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Novartis Benefited By COVID-19 Forward Purchasing; Sees Slowdown In Enrollments

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Swiss drug major Novartis (NVS) on Tuesday confirmed its fiscal 2020 outlook after its first-quarter earnings. Sales were benefited partly by increased forward purchasing and lower spending due to COVID-19. However, these impacts are expected to reverse in the rest of 2020.

Novartis said the pandemic did not have a material impact on its underlying business in the quarter, while there are manageable disruption to clinical trials and minimal disruption to ongoing regulatory submissions at present.

For the remainder of the year, Novartis said it do not expect delays in planned 2020 regulatory submissions. Meanwhile, the company is seeing slowdown in new enrollments in ongoing clinical studies and start-up with new studies.

Citing strong mitigation measures and inventory levels, the company said it does not anticipate supply chain disruption for the majority of the portfolio at this time.

In its efforts to fight against Covid-19, Novartis is participating in collaborative research efforts such as the COVID-19 Therapeutics Accelerator, coordinated by the Bill & Melinda Gates Foundation, Wellcome, and Mastercard, as well as a COVID-19 directed partnership organized by the Innovative Medicines Initiative.

Novartis is also contributing by making available several compounds from its libraries that are considered suitable for in vitro antiviral testing.

Further, the company is assessing whether its clinical-stage investigational or approved medicines could be repurposed beyond their intended or approved indications to treat complications of SARS-CoV-2 infection.

Going ahead for fiscal 2020, the company confirmed guidance for continuing operations. Net sales are expected to grow mid to high-single digit and core operating income expected to grow high-single to low double digit, both at constant currency rates.

Novartis said its previous outlook excluded the Sandoz US oral solids and dermatology portfolio. As Novartis is retaining the Sandoz US portfolio after mutual agreement with Aurobindo to terminate the transaction, the latest outlook is now on continuing operations.

Novartis now expects growth of sales from continuing operations and core operating income to be approximately 1 percent lower than the previous guidance.

Vas Narasimhan, CEO of Novartis, said, "While there are many uncertainties for the coming year, we are maintaining our full year outlook at this time and will continue to play our part to overcome the pandemic."

For the first quarter, net income grew 16 percent to $2.17 billion from last year's $1.87 billion. Earnings per share were $0.96, up 19 percent from $0.81 a year ago.

Core net income was $3.55 billion or $1.56 per share, compared to $2.81 billion or $1.21 per share last year.

Operating income climbed 22 percent to $2.74 billion. Core operating income grew 28 percent from last year to $4.18 billion, mainly driven by higher sales, benefiting from COVID-19 forward purchasing and gross margin improvement, partly offset by launch investments.

Excluding COVID-19 related forward purchases and lower spending, core operating income would have grown around 22 percent at constant currency rates.

For the quarter, net sales from continuing operations increased 11 percent to $12.28 billion from prior year's $11.11 billion. Sales grew 13 percent at constant currency rates with double digit growth in Innovative Medicines and Sandoz.

Excluding COVID-19 related forward purchases, constant currency sales growth would have been around 9 percent.

In Switzerland, Novartis shares were trading at 88.25 Swiss francs, up 0.25 percent.

In pre-market activity on the NYSE, the stock is up 1.02 percent and trading at $90.50.

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