Novartis names ex-BMS CEO Caforio as chair amid strong Q1

Novartis chief executive Vas Narasimhan

Novartis has posted a healthy rise in sales and profits in the first full quarter since it separated from Sandoz and proposed former Bristol Myers Squibb’s chief executive Giovanni Caforio as its preferred successor to Joerg Reinhardt when he steps down next year.

The Swiss group reported sales of $11.8 billion in the first three months of the year, a rise of 10% on a pro forma basis, with operating profit up 16%, and said it now expects annual sales growth to rise by a high single-digit to a low double-digit percentage. The news sparked a near-5% rise in Novartis’ share price.

Chief executive Vas Narasimhan said performance was good “across all key growth brands and geographies” and “gives us continued confidence in our mid- and long-term growth outlook.”

Spinning out generic and biosimilar unit business Sandoz has left Novartis as a pure-play innovative medicines business, and follows a lengthy period of restructuring that is designed to position the company for a sustained period of growth in the coming years.

To that end, there was encouraging news for the company from new products including prostate cancer therapy Pluvicto (lutetium [lu177] vipivotide tetraxetan) and cholesterol therapy Leqvio (inclisiran), sales of which grew 47% to $310 million and 139% to $151 million, respectively.

Top sellers Entresto (sacubitril/valsartan) for heart failure and immunology blockbuster Cosentyx (secukinumab) also put in a strong performance, with double-digit sales rises to $1.9 billion and $1.3 billion, and Novartis also said it is now expecting a smaller impact from generic competition this year. Entresto – currently Novartis’ biggest product – is due to start losing patent protection in 2025.

Analysts at Jefferies called the results a “much-needed…return to beat-and-raise,” in a research note reported by Bloomberg.

No change in M&A strategy

Giovanni Caforio
Giovanni Caforio

The proposal that Caforio replace Reinhardt when he retires next year after the maximum 12-year term as chair led to some speculation that Novartis may be considering an M&A push. The ex-BMS CEO was the architect of some massive deals, including the $74 billion takeover of Celgene in 2019.

Novartis said this morning, however, that its focus remains firmly on internal R&D, which is accentuated by smaller-scale bolt-on deals in the mould of recent transactions involving Arvinas and MorphoSys.

“Under his leadership, BMS successfully transformed into a global medicines company with strong capabilities across R&D and commercialisation,” said Novartis in its update, adding that Caforio will assist the group’s ongoing efforts to build a bigger presence in the US.

Between 2015 and 2023, while Caforio was CEO, BMS revenues nearly tripled, with 12 product launches, including five first-in-class therapies.