Bowing to Pressure in U.S. Novartis Ends Price Hikes

Helped by strong results from the second quarter CEO of Novartis Vas Narasimhan is expecting the drug maker to reach the top of its sales guidance for 2018 despite joining its rival Pfizer in freezing drug prices in the U.S. for the remainder of 2018.

Shares of the Swiss pharmaceutical giant were up 2.7% in early Wednesday trading in Zurich.

Core operating profit for the second quarter increased 7% to end the three-month period at $3.54 billion said the company. That beat the expectations on Wall Street of $3.46 billion. Sales were up 5% ending the quarter at $13.16 billion and beating analyst forecasts of $12.92 billion.

Increasing demand for Cosentyx the arthritis and psoriasis drug, as well as strong sales for Entresto its medicine for heart-failure, prompted the CEO to forecast the drug maker would easily reach mid-single digit sales growth percentages for 2018.

Operating profit for the full year should grow at a rate of the mid to upper single digits percentage, said the CEO.

Narasimhan added that the growth would come without any price hikes as the company keeps a tight lid on medicine costs amidst pressure from lawmakers in the U.S. and President Trump.

The president told Ian Read the CEO at Pfizer earlier in July that his hikes in prices effective on July 1 complicated his plans for drug prices, which promoted Read to reverse his course.

That same message has apparently been received by Novartis, as Narasimhan said the company is not planning any further increases in prices for 2018 in the U.S.

Overall, the net drug prices for Novartis in 2018 are flat to declining, said the CEO, including the impact from its generics unit Sandoz, where the price pressure on its pill business in the U.S. spurred the drug maker into predicting the sales in the business would decline in 2018, after saying previously they would remain flat.

Narasimhan continues reviewing his options for the generic business in the U.S, but confirmed that Novartis is committed to its Sandoz unit.

Ahead of its planned spinoff of the Alcon eye care business to its shareholders, which is set for early 2019, Novartis increased the sales guidance for the unit to a percentage growth of mid-single digit for 2018, after second quarter revenue increased by 5% to more than $1.8 billion.

Growth in the second quarter was helped by an increase of 40% in sales of Cosentyx to over $701 million.