Market Overview

Novartis Announces $5B Share Buyback

Novartis (NYSE: NVS) today announced the launch of a USD 5 billion share buyback, reflecting the company's confidence in its long-term growth prospects, as well as its commitment to deliver strong shareholder returns. The buyback will start immediately and be executed over two years on the 2nd trading line.[*]

"Novartis has reached an inflection point, having fully integrated Alcon and reduced debt," said Joseph Jimenez, CEO of Novartis. "We are now further sharpening the execution of our strategy to strengthen shareholder value through science-based innovation in high-growth segments of healthcare where we have the global scale, competitive advantage and the right capabilities to win."

Novartis recently announced a definitive agreement to divest its blood transfusion diagnostics unit to Grifols for USD 1.7 billion. The sale enables Novartis to focus more sharply on its strategic businesses and is one result of the ongoing review of the diversified portfolio.

Novartis continues to focus on delivering shareholder returns in 2014 and 2015 Novartis re-confirms its capital structure aligned with a target rating of double-A as a reflection of the company's financial strength and discipline. Within this target rating, Novartis will allocate capital to a strong and growing dividend, value-creating bolt-on acquisitions and a USD 5 billion share buyback starting immediately, which reflects confidence in the company's growth prospects.

Novartis also announces it will continue to pursue an aggressive productivity agenda, which has offset generic erosion and growth investments over the past two years. Ongoing initiatives include leveraging scale in Procurement, consolidating Research sites around the world and optimizing the manufacturing footprint. These programs are expected to deliver approximately 3-4% of sales in productivity gains per year through 2015, and contribute to organic margin leverage.

Pharmaceuticals entering a new growth phase, driven by productive R&D engine

Pharmaceuticals, the largest division in the Novartis portfolio is preparing for a new growth phase, driven by an expanding blockbuster portfolio and an industry-leading pipeline. In addition to products with blockbuster status such as Lucentis, Gilenya, Afinitor and Tasigna, the Galvus group is expected to reach more than USD 1 billion in net sales by year end and there is the potential for a total of 14 or more blockbusters by 2018.

Novartis' productive R&D engine is reflected by the expanding blockbuster portfolio and, additionally, three FDA Breakthrough Therapy designations in 2013. This year, the company is thoroughly reviewing its assets, and has prioritized its development portfolio and established new platforms in areas where it sees significant potential for future sales growth - including Dermatology, Heart Failure, Respiratory and Cell Therapy - to complement the already successful Oncology business.

In Respiratory, for example, our comprehensive portfolio of products, Onbrez, Seebri and Ultibro, delivered through the Breezhaler inhalation device has the potential to address a large COPD population. Ultibro has recently been launched in Germany, the Netherlands and Japan.

In Dermatology, Pharmaceuticals has promising products under development including AIN457 (secukinumab). A regulatory application for the use of AIN457 for moderate-to-severe plaque psoriasis was submitted in the US and EU in October.

Oncology on track to grow every year through Glivec patent expiry Within Pharmaceuticals, Novartis Oncology has continued to transform and rejuvenate its portfolio, and is on track to grow every year in the next five years despite loss of exclusivity for Glivec.

The Oncology pipeline includes an industry-leading 24 ongoing pivotal trials exploring 16 new products and indications. This acceleration of the development process is expected to lead to more approvals and sales by 2017 than previously projected. Expected news flow through 2015 includes results from 11 pivotal studies, including data on LDK378, an FDA Breakthrough Therapy, in ALK+ non-small cell lung cancer pre-treated with chemotherapy and crizotinib.

Innovation power focused on targeted and cellular therapies for cancer Novartis' broad Oncology portfolio places the company at a strategic advantage in developing targeted and cellular therapies, as it provides access to single agents and unique proprietary combinations that can target specific tumor mutations and potentially overcome resistance mechanisms. For example, in 2013, Novartis initiated multiple combination studies containing LEE011, BKM120, BYL719, LGX818 or MEK162 including the initiation of a Phase III trial in December in breast cancer for LEE011 in combination with letrozole.

In addition, Oncology's groundbreaking chimeric antigen receptor technology (CART) platform, which now has multiple programs in various stages of development, bridges targeted therapies and immunotherapy with the potential to revolutionize cancer treatment. CTL019, in particular, has shown promise in chronic lymphocytic leukemia and acute B-cell lymphocytic leukemia patients, and is being investigated in additional CARTs.

Alcon expected to deliver above-market growth Since the merger in 2011, Alcon has been integrated into the Novartis Group and achieved cost synergies of USD 370 million. The division is now positioned to deliver above-market growth in the mid to high-single digits in constant currencies, due to Alcon's broad portfolio of new and innovative products addressing significant patient need.

Surgical is growing the fastest, and is expected to benefit from the launch of its next-generation cataract refractive suite including Centurion, which has the potential to transform refractive outcomes for cataract patients. In Ophthalmic Pharmaceuticals, loss of exclusivity on some brands is expected to have a near-term impact, with products such as Jetrea and Simbrinza presenting opportunities for mid-term growth. Vision Care, with the launch of Dailies Total1, is well-positioned with a broad innovative portfolio in contact lenses.

A winning strategy for shareholders Novartis maintains a consistent emphasis on innovation, growth and productivity across its diversified healthcare portfolio as part of its long-term strategy. Now, with greater clarity around its capital structure and allocation priorities, sharpened focus on actively managing the portfolio, and capturing synergies across divisions, Novartis' strategy is aligned with shareholder interests.

Posted-In: News Buybacks

 

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