Swiss pharmaceutical company Novartis reported first-quarter core operating profit and sales that fell short of market expectations on Tuesday. The weaker performance was mainly driven by increasing competition from generic versions of its top-selling heart medication, Entresto, which put pressure on overall revenue growth.
Following the announcement, shares of Novartis declined by around 3% in premarket trading, reflecting investor concerns over the impact of rising generic competition on one of the company’s key products.
Quarterly group operating income, adjusted for special items, fell 12% to $4.9 billion, coming in below the average analyst forecast of approximately $5.1 billion, according to Visible Alpha estimates.
Novartis is currently facing its most significant patent expirations in the past two decades, including the loss of exclusivity for Entresto, which accounted for about 14% of its total net sales in the previous year. This transition marks a major challenge for the company as it deals with increasing generic competition in a key revenue-driving product.
CEO Mukul Mehta stated during a call with reporters that the company’s performance was broadly in line with its internal expectations, suggesting that the impact of these developments had been anticipated in its financial planning.
“We do expect growth to return back to our P&L in second half of this year,” he said.
Novartis reported a sharp decline in Entresto’s performance, with first-quarter sales falling 42% to $1.31 billion following the expiration of its U.S. patents and the launch of competing generic versions. The drug is also expected to face additional patent expirations in Europe beginning in November, which could further intensify competitive pressure.
Analysts had projected slightly stronger results, with Entresto sales expected to reach around $1.37 billion for the quarter ended March 31, according to data compiled by Visible Alpha.
Blood disorder treatment Promacta and leukemia drug Tasigna are also facing increasing competition from generic versions, adding further pressure on Novartis to drive growth through its newer medicines.
For the quarter, the company reported total net sales of $13.11 billion, which came in below analysts’ expectations of $13.40 billion.
The Swiss pharmaceutical group has also projected that overall sales could decline by around $4 billion this year, largely due to generic competition affecting Entresto, Promacta, and Tasigna. Despite these challenges, the Basel-based company reaffirmed its full-year outlook, forecasting a low single-digit percentage decline in core operating income, excluding the impact of currency fluctuations.
