This Bull is Not Stale
Whilst many Novartis bulls have given up the ghost, we remain optimistic on the mid-term outlook given that estimates are likely to have bottomed, we are due a flurry of pipeline news in the next 18mths and 2018 EPS could grow double-digit. We show that the 12 P3 assets/line-extensions could sell $11.3bn at peak, offset the 2019/20 patent expiries and drive 10% EPS growth 2017-21. We also analyse potential acquirers of Alcon, Novartis’ fit with AZN and show that Novartis has peer-leading R&D (see chart below).Alcon & Entresto Forecasts Bottomed – 2 years of downgrades led by Alcon & Entresto appear to have ended. 2017 EPS forecasts fell 11% in the last 12mths and 20% since the beginning of 2015. However, we believe the market has now adequately priced these issues and sentiment will improve.
Novartis R&D Undervalued – Whist the market is willing to pay a premium for Roche’s ability to replenish its top-line, analysis from our Proprietary R&D database shows that in fact Novartis has had a better track record in creating new sales since 2005. Further analysis shows that Novartis has the best R&D risk/reward profile in Global Pharma.
Strong Growth Through 2019/20 Patent Losses – We show that growth in Pharma is more than sufficient to offset the losses from US Gilenia, Afinitor and US Exjade.
Novartis is a multinational healthcare group based in Switzerland. Co. provides healthcare solutions that address the evolving needs of patients and societies worldwide. Co.'s broad portfolio includes innovative medicines, eye care products and cost-saving generic pharmaceuticals. Co.'s operations are organized along three operating divisions: Innovative Medicines Division; Sandoz Division; and Alcon Division. Co.'s operations are supported by the Novartis Institutes for BioMedical Research and Novartis Business Services.
Provided by our team of experienced analysts, our work is idea driven, based on independence of thought, sector expertise, and firmly focussed on fundamentals and valuation.
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