Novartis (NVS) Benefits From New Drugs & Key Acquisitions

Shares of Novartis AG (NYSE:NVS) have gained 14.1% in the past six months compared with the industry’s growth of 10.3%.

The company’s efforts to turnaround its business in 2018 has been impressive, given the loss of exclusivity for key drugs. The company made acquisitions to develop its pipeline in other promising areas. Novartis restructured its business in 2018 and plans to focus on becoming a core drug-focused company, powered by data and digital technologies.

Novartis has one of the largest and diverse portfolios in oncology, with drugs like Afinitor, Exjade, Jakavi, Zykadia, Tasigna, Jadenu and Kisqali. The company is striving to bring new therapies to the market like CAR T therapy and Kymriah in the oncology space.

The company recently acquired erstwhile Endocyte to expand expertise in radiopharmaceuticals and transformational therapeutic platforms. The acquisition will add 177Lu-PSMA-617, a potential first-in-class radioligand therapy, to Novartis’ diverse portfolio. The therapy is in phase III development for metastatic castration-resistant prostate cancer (mCRPC) and will complement the robust Advanced Accelerator Applications radiogland therapy pipeline.

We remind investors that Novartis earlier acquired Advanced Accelerator Applications and added Luthathera to its portfolio.

Earlier this year, the company acquired gene-therapy company, AveXis, Inc. The European Commission (EC) recently approved Luxturna, a one-time gene therapy, for the treatment of patients suffering from vision loss due to a genetic mutation in both copies of the RPE65gene and who have enough viable retinal cells. Luxturna was developed and is commercialized in the United States by Spark Therapeutics (NASDAQ:ONCE) . Novartis and Spark Therapeutics entered into a licensing and supply agreement in January 2018 for the development, registration and commercialization rights to Luxturna in markets outside the United States. Per the agreement, Novartis can commercialize Luxturna in the EU/EEA. The company already owns exclusive rights to development, registration and commercialization of the gene therapy in all other countries outside the United States, and Spark Therapeutics will supply it to Novartis.

Approval of new drugs and label expansion of existing drugs has also boosted performance. The strong performance of Cosentyx and Entresto continues to boost performance.

Meanwhile, Novartis intends to spin-off Alcon into a separately-traded standalone company to grow as a medicines company solely and focus better on its legacy drug business. The spin-off is expected to be completed in the first half of 2019. Earlier, Novartis divested its stake in the OTC joint venture with GlaxoSmithKline (NYSE:GSK) for $13 billion.

Sandoz, the generic arm of Novartis, continues to advance its portfolio of biosimilars and generics. The division has eight approved biosimilars in its portfolio, including five in the past eighteen months.

We expect strong performance of new drugs and approval of innovative therapies to boost business for the company in 2019.

Zacks Rank & Another Key Pick

Novartis currently carries a Zacks Rank #2 (Buy). Another well-placed stock in the healthcare sector is Bristol-Myers Squibb Company (NYSE:BMY) , which sports the same rank as Novartis. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Bristol-Myers’ delivered a positive earnings surprise in all the trailing four quarters, with average of 11.99%.

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