LONDON, UK / ACCESSWIRE / July 20, 2017 / Pro-Trader Daily has just published a free post-earnings coverage on Novartis AG (NYSE: NVS), which can be viewed by registering at http://protraderdaily.com/optin/?symbol=NVS, following the Company's reporting of its financial results on July 18, 2017, for the second quarter fiscal 2017. The drugmaker surpassed top- and bottom-line expectations. Our daily stock reports are accessible for free, and with those to look forward today you also will be signing up for a complimentary member's account at:

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Earnings Reviewed

For the second quarter 2017, Novartis reported net sales of $12.24 billion, down 2% , or 0% on constant currency basis, compared to sales of $12.47 billion in Q2 2016, The Company's volume growth of 6% was offset by the negative impacts of generic competition of 3% and pricing by 3%. Novartis' sales topped analysts' expectations of $12.1 billion.

Novartis's operating income for Q2 2017 totaled $2.3 billion, reflecting an increase of 9%, or 13% on constant currency basis, driven by higher divestment gains and lower amortization. Excluding adjustments totaling $1.0 billion, the Company's core operating income was $3.2 billion down 3% or flat on constant currency basis. Core operating income margin in constant currencies remained flat as the generic erosion of Gleevec/Glivec and growth investments were offset by gross margin expansion and productivity.

For Q2 2017, Novartis reported net income of $1.98 billion, or $0.84 per share, compared to net income of $1.81 billion, or $0.76 per share, for Q2 2016. The Company's core net income was $2.87 billion, or $1.22 per share, for the reported quarter versus $2.93 billion, or $1.23 per share, for the prior year's comparable quarter. Novartis' earnings numbers exceeded Wall Street's expectations of $1.16 per share.

Segment Results

For Q2 2017, Novartis' Innovative Medicines' net sales totaled $8.28 billion, down 1%, or up 1% on constant currency basis, compared to net sales of $8.39 billion in Q2 2016. The Company noted that generic competition had a negative impact of 4% and pricing had a negative impact of 2%, both largely due to Gleevec/Glivec genericization in Europe and the US.

During Q2 2017, the segment's operating income was $2.1 billion growing 11% on a y-o-y basis primarily due to divestment gains and lower amortization. Core operating income was $2.6 billion down 3% on a y-o-y basis, while core operating income margin in constant currencies decreased by 0.2% due to generic erosion and launch investments for Entresto,

Novartis' Sandoz net sales totaled $2.45 billion in Q2 2017, down 5%, or 4% on a constant currency, to $2.58 billion in Q2 2016, as volume growth of 4% was more than offset by 8% of price erosion, primarily in the US. The segment's sales in the US fell 15%, principally due to pricing pressure in retail generics and the prior year's launch timing. Net sales across Europe and the rest of the world grew 3% on a constant currency basis.

Sandoz' operating income was $330 million in Q2 2017, down 13% y-o-y and on a constant currency basis. The segment's core operating income was $497 million, down 7% y-o-y and a constant currency basis. Core operating income margin in constant currencies had decreased by 0.7%.

During Q2 2017, Novartis' Alcon division posted net sales of $1.52 billion, up 1%, or 3% on a constant currency basis, compared to $1.51 billion in Q2 2016. The segment's surgical sales grew 3% on a constant currency basis with strong growth in cataract consumables and vitreoretina, intraocular lenses returning to growth globally. Alcon's Vision Care sales rose 2% on a constant currency basis, driven by the continued double-digit growth of Dailies. The segment's operating loss was $19 million for Q2 2017 compared to $7 million income in the prior year's corresponding quarter. Core operating income was $211 million, down 11%, or 7% on constant currency basis, impacted by growth plan investments in M&S. Core operating income margin in constant currencies decreased by 1.5%.

In January 2017, Novartis announced a strategic review of Alcon. The Company stated that options to maximize shareholder value of the Alcon Division are under consideration and a status update will be provided towards the end of 2017.

Capital structure and net debt

For Q2 2017, Novartis' free cash flow amounted to $3.2 billion compared to $2.5 billion in the prior year's same quarter. The increase of $0.7 billion was mainly driven by improved cash flows from operating activities, which included a higher dividend received from GSK Consumer Healthcare Holdings Ltd, as well as higher divestment proceeds and lower capital expenditure.

During H1 2017, Novartis repurchased 35.1 million shares under this buyback and 6.3 million shares to mitigate dilution related to equity-based participation plans of associates. In addition, 2.3 million shares were repurchased from associates and 12.5 million treasury shares were delivered as a result of options exercised and share deliveries related to participation plans of associates.

As of June 30, 2017, Novartis' net debt increased by USD 6.1 billion to USD 22.1 billion. The increase was mainly driven by the USD 6.5 billion annual dividend payments, net share repurchases, and M&A related payments, which was partly offset by USD 4.9 billion free cash flow in H1 2017.

Outlook

For FY17, Novartis is expecting sales to be broadly in-line with the prior year on a constant currency basis. For its Innovative Medicines the Company expects sales to be between flat to a slight increase for Sandoz; Novartis is projecting sales to be broadly in-line with the prior year. For Alcon, the Company revised sales outlook to be between upward to low single digit growth. For FY17, Novartis' group core operating income is expected to be broadly in-line with the prior year to a low single digit decline on a constant currency basis.

Stock Performance

Novartis' share price finished yesterday's trading session at $85.03, slightly up 0.31%. A total volume of 1.74 million shares have exchanged hands. The Company's stock price surged 16.90% in the last three months, 18.28% in the past six months, and 4.29% in the previous twelve months. Additionally, the stock rallied 16.74% since the start of the year. Shares of the Company have a PE ratio of 32.01 and have a dividend yield of 3.20%. The stock currently has a market cap of $220.96 billion.

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