Novartis CEO: IRA impact manageable short-term, midterm growth goal intact

Novartis anticipates an average annual sales growth of at least 5% from 2023 to 2028, according to CEO Vas Narasimhan. Despite looming drug price negotiations under the Inflation Reduction Act (IRA), Narasimhan suggested that initial cost reductions might be manageable for the company's first few products included in the negotiations. This is because the initial 10 drugs subject to price adjustments are nearing their patent expirations, with generic versions expected soon. One of these drugs is Novartis' heart failure medication, Entresto, which is slated for IRA price adjustments effective in 2026 and faces potential generic competition by mid-2025.

Narasimhan highlighted that managing the financial impact of the IRA might become increasingly challenging as more drugs, especially those early in their lifecycle, are added to the list. Companies and the Centers for Medicare & Medicaid Services have until the end of July to set maximum fair prices for the 10 drugs, with results to be published by September 1. Johnson & Johnson, which has three drugs on the list, has already received final price offers from Medicare and maintains its sales growth projection of 5% to 7% on average from 2025 to 2030.

During a recent earnings call, Narasimhan reaffirmed Novartis' mid-term sales growth target. CFO Harry Kirsch added that the company expects to continue growing annually despite the potential generic competition to Entresto. Novartis reported a successful second quarter, with sales increasing by 11% at constant currencies to $12.5 billion, surpassing Wall Street expectations.

Novartis' confidence is bolstered by several growth drivers, although one, in particular, fell short in the second quarter. The radioligand therapy Pluvicto, used for treating prostate cancer, generated $345 million, missing consensus estimates by 5%. Despite this, the drug showed sequential growth from the first quarter, and Narasimhan emphasized the need to generate demand across more treatment centers and eventually the broader community oncology setting.

Pluvicto has achieved about 30% market share in its current approved use as a post-chemotherapy treatment for metastatic castration-resistant prostate cancer, reaching as high as 90% in well-established centers. Novartis aims to expand its presence to newer sites, with a goal of increasing market share from 50% to 90%, and from 10% to 90% in community centers.

To support these goals, Novartis has expanded Pluvicto's field force, ramped up U.S. promotional efforts, and planned a direct-to-consumer campaign for the third quarter. Additionally, the company is launching a "patient-ready dose" to reduce administration time significantly, potentially increasing patient capacity at treatment sites. Global expansion is also on the agenda, with recent reimbursement approval in Germany and a planned application in China.

Looking to advance Pluvicto's use before chemotherapy, Novartis is preparing an FDA application following favorable survival trends in the phase 3 PSMAfore trial. Another key growth driver, the breast cancer drug Kisqali, is awaiting an FDA decision for its use as an adjuvant therapy in early-stage disease. The decision, expected by the end of September, has been delayed due to recent manufacturing adjustments. Despite the delay, Kisqali's sales in metastatic breast cancer surged by 50% year-over-year to $717 million in the second quarter.

Novartis also postponed its U.S. filing for the BTK inhibitor remibrutinib in chronic hives to 2025, citing the need for further manufacturing adjustments. The cholesterol drug Leqvio, however, exceeded expectations with $182 million in sales, indicating growing acceptance of its biannual dosing regimen, which achieves significant cholesterol reduction.