The Novartis Group has long since completed the spin-off of Sandoz. The effects on the business are only now coming to bear.
Basel-based company Novartis provided the key information on Sandoz on page 30 of the 2024 half-year report.
The pharmaceutical company made a profit of around 144 million dollars by selling Sandoz shares that it had spun off from the parent company but still held.
Spin-off decides
They repeated the same game at the beginning of July, as stated in the half-year report. However, this will only be reflected in the reporting for the third quarter.
In general, however, the effects of the Sandoz spin-off at Novartis are now clearly reflected in the books.
Almost all the media had reported the 2023 annual result incorrectly, as net profit had increased by over 100 percent to around 15 billion dollars in the past financial year.
However, many journalists had only looked at the profit from continuing operations excluding Sandoz, which exactly played into the Group’s hands. But muula.ch reported the actual facts.
Price development a burden
In the first half of 2024, net profit rose by around 28% to 5.9 billion dollars, as can be seen from today’s figures.
However, this also makes it crystal clear that the previous year’s level of net profit could hardly be matched.
Turnover at the company, led by CEO Vas Narasimhan, rose by 9 percent to 24.3 billion dollars in the first six months of the current financial year.
Volume increases contributed around 15 percentage points to growth, it was reported.
However, both generic competition and the price trend each had a negative effect of 2 percentage points.
Sandoz as treasury shares
The increase in sales and fewer impairments as well as lower restructuring costs helped to increase profits, Novartis explained.
Sales of the best-selling drug ‘Entresto’ alone rose by 30 percent to almost 4 billion dollars in the first half of the year. This means that almost 20 percent of revenues are attributable to this blood pressure medication.
The Basel-based pharmaceutical group classified the Sandoz spin-off as “discontinued operations” and it is now also clear that the Group no longer receives any sales from Sandoz via generics and biosimilars.
The shares still held were transferred to foundations and declared as treasury shares.
No profit this year
Furthermore, as the spin-off of Sandoz was completed on October 3, 2023, no operating results in connection with the discontinued operations were recognized in the first half of 2024.
In the first half of 2023, net sales from discontinued operations amounted to 5.0 billion dollars and net income from discontinued operations was 190 million dollars. All of this is now missing.
As a precautionary measure, Novartis did not even calculate the percentage deviations – probably to make it less noticeable.
Showing a bigger plus
The company is once again focusing on the profit from continuing operations and that same figure of 5.9 billion dollars is shown in the books. There are ‘only’ 190 million dollars missing.
Novartis half-year financial statements without percentages. (Screenshot: muula.ch)
However, the previous year’s deviation on this line of the income statement shows a profit increase of 34 percent – instead of 28 percent, as the press release clearly shows.
Investors running away
Net debt almost doubled from 10.2 billion dollars at the end of 2023 to 18.8 billion dollars at the end of June 2024, partly due to the net cash outflow of 5.0 billion dollars for M&A activities and the purchase of treasury shares for 2.7 billion dollars.
None of this news was generally well received on the stock market.
Novartis shares fell more and more over the course of the trading day and closed down 4 percent.
18.07.2024/kut./ena.
