February 1, 2023: “Commenting on 2022 results, Vas Narasimhan, CEO of Novartis, said: “Novartis is on track to become a pure-play innovative medicines company, uniquely positioned to leverage its global scale and R&D platforms.
Our six multi-billion brands now represent 32% of our Innovative Medicines sales and are growing 26%. Pluvicto and Scemblix had very strong launch performances, and the Leqvio launch continues to progress.
Pivotal Ph3 readouts for two iptacopan studies and Pluvicto in earlier lines of therapy provide strong confidence for near to mid-term growth. Looking ahead, we have a catalyst rich pipeline with 15 pivotal readouts in the mid-term.
We expect to continue to deliver improved financials and strengthen Novartis ESG foundations, on our journey to become most trusted and valued medicines company in the world”.
Key figures1
| Q4 2022 | Q4 2021 | % change | FY 2022 | FY 2021 | % change | |||
| USD m | USD m | USD | cc | USD m | USD m | USD | cc | |
| Net sales | 12 690 | 13 229 | -4 | 3 | 50 545 | 51 626 | -2 | 4 |
| Operating income | 1 949 | 2 562 | -24 | -14 | 9 197 | 11 689 | -21 | -13 |
| Net income | 1 466 | 16 306 | -91 | -90 | 6 955 | 24 018 | -71 | -67 |
| EPS (USD) | 0.69 | 7.29 | -91 | -89 | 3.19 | 10.71 | -70 | -66 |
| Free cash flow | 3 552 | 3 027 | 17 | 11 945 | 13 282 | -10 | ||
| Core operating income | 4 030 | 3 819 | 6 | 15 | 16 665 | 16 588 | 0 | 8 |
| Core net income | 3 251 | 3 135 | 4 | 14 | 13 352 | 14 094 | -5 | 3 |
| Core EPS (USD) | 1.52 | 1.40 | 9 | 19 | 6.12 | 6.29 | -3 | 6 |
1 Constant currencies (cc), core results and free cash flow are non-IFRS measures. An explanation of non-IFRS measures can be found on page 50 of the Condensed Financial Report. Unless otherwise noted, all growth rates in this Release refer to same period in prior year.
A table showing the Q4 2022 and FY 2022 key figures excluding Roche can be found on page 8 and a reconciliation of 2021 IFRS results and non-IFRS measures core results to exclude the impacts of the 2021 divestment of our Roche investment can be found on page 58 of the Condensed Financial Report.
As per December 31, 2022. Please see detailed guidance assumptions on page 6. Potential USD sales.
Strategy Update
Our focus
During 2022, Novartis unveiled a new focused strategy with our transformation into a “pure-play” Innovative Medicines business. We have a clear focus on five core therapeutic areas (cardiovascular, immunology, neuroscience, solid tumors and hematology), with multiple significant in-market and pipeline assets in each of these areas, that address high disease burden and have substantial growth potential.
In addition to two established technology platforms (chemistry and biotherapeutics), three emerging platforms (gene & cell therapy, radioligand therapy, and xRNA) are being prioritized for continued investment into new R&D capabilities and manufacturing scale. Geographically, we are focused on growing in our priority geographies – the US, China, Germany and Japan.
Our priorities
- Accelerate growth: Renewed attention to deliver high-value medicines (NMEs) and focus on launch excellence, with a rich pipeline across our core therapeutic areas.
- Deliver returns: Continuing to embed operational excellence and deliver improved financials. Novartis remains disciplined and shareholder-focused in our approach to capital allocation, with substantial cash generation and a strong capital structure supporting continued flexibility.
- Strengthening foundations: Unleashing the power of our people, scaling data science and technology and continuing to build trust with society.
Sandoz planned spin-off
The planned spin-off remains on track for H2 2023. Completion of the transaction is subject to certain conditions, including consultation with works councils and employee representatives (as required), general market conditions, tax rulings and opinions, final Board of Directors endorsement and shareholder approval in line with Swiss corporate law.
The transaction is expected to be tax neutral to Novartis.
Financials
Fourth quarter
Net sales were USD 12.7 billion (-4%, +3% cc) in the fourth quarter driven by volume growth of 10 percentage points, partly offset by price erosion of 3 percentage points and the negative impact from generic competition of 4 percentage points.
Operating income was USD 1.9 billion (-24%, -14% cc), mainly due to higher restructuring costs (USD 0.6 billion), primarily related to the implementation of the previously announced streamlined organizational model.
Net income was USD 1.5 billion (-91%, -90% cc), impacted by Roche income in the prior year of USD 14.6 billion. Excluding the impact of Roche income, net income grew +2% (cc). EPS was USD 0.69 (-91%, -89% cc). Excluding the impact of Roche income, EPS grew +7% (cc).
Core operating income was USD 4.0 billion (+6%, +15% cc) driven by higher sales and productivity, including initial savings from the previously announced streamlined organizational model. Core operating income margin was 31.8% of net sales, increasing by 2.9 percentage points (+3.5 percentage points cc).
Core net income was USD 3.3 billion (+4%, +14% cc), mainly driven by growth in core operating income, partly offset by the loss of Roche core income. Excluding the impact of Roche core income, core net income grew +17% (cc). Core EPS was USD 1.52 (+9%, +19% cc), benefiting from lower weighted average number of shares outstanding. Excluding the impact of Roche core income, core EPS grew +23% (cc).
Free cash flow amounted to USD 3.6 billion (+17% USD), mainly driven by higher net cash flows from operating activities and lower purchases of intangible assets.
Innovative Medicines net sales were USD 10.4 billion (-3%, +3% cc) with volume contributing 11 percentage points to growth, mainly driven by continued strong performance from Entresto, Kesimpta, Pluvicto and Kisqali. Generic competition had a negative impact of 5 percentage points, mainly due to Gilenya, Exjade and Afinitor.
Pricing had a negative impact of 3 percentage points, including approximately 1 percentage point impact from a revenue deduction true-up for Cosentyx in the US, which was related to prior quarters in 2022.
Sales growth for the quarter was also negatively impacted by the prior year reclassification of contract manufacturing from other revenues to sales.
Excluding the contract manufacturing reclassification impact, sales would have grown +4% (cc). Sales in the US were USD 4.2 billion (+7%) and in the rest of the world USD 6.2 billion (-9%, +1% cc).”
