
Galvus Group | 278 | -5 | 0 | 1 092 | -9 | -8 |
Ilaris | 284 | 18 | 23 | 1 059 | 21 | 22 |
Gleevec/Glivec | 233 | -20 | -19 | 1 024 | -14 | -15 |
Afinitor/Votubia | 174 | -33 | -31 | 938 | -13 | -14 |
Kisqali | 285 | 55 | 58 | 937 | 36 | 36 |
Exforge Group | 197 | -20 | -20 | 901 | -8 | -11 |
Diovan Group | 189 | -16 | -14 | 773 | -23 | -25 |
Kymriah | 143 | 1 | 4 | 587 | 24 | 22 |
Ultibro Group | 148 | -8 | -5 | 584 | -6 | -10 |
Top 20 products total | 8 239 | 5 | 7 | 32 664 | 10 | 8 |
R&D update - key developments from the fourth quarter
New approvals
Leqvio (inclisiran) | Approved in the US as the first and only small interfering RNA (siRNA) therapy for LDL-C reduction. Leqvio provides effective and sustained LDL-C reduction of up to 52% vs placebo |
Cosentyx | Approved in the US for ERA and JPsA (forms of juvenile idiopathic arthritis). Cosentyx is now the first biologic indicated for ERA, and the only biologic treatment approved for both ERA and PsA in pediatric patients in the US |
Scemblix (asciminib) | Approved in the US for the treatment of CML in: 1) adult patients with Philadelphia chromosome-positive CML in chronic phase (Ph+ CML-CP), previously treated with two or more tyrosine kinase inhibitors (TKIs). 2) Adult patients with Ph+ CML-CP with the T315I mutation |
Regulatory updates
Kymriah | FDA and EMA accepted a Supplemental Biologics License Application and Type II Variation, respectively, in adult patients with relapsed or refractory follicular lymphoma after two prior lines of treatment |
Cosentyx | Regulatory submissions made in ERA and JPsA in Europe |
Branaplam (LMI070) | FDA granted fast track designation for the treatment of Huntington’s Disease |
Alpelisib (BYL719) | FDA granted priority review for the treatment of PIK3CA-related overgrowth spectrum |
Trastuzumab | Sandoz submitted a Biologics License Application to the FDA for a biosimilar used to treat human epidermal growth factor receptor 2 positive (HER2-positive) breast cancer and metastatic gastric cancers |
Results from ongoing trials and other highlights
Ensovibep | In early January 2022, the Ph2 EMPATHY Part A study in acute COVID-19 ambulatory patients, met its primary endpoint of viral load reduction over eight days. Ensovibep continues to maintain potent in vitro pan-variant activity against all variants of concern identified so far, including Omicron. On 17 January 2022, Novartis exercised its option to in-license and plans to seek expedited regulatory authorizations globally |
Cosentyx | Ph3 SUNRISE and SUNSHINE studies met their primary endpoint in moderate to severe hidradenitis suppurativa (HS). Safety was consistent with the known profile of Cosentyx Ph3 JUNIPERA study (children with active ERA and jPSA) two-year results demonstrated a 72% reduction in the risk of flare with Cosentyx versus placebo. Safety was again consistent with known profile |
Ligelizumab | Ph3 PEARL 1 and PEARL 2 studies in chronic spontaneous urticaria, met their primary endpoints of superiority for ligelizumab versus placebo at Week 12, but not versus omalizumab (Xolair). Novartis is continuing to evaluate the data and will provide an update in due course |
Scemblix (asciminib) | Ph3 ASCEMBL trial (3L Ph+ CML – CP) showed improved major molecular response and lower discontinuation rate vs bosutinib at 48 weeks. Data was presented at ASH 2021 |
Leqvio (inclisiran) | Ph3, ORION-9, -10 and -11 pooled post-hoc analyses data demonstrated effective and sustained lipid lowering compared to placebo across a range of atherogenic lipids, when used in addition to other lipid-lowering therapies. Results were presented at the American Heart Association Scientific Sessions 2021 |
Kymriah | Ph2 ELARA study showed strong efficacy in high-risk patients with relapsed or refractory follicular lymphoma based on a subgroup analysis from ~17 month median follow-up. Data was presented at ASH 2021 |
YTB323 T-Charge™ | One of the Novartis CAR-T cell therapies being developed using T-Charge™. Ph1 data in DLBCL demonstrated 73% complete response rate at month three in 15 patients. Data was presented at ASH 2021 |
PHE885 T-Charge™ | One of the Novartis CAR-T cell therapies being developed using T-Charge™. Ph1 data in multiple myeloma demonstrated 100% best overall response in 11 patients. Data was presented at ASH 2021 |
Ianalumab (VAY736) | Ph2b study in Sjögren’s disease met its primary endpoint, defined as change in ESSDAI from baseline at 24 weeks. Efficacy was demonstrated on systemic extra-glandular manifestations and displayed good tolerability |
Kisqali | Ad-hoc exploratory analysis from the Ph3 MONALEESA program showed that Kisqali in combination with ET consistently provided significant OS benefit compared to ET alone across most common intrinsic tumor subtypes. Data was presented at SABCS 2021 |
Ociperlimab | Option, collaboration and license agreement with BeiGene, Ltd. for TIGIT inhibitor ociperlimab. Two Ph3 trials are underway in non-small cell lung cancer and additional studies ongoing in a wide range of solid tumors |
Gyroscope Therapeutics | Entered into a definitive agreement to acquire Gyroscope Therapeutics, including an investigational, one-time gene therapy currently in Ph2 for geographic atrophy* |
DLX313 (UCB0599) / UCB7853 | Global co-development and co-commercialization agreement with UCB for potentially disease-modifying therapies DLX313 (UCB0599), with opt-in for UCB7853, in Parkinson’s Disease |
* Closing of the transaction is subject to customary closing conditions including regulatory approvals. Until closing, Novartis and Gyroscope Therapeutics will continue to operate as separate and independent companies.
Capital structure and net debt
Retaining a good balance between investment in the business, a strong capital structure and attractive shareholder returns remains a priority.
In 2021, Novartis repurchased a total of 30.7 million shares for USD 2.8 billion on the SIX Swiss Exchange second trading line, including 19.6 million shares (USD 1.8 billion) under the up to USD 2.5 billion share buyback announced in November 2020, 8.6 million shares (USD 0.8 billion) to mitigate dilution related to participation plans of associates and 2.5 million shares (USD 0.2 billion) under the up to USD 15 billion share buyback announced in December 2021. In addition, 1.5 million shares (USD 0.1 billion) were repurchased from associates. In the same period, 10.3 million shares (for an equity value of USD 0.8 billion) were delivered as a result of options exercised and share deliveries related to participation plans of associates. Consequently, the total number of shares outstanding decreased by 21.9 million versus December 31, 2020. These treasury share transactions resulted in a decrease in equity of USD 2.1 billion and a net cash outflow of USD 3.0 billion.
As of December 31, 2021, the net debt decreased to USD 0.9 billion compared to USD 24.5 billion at December 31, 2020. The USD 23.6 billion decrease was mainly driven by the proceeds received from the Roche divestment of USD 20.7 billion and free cash flow during 2021 of USD 13.3 billion, partially offset by the USD 7.4 billion annual dividend payment and the net cash outflow for treasury share transactions of USD 3.0 billion.
The Group has not experienced liquidity or cash flow disruptions during 2021 due to the COVID-19 pandemic. We are confident that Novartis is well positioned to meet its ongoing financial obligations and has sufficient liquidity to support its normal business activities.
As of Q4 2021, the long-term credit rating for the company is A1 with Moody’s I
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