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

Last week, Swiss pharma giant Novartis NVS reported better-than-expected fourth-quarter 2024 results, wherein both earnings and revenues beat estimates. Core earnings (excluding one-time charges) of $1.98 per share easily beat the Zacks Consensus Estimate of $1.81 and were up from $1.53 reported a year ago.Revenues of $13.15 billion rose 15% from the year-ago reported figure and beat the Zacks Consensus Estimate of $12.97 billion. On a constant currency basis, sales increased 16%, driven by the momentum in its key drugs like Entresto, Kesimpta, Kisqali, Cosentyx and Leqvio.Investors were impressed by the company’s strong quarterly performance and impressive outlook for 2025.Net sales are expected to grow in mid to high single digits in 2025. Core operating income is expected to grow in high single to low double digits.Shares of the company have gained 5% since the earnings release. Novartis has performed well in the previous few months.For a company like NVS, the results of a single quarter are not that paramount, and the focus is mostly on its fundamentals.Novartis Key Drugs Propel GrowthWith the successful spin-off of the Sandoz business, Novartis operates as a single global operating segment. It now concentrates on four core therapeutic areas — cardiovascular, renal, metabolic, immunology, neuroscience and oncology.Top drugs like Entresto (cardiovascular) and Cosentyx (psoriasis, spondylitis and arthritis) performed well in 2024. Cosentyx sales are being boosted by recent launches, including the hidradenitis suppurativa indication (HS) and the intravenous formulation (IV) in the United States, and volume growth in core indications.Key drugs like Kisqali (breast cancer), Kesimpta (multiple sclerosis), Scemblix (chronic myeloid leukemia or CML), Pluvicto (prostate cancer), Leqvio (cholesterol) and Fabhalta (paroxysmal nocturnal hemoglobinuria) are likely to drive Novartis’ growth in the coming years.Kisqali put up a stellar performance in 2024 as sales grew across all regions, driven by growth in the United States. Strong momentum from the recently launched early breast cancer (eBC) indication also fueled sales.On its fourth-quarter conference call, Novartis announced that it has settled the compound patent litigation with a generic manufacturer for Kisqali. This supports patent protection for Kisqali in the United States is until at least the first quarter of 2031.Strong growth in Pluvicto (post-taxane setting) is also propelling sales. An anticipated launched in the first half of 2025 in the pre-taxane setting should further fuel sales.Leqvio put up a strong performance in the United States. Solid uptake in markets such as Germany and China is also fueling sales. Novartis obtained global rights to develop, manufacture and commercialize Leqvio under a license and collaboration agreement with Alnylam Pharmaceuticals ALNY.New drug Fabhalta for PNH and IgAN has shown encouraging uptake and should gain traction. An application was submitted to the FDA for expanding the drug’s label for the treatment of C3 glomerulopathy (C3G). The FDA granted Priority Review status to Fabhalta in this indication. The FDA also confirmed that there wasn’t any need for an Advisory Committee meeting.NVS’ Encouraging Pipeline ProgressLabel expansion of existing drugs should further fuel sales. Novartis has a deep pipeline with a number of promising candidates (remibrutinib, ianalumab, pelacarsen, atrasentan and zigakibart).The company recently announced that the phase III STEER study of OAV101 IT met the primary endpoint in children and young adults with spinal muscular atrophy.NVS also strengthened its neuroscience pipeline with the in-licensing of votoplam (PTC518), the potential first oral disease-modifying therapy for Huntington’s Disease, from PTC Therapeutics PTCT.In 2024, Novartis acquired MorphoSys AG. The acquisition added pelabresib (late-stage BET inhibitor for myelofibrosis) and tulmimetostat (early-stage dual EZH2 and EZH1 inhibitor for solid tumors or lymphomas) to NVS’ pipeline.Generic Competition May Impact NVS’ Sales Growth  Generic competition for Tasigna, Promacta and Entresto may affect sales. Entersto is likely to face generics in the United States by mid-2025.Entresto is a top drug for NVS and a decline in its sales should have an adverse impact on the top line.Meanwhile, a readout on cardiovascular candidate pelacarsen (secondary prevention of cardiovascular events in patients with elevated levels of lipoprotein) was expected in 2025. However, the same is now anticipated in 2026.NVS’ Price Performance and Estimate RevisionShares of Novartis have risen 6.2% in the past year against the industry’s decline of 4.4%.Image Source: Zacks Investment ResearchThe Zacks Consensus Estimate for 2025 earnings per share has risen from $8.34 per share to $8.42 while that for 2026 has increased from $8.80 to $8.84 over the past seven days.Image Source: Zacks Investment ResearchHold NVS Stock for NowPharma bigwigs are mostly considered safe havens for investors interested in this sector. NVS has one of the most diversified portfolios in the industry, with a presence in most markets. Newer drugs pave the way for growth, and the approval of additional new drugs should further bolster the portfolio.While generic competition, particularly for Entresto, is a major headwind, the performance of key brands is impressive and should enable the company offset this decline.Backed by strong momentum in key drugs in 2024, Novartis is confident in its mid-term guidance of 5% CAGR (2024-2029) at constant currency in sales and continues to target a core operating income margin guidance of 40%+ by 2027.For investors already owning the stock, staying invested would be prudent, given the company’s strong and diversified portfolio, encouraging pipeline progress, rising estimates and a good dividend yield.Novartis currently carries a Zacks Rank #3 (Hold).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. 7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.3% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Alnylam Pharmaceuticals, Inc. (ALNY): Free Stock Analysis Report Novartis AG (NVS): Free Stock Analysis Report PTC Therapeutics, Inc. (PTCT): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks