Novartis AG reports a 4% decline in net profit in the second quarter

on Jul 21, 2020
  • Novartis AG reports a 4% decline in net profit in the second quarter.
  • The pharmaceutical company says its sales declined by 1% in Q2.
  • Novartis tightens ranges but reaffirms its full-year financial guidance.

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Novartis AG (SWX: NOVN) announced a significant decline in its sales and net profit in the second quarter on Tuesday. The company said that medicine stockpiling that was at its peak in the first quarter was largely reversed in Q2. Novartis received a buy rating from Goldman Sachs last week.

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Shares of the company are currently 1.5% down on Tuesday as compared to the closing price on Monday. At £68.68 per share, Novartis AG is more than 10% down year to date in the stock market after recovering from an even lower £58.85 per share in March. Learn more about how can you start trading in the stock market.

Novartis sales decline by 1% in Q2

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At £1.47 billion, the pharmaceutical company said that its net profit attributed to continuing operations in the second quarter came in 4% lower at constant currencies on a year over year basis. Its core operating income in Q2, on the other hand, contracted by 1% in the recent quarter to £2.91 billion on the back of improved gross margin and lower spending.

Continuing operations, Novartis added, resulted in £8.90 billion of net sales in the second quarter versus the year-ago figure of £9.22 billion. Its flagship drugs, including Zolgensma, Entresto, and Cosentyx, took a hit to sales volume in Q2 due to the ongoing health crisis. A U.S. court ordered Novartis to pay over £583 million to settle charges of illicit incentives to doctors and patients earlier in July.

According to FactSet, experts had forecast the company to print an even higher £9.32 billion worth of sales in the second quarter. Its sales were massively boosted in Q1 due to stockpiling amidst COVID-19. The increase, however, was offset in the recent quarter.

Novartis sales in the first half jumped 6%

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As per Novartis AG:

“Despite this, our operations remain stable, with record-high customer service levels. Our product portfolio remains resilient despite COVID-19 negatively impacting sales in April and May.”

In the first two quarters combined, the Basel-headquartered company showed robust performance with a 6% growth in sales and a much broader 19% growth in core operating income.

The Swiss multinational drugmaker tightened ranges but reaffirmed its full-year financial guidance. Net sales, as per Novartis, are likely to climb by mid-single-digit in fiscal 2020. Its annual core operating income, on the other hand, is expected to increase by low double-digits.

At the time of writing, the Swiss multinational pharmaceutical company is valued at £169.39 billion and has a price to earnings ratio of 16.61.

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