Novartis injects small dose of dividends

Logo of Novartis at a building in Basel
Novartis doubles the salary of its CEO Vas Narasimhan. (Image: media service)

The pharmaceutical company Novartis has achieved a gigantic leap in profits. But the money should stay in its coffers.

Pharmaceutical group Novartis has returned to its former strength. In the past financial year, the Basel-based company increased sales by “only” 8 percent to 45.4 billion dollars.

Drug brings in 15 percent

At constant exchange rates, however, this would have been an increase of 10 percent, as Novartis announced on Wednesday.

One drug alone, the heart drug Entresto, brought in 6 billion dollars in sales. That is a share of over 13 percent. The top-selling drug increased earnings by 30 percent.

According to an investor presentation, the second growth driver, Kesimpta for the treatment of multiple sclerosis, saw sales increase by 100 percent to just over 2 billion dollars.

Two-part jump in profits

But profits are really taking off. The bottom line was a consolidated profit of 14.9 billion dollars. This is an increase of over 100 percent and is represented in the 2023 annual financial statements.

The profit margin, calculated on sales, was therefore up an impressive 33 percent over their Basel-based competitor, Roche.

Net profit from discontinued operations alone, which mainly includes the spin-off of the Sandoz generics business, amounted to 6.3 billion dollars over the past financial year, compared to 906 million dollars in the previous year.

Worthwhile spin-off

The result was characterized by the non-cash net profit according to accounting standards from the distribution of Sandoz Group AG to the shareholders of Novartis AG, Novartis explained.

This amount amounted to 5.9 billion dollars. This shows that the spin-off has paid off.

Net income from continuing operations amounted to 8.6 billion dollars, according to the communiqué. This is still an increase of 42 percent compared to 2022. Furthermore, at constant exchange rates, the increase would even have been 62 percent.

Almost constant payout

Commenting on the 2023 results, Vas Narasimhan, CEO of Novartis, said that the pharma group had completed its strategic transformation into a company focused purely on innovative medicines.

The very strong performance of the key growth drivers and the pipeline of medicines underpins confidence in the medium-term outlook for future growth, the CEO explained.

A dividend of 3.30 Swiss francs per share – an increase of 3.1 percent – will be proposed for 2023. In view of the high increase in profits, some investors may have expected more. However, Novartis proudly announced that this would still be the 27th consecutive dividend increase since Novartis was founded in December 1996.

Shareholders will vote on this proposal at the Annual General Meeting on March 5, 2024.

Management remains comfortable

Narasimhan and his management team are not skimping on their remuneration either. In line with the increase in profit, the CEO received total remuneration of 16.2 million Swiss francs for the 2023 financial year, compared to 8.5 million Swiss francs in the previous year. 

However, the Group went to great lengths in the media release and in the presentation not to mention the actual Group profit, but to focus mainly on continuing operations.

Notwithstanding, this would mean that shareholders would lose sight of the profit from the Sandoz spin-off. And that information was not well received on the stock market. The Novartis share price immediately fell by around 5 percent right at the start of trading.


Novartis injects small dose of dividends

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