By John Miller
ZURICH (Reuters) – Novartis <NOVN.S> may ratchet up its 2018 sales outlook, its finance chief said on Wednesday, despite halting planned U.S. drug price hikes amid pressure on the industry from President Donald Trump’s administration over the high cost of medicines.
Shares in the Swiss drugmaker, whose decision to freeze prices this year in the world’s largest drug market was mirrored by Pfizer <PFE.N>, closed 2.5 percent higher in Zurich after the firm beat forecasts with second-quarter results.
Second-quarter core operating profit rose 7 percent to $3.54 billion, it said, better than the average forecast of $3.46 billion in a Reuters poll. Sales climbed 5 percent to $13.16 billion, topping the $12.92 billion forecast.
Full-year 2018 sales are seen rising at low-to-mid single digit percentage rates, with operating profit rising in the mid-to-upper single digit percentages.
But Chief Financial Officer Harry Kirsch told analysts on a conference call he expected “continued good momentum” for products including psoriasis-and-arthritis drug Cosentyx and heart-failure medicine Entresto. That increased the likelihood that Novartis would upgrade its sales targets for 2018, he said.
“You may see us raise (the guidance) in quarter three,” Kirsch said. “It’s a bit too early now, but I’m quite confident we will be at the upper end of the guidance on sales.”
This would come without price hikes as Novartis keeps the lid on medicine costs under pressure from U.S. lawmakers and Trump.
A call from the president prompted Pfizer CEO Ian Read this month to reverse course on price hikes his company had enacted on July 1.
Novartis said it made its own decision in June to forego what had been planned hikes, adding that a range of factors were considered.
Novartis Chief Executive Narasimhan told Reuters that, unlike Pfizer’s Read, he did not have a direct talk with Trump on drug prices but he said his company has been speaking to the federal Department of Health and Human Services about the U.S. administration’s “blueprint” to trim costs.
“We don’t plan to take any further price increases in the United States for 2018,” the Novartis CEO said. “Right now, in a very dynamic environment in the United States … we view it as the prudent course.”
Novartis’s net U.S. drug prices this year are “flat to declining,” he said, including the impact from its Sandoz generics unit where price pressure continues in the United States.
Novartis now predicts Sandoz sales for 2018 will fall in the low single digit percentages, after previously holding out hopes for them to remain steady.
Narasimhan is still reviewing options for the U.S. generics business, but said Novartis remained committed to its Sandoz unit as a whole.
Ahead of the planned spinoff of Novartis’s Alcon eye-care business to shareholders, set for early next year, Novartis raised the unit’s sales guidance to mid-single digit percentage growth for 2018 after revenue in the second quarter grew 5 percent to $1.8 billion.
Second-quarter growth was also helped by a 40 percent increase in Cosentyx sales to $701 billion, a development analysts said was a relief after sales of the medicine missed expectations at the start of 2018.
“It confirms Q1’s blip was a combination of not just rebates but also wholesaler destocking,” Deutsche Bank’s Tim Race wrote in a note. “All in all, we sum up the quarter as solid.”
Novartis has been in the firing line over a $1.2 million contract with Trump’s former lawyer for consulting work. U.S. lawmakers accused the firm last week of misleading the public about the depth of its contacts with Michael Cohen. Novartis disputes this.
Narasimhan, who has said the contract was a mistake, said no outstanding U.S. government or congressional inquiries remained into his company’s ties to Cohen’s firm that paid $130,000 to pornographic film actress Stormy Daniels.
“I view the Cohen issue as closed at this point,” he said. “We’re really focused on our future.”
Narasimhan said Novartis was on track to file for regulatory approval by October of its gene therapy for spinal muscular atrophy, which came with its $8.7 billion purchase of AveXis.
He also said he expected the launch of multiple sclerosis drug BAF312 in early 2019.
(Reporting by John Miller; Editing by Jason Neely and Edmund Blair)