Novartis Rises 5% Since Q4 Earnings: How Should You Play the Stock?

Core Viewpoint - Novartis reported better-than-expected fourth-quarter 2024 results, with core earnings of $1.98 per share and revenues of $13.15 billion, both surpassing estimates and showing significant year-over-year growth [1][2]. Financial Performance - Core earnings increased from $1.53 a year ago to $1.98, exceeding the Zacks Consensus Estimate of $1.81 [1]. - Revenues rose 15% year-over-year, beating the Zacks Consensus Estimate of $12.97 billion, with a constant currency sales increase of 16% [2]. - The company expects net sales growth in mid to high single digits and core operating income growth in high single to low double digits for 2025 [3]. Key Drug Performance - Key drugs such as Entresto, Kesimpta, Kisqali, Cosentyx, and Leqvio are driving sales growth [2][4]. - Cosentyx sales benefited from recent launches and volume growth in core indications [5]. - Kisqali showed strong performance with sales growth across all regions, particularly in the U.S. [6]. - Novartis settled patent litigation for Kisqali, ensuring patent protection until at least Q1 2031 [7]. Pipeline and Future Growth - Novartis has a robust pipeline with promising candidates, including remibrutinib and ianalumab, and recent acquisitions like MorphoSys AG [10][12]. - The company is optimistic about label expansions for existing drugs, which should further enhance sales [10]. - The FDA granted Priority Review status to Fabhalta for an expanded indication, indicating strong potential for future growth [9]. Market Position and Stock Performance - Novartis shares have gained 5% since the earnings release and 6.2% over the past year, outperforming the industry [3][15]. - The Zacks Consensus Estimate for 2025 earnings per share has increased from $8.34 to $8.42, reflecting positive market sentiment [17]. Challenges and Competition - Generic competition for drugs like Entresto and Tasigna may impact future sales, with Entresto expected to face generics by mid-2025 [13][19]. - Despite these challenges, the strong performance of key brands is expected to help offset potential declines [19].