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Novartis cuts guidance after cancer drug sales flop

Novartis is forced to cut profit guidance after disappointing sales of its flagship cancer drug.

Cancer cells
“I’m not going to let any constraints minimize the peak sales potential."

Pharmaceuticals group Novartis (NYSE:NVS) issued a profit warning after falling sales of cancer blockbuster Gleevec force the firm to ramp up investment in its new heart-failure drug.

Novartis will boost investment in Entresto by a further US$200mln this year, a move that could cost the company 1-2% of core operating income.

The extra spending would mainly go into building a sales force to target primary-care physicians.

Having previously said it would be broadly in line with last year, the group updated guidance to say core operating income would fall by a low single digit.

Revenue guidance was held steady however, as sale would be broadly in line with 2015.

The group is also counting on Cosentyx, a new drug for psoriasis and certain rheumatic diseases, to play a key role in driving growth. It generated around US$260mln in the second quarter was significantly ahead of expectations. 

Sales at Sandoz, its generic drug business were up 3% at constant currencies to US$2.6bn as strong volume growth more than offset lower prices.

Pressure from declining sales of its flagship cancer drug Gleevec, - which has faced competition from a cheaper copycat in the US since February when it come off patent – has dragged down sales at the innovative medicines unit by 1% to $8.4bn, despite a 23% increase in revenue from Novartis’ new drugs.

Chief executive Joe Jimenez said the boosted investment was a “hard decision” but was “absolutely the right thing to do”.

“There are two big catalysts for this company over the next two years in terms of growth. One is Entresto,” said Jiminez, “I’m not going to let any constraints minimize the peak sales potential of that brand”.

 

 

 

Quick facts: Novartis AG (ADR)

Price: 85.69 USD

NYSE:NVS
Market: NYSE
Market Cap: $196.14 billion
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