Novartis Ups Sales Forecast and Expands Pipeline with New Acquisitions
Novartis (NVS) has raised its sales outlook for the coming years. The company now expects total sales to grow at a compound annual growth rate (CAGR) of 6% from 2023 to 2028, up from the previous estimate of 5%.
This updated guidance is driven by solid performance from Novartis’ key products and upcoming drug launches.
So far this year, Novartis shares have jumped 4%, closely aligning with the industry‘s 4.8% growth.
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Increased Mid-Term Expectations
For the period from 2024 to 2029, Novartis anticipates a CAGR of 5%. The company aims to achieve a core operating income margin of over 40% by 2027, fueled by strong sales growth and productivity enhancements.
The upward revision in sales forecasts results from increased peak sales expectations for several key products, including Cosentyx, Kisqali, Kesimpta, Pluvicto, and Leqvio.
The company expects significant growth from eight major drugs, which could generate between $3 billion and $8 billion in peak sales. Additionally, Novartis has planned 15 submission-enabling data releases in the coming years to strengthen its growth prospects.
Looking further ahead, Novartis has identified over 30 drug candidates in its pipeline that are expected to support mid-single-digit growth after 2029.
Strategic Acquisition of Kate Therapeutics
To complement its organic growth, Novartis is pursuing strategic acquisitions. The company recently acquired Kate Therapeutics, aiming to enhance its gene therapy portfolio. Under the deal, Kate’s shareholders will receive up to $1.1 billion, which includes a cash payment made at the transaction’s closing and contingent payments tied to specific milestones.
Kate Therapeutics, based in San Diego, specializes in developing adeno-associated virus (AAV)-based gene therapies targeting genetically defined neuromuscular disorders. Key projects include preclinical treatments for Duchenne muscular dystrophy, facioscapulohumeral dystrophy, and myotonic dystrophy type 1.
Collaboration with Ratio Therapeutics
In addition to acquisitions, Novartis has signed a global collaboration agreement with Ratio Therapeutics Inc. for a new SSTR2-targeting radiotherapeutic candidate, enhancing its radioligand therapy pipeline.
Ratio Therapeutics will work with Novartis to conduct preclinical research and identify a suitable SSTR2-targeting development candidate. Novartis will handle the remaining development, manufacturing, and marketing efforts. The deal includes potential milestone payments to Ratio totaling up to $745 million, along with tiered royalty payments.
Strengthening Business Structure
Novartis showed strong performance in the third quarter, exceeding earnings and sales expectations. The increased sales forecast signals robust growth momentum across its major drugs in the upcoming quarters.
Following the successful spinoff of its Sandoz division, Novartis now operates as a single global segment, focusing on four main therapeutic areas: cardiovascular-renal-metabolic, immunology, neuroscience, and oncology.
The company is committed to strengthening its core pharmaceutical operations through strategic acquisitions. Notably, Novartis previously acquired MorphoSys AG, which enriched its portfolio with pelabresib (a late-stage BET inhibitor for myelofibrosis) and tulmimetostat (an early-stage dual EZH2 and EZH1 inhibitor for solid tumors and lymphomas).
NVS Stock Insights and Comparisons
Currently, NVS holds a Zacks Rank #3 (Hold).
Among better-ranked stocks in the pharma/biotech sector, Pfizer (PFE) and Gilead Sciences (GILD) both have a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In recent updates, Pfizer’s earnings estimates for 2024 rose from $2.62 to $2.91 per share, and for 2025, from $2.85 to $2.92. Despite a year-to-date decline of 12.2%, Pfizer has consistently exceeded earnings estimates over the last four quarters, averaging a surprise of 74.50%.
Similarly, Gilead Sciences has seen its 2024 earnings estimates increase from $3.79 to $4.28 per share, and projections for 2025 have moved from $7.24 to $7.40. Gilead beat earnings expectations in three of the last four quarters, with an average surprise of 15.46%.
Opportunities for Growth
Novartis is working to enhance its growth prospects. A selection of potential stocks experienced significant gains in past recommendations, with some increasing by +100% or more in 2024.
The stocks featured in this report may provide an opportunity for investors to capitalize on early growth potential.
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