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 The stock declined 2.2 percent at 1200 GMT, more than double the
fall of the broader European Healthcare index after the company
released first-quarter earnings.
While Narasimhan confirmed 2018 growth targets, his Cosentyx drug
for psoriasis and arthritis missed analyst expectations with revenue
plunging from the fourth quarter.
And though price pressure on Novartis's Sandoz U.S. generics
business is no secret, the 18 percent sales decline in the world's
biggest market underscores the company's uphill struggle in the U.S.
to market cheap, copycat pills amid fierce competition and insurers
seeking to cut costs.
Sandoz's U.S. business is under review for a possible disposal, but
the relentless price battle could make finding a buyer more
difficult, especially one willing to pay a reasonable price.
"At Sandoz, times are tough," said Berenberg analyst Laura
Sutcliffe, who has a "hold" rating on the shares. "The biggest
surprise is that psoriasis drug Cosentyx delivered sales that are a
9 percent miss versus consensus."
"It is possible we are starting to see the effects of a
more-competitive landscape in psoriasis."
Cosentyx, a pillar of Narasimhan's plan to replace plunging revenue
from Novartis's patent-expired Gleevec blood cancer drug, had only
$580 million in sales, well under revenue of $615 million in the
fourth quarter.
Narasimhan downplayed the Cosentyx slump, blaming the development on
pharmacies reducing inventory without buying more from Novartis, as
well as price concessions made to help establish the medicine in
earlier stages of treatment.
"We did have some destocking at the speciality pharmacy in Q1, but
we believe we'll overcome that in subsequent quarters and are
looking forward to a strong year," he told reporters on an afternoon
conference call.
MIXED BAG
Overall, core net income rose 4 percent to $2.98 billion, the
Basel-based company said, equaling analyst forecasts in a Reuters
poll. Sales rose 4 percent in constant currencies to $12.7 billion,
beating forecasts for $12.3 billion.
Narasimhan, who took over Feb. 1, has other reasons for
encouragement.
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His cancer drugs portfolio enjoyed 6 percent growth in the first
three months of 2018, heart-failure drug Entresto sales finally hit
$200 million, more than double a year ago, and Novartis's resurgent
Alcon eye care unit profited from demand for products like
implantable lenses.
Alcon's $1.8 billion sales, up 7 percent, beat analysts' $1.6
billion forecast and could increase Novartis's options as it
considers spinning off the unit to shareholders to focus on
prescription drugs.
A spin-off could come as early as first-half 2019, Novartis said.
He also announced that he had poached Amgen's John Tsai as his new
chief drug developer.
Novartis is on track for 2018 core operating profit to rise by a
mid-to-high single-digit percentage, it said.
Even so, Narasimhan, a U.S. citizen and Harvard-trained doctor, is
not there yet: First-quarter core operating profit rose only 4
percent to $3.34 billion, so improvements are needed by year's end,
with Narasimhan saying Alcon performance, manufacturing cost cuts
and rising Cosentyx and Entresto sales will drive that.
"We've made the big investments in Cosentyx and Entresto,"
Narasimhan said. "As the sales grow, we expect the profit to flow
down, and that should give us operating leverage over the latter
part of the year."
To start 2018, Narasimhan has been aggressively managing his
portfolio, unloading a consumer health venture to GlaxoSmithKline
and adding gene therapy hopeful AveXis for $8.7 billion.
Narasimhan said he remains on the hunt for bolt-on acquisitions,
with deals ranging up to around $10 billion.
(Reporting by John Miller; Editing by Keith Weir/Mark Heinrich)
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