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Novartis ups FY'19 guidance on strong sales of new medicines, notably Zolgensma

Novartis AG, the second-largest drug company in the world by sales, lifted guidance for the year after stronger-than-expected sales of a raft of new medicines including Zolgensma for childhood spinal muscular atrophy and Lutathera, a nuclear-based cancer medicine.

Sales of recently launched Zolgensma beat analyst expectations, coming in at $160 million in the third quarter — some 63% higher than consensus expectations, according to UBS. Uptake of the one-time gene therapy will be expanded into SMA types 2 and 3, and newborn screening to detect the disease early will also help to propel sales, Novartis CEO Vas Narasimhan said. Zolgensma is the most expensive drug on the market today, priced at $2.1 million.

"With Zolgensma, we had broad access and really strong uptake so we're very pleased with the uptake that we've seen across the United States. And we plan to continue to drive that uptake in the U.S. and then next year in Europe as well," Narasimhan told reporters on a call following third-quarter results.

With 16 new medicines and 60 major submissions expected by the end of 2023, Novartis is intensifying its focus on innovative medicines after gaining approval for Kymriah, the first-ever chimeric antigen T-cell medicine from U.S. regulators in 2017, and following the spinoff of the Alcon eye care business. The new leadership at Sandoz, Novartis' generics business, is continuing to streamline operations, building out a biosimilars portfolio, and making licensing and partnerships deals. The partnership on three biosimilar versions of insulin with China's Gan & Lee is continuing, Novartis said.

However, the Basel, Switzerland-based pharmaceutical giant announced that its experimental asthma treatment fevipiprant failed to meet its efficacy endpoint in the Zeal 1 and 2 lung function studies in a population with a milder version of the condition. Still, the CEO told reporters that this does not have a read through to the pivotal studies in severe eosinophilic asthma — the primary goal for this program — for which data is expected in the first quarter of 2020.

"Those are the critical programs for ultimately determining how we file fevipiprant," Narasimhan said.

Wolfe Pharma analyst Tim Anderson said his odds for the program were 50/50 and had not yet included revenue forecasts for fevipiprant in his model, although consensus expectations are for $900 million sales in 2027.

As Novartis prepares Sandoz to exist as a stand-alone business, the CEO said the intention is for the generics business to be autonomous from 2020 — notably on the manufacturing front in order to better compete with rival generic companies. This addresses a concern previously raised by analysts regarding Novartis and Sandoz's intertwined manufacturing facilities.

"We believe Novartis' shares can further appreciate, with potentially exciting Zolgensma, Mayzent [for multiple sclerosis], Piqray [for breast cancer] and Beovu [for wet age-related macular degeneration] launches, plus underappreciated ongoing Cosentyx [for psoriasis] momentum, driving our 2020 EPS around 3% to 7% above consensus," said Jefferies analyst Peter Welford in a note to clients.