Investor Insights - Issue 4
December 18, 2012
Investor Perspective: Paving the Path to Future Growth
Long-Term Growth Expected from Current Product Portfolio
D. Epstein
Our current product portfolio contains a number of products which we believe have significant commercial potential across multiple therapeutic areas. In oncology, both Afinitor® and Tasigna® have the potential to deliver sales meaningfully above 2017 consensus estimates; with recent approvals for Afinitor® in additional indications expected to enhance that compound’s future prospects. Additional currently marketed drugs with upside potential to 2017 consensus estimates include Gilenya® for multiple sclerosis, Lucentis® for multiple vision-related indications, Galvus® for type 2 diabetes, and Xolair® for multiple respiratory-related conditions.
At our recent R&D Investor Day, we had the opportunity to highlight a number of promising compounds and lay out our expectations for growth. Our strategy of continuing to invest in the research and development of innovative treatments has produced a strong portfolio of growing new products, as well as a robust pipeline that is expected to address a significant number of unmet medical needs in the coming years. As a result, we believe that Novartis is well positioned for future growth, and we expect to have total of 14 blockbuster drugs in its portfolio by 2017.
The company’s world-class commercial capabilities are expected to enable Novartis to maximize the revenues from its product portfolio. Novartis distinctive development, regulatory and reimbursement capabilities are truly global, which can allow us to compress the time between approvals across different regions, and raising the potential to achieve peak revenue quickly. Evidence of this is the fact that Gilenya® was launched in both the U.S. and Europe within six months of each other, Afinitor® was approved for breast cancer in both U.S. and Europe within 10 days of each other, and Seebri® was approved simultaneously in Japan and Europe.
Industry Leading Pipeline
As a result of our strong commitment to R&D, Novartis is expecting a potentially record number of late-stage development milestones over the next 12 months, including 13 pivotal study read-outs, 10 filings and seven approvals. Looking further ahead, Novartis expects an additional 11 pivotal study read-outs, 10 filings and 11 approvals in the next 13-24 months. With 139 projects and 73 new molecular entities (NMEs) in development, Novartis has the leading industry pipeline in terms of number of projects. Beyond quantity, another key component of the Novartis pipeline is its diversity and the balance between oncology and general medicines. Of the 139 projects currently in development, approximately 60% fall within our general medicines portfolios, while the rest fall in Novartis Oncology.
By focusing on strength across disease areas, we believe that we have built a pipeline with the potential to be sustainable, and that is poised to deliver its next generation of drugs to patients in need of new effective therapies.
Of particular note within our general medicines pipeline is our late-stage cardiovascular pipeline, which includes RLX030 for acute heart failure and LCZ696 for hypertension and chronic heart failure. Both RLX030 and LCZ696 have the potential to address large patient populations, as the prevalence of heart failure is increasing. Chronic heart failure currently affects 20 million people worldwide and is projected to grow by 2.3% over the next decade. Of the 2 million people with acute heart failure who are discharged from the hospital each year in the U.S. and Europe[1], approximately 50% could be eligible for RLX030 if approved[2,3].
Productivity is central to the output of the Novartis pipeline. To this end, the Pharmaceuticals Division has achieved annual savings of over USD 1 billion in 2011 through productivity initiatives. This has been a significant driver of a record 10 consecutive quarters of quarter-on-quarter margin improvement for the division. A large portion of these savings have helped to launch new products or have been re-invested into the pipeline, which has resulted in a number of promising late-stage compounds that we believe offer significant revenue potential in the near- and medium-term.
Spotlight on Oncology
Novartis Oncology franchise is expected to deliver growth as a result of significant contributions from other currently marketed products, including Afinitor®, as well as anticipated impact from the pipeline. Afinitor® is expected to achieve total sales of over USD 1 billion in 2013, with the potential for sales in excess of USD 2 billion by 2017 in the breast cancer indications alone. Afinitor® potentially could also achieve up to USD 500 million of potential sales by 2017 in several current and potentially new indications (renal cancer, TSC SEGA/AML/seizures[4], carcinoid/NET[5], lymphoma).
Novartis Oncology has industry-leading development capabilities which culminated in six indications with regulatory approvals in 2012, including two new chemical entities through Jakavi® for myelofibrosis and Signifor® for Cushing’s Disease. We expect that the strong performance of Novartis Oncology seen in 2012 will continue in the coming years due to our broad development pipeline that is being investigated in a diverse range of cancer indications addressing greater than 160,000 newly diagnosed patients each year[6]. Novartis deep late-stage oncology pipeline includes 14 targeted agents, with almost all programs having companion diagnostics. Novartis expects 13 pivotal study read-outs before the end of 2014. As a result, the Novartis oncology pipeline is poised to fill the gap created by the loss of patent exclusivity for Glivec® in various regions over the next several years. In addition, sales from select pipeline launches could potentially reach over USD 1 billion in 2017. Novartis has established itself as a leader in the oncology field and is excited about the expected significant commercial potential for its late-stage oncology compounds.
Potential for Sustained Future Growth
We believe that our strategic priorities of innovation, growth and productivity have Novartis well positioned for sustained future growth. Novartis expects to grow over the next five years through a portfolio of products already on the market, with potential commercial upside provided by a significant number of incremental pipeline opportunities in a variety of indications. Novartis has historically invested approximately 20% of total pharmaceutical sales into research and development, which has translated into approval rates above industry “preclinical to approval” norms. From 2007 to 2011, Novartis has had a fivefold greater probability of success[7] than the industry standard in getting drugs from pre-clinical to market. As a result of our best in class pipeline, productivity initiatives and global commercial capabilities, we believe that Novartis is poised to build on its already substantial portfolio of innovative therapies and to have 14 blockbusters by 2017.
Disclaimer
These materials contain forward-looking statements that can be identified by terminology such as “future growth prospects,” “pipeline,” “expects,” “expected,” “planned,” “potential,” “aims,” “will,” “plans,” “recommendations,” “projected,” “promising,” “anticipates,” “could,” “goal,” “can,” or similar expressions, or by express or implied discussions regarding potential new products, potential new indications for existing products, or regarding potential future revenues from any such products; or regarding potential future sales or earnings of the Novartis Group or any of its divisions; or by discussions of strategy, plans, expectations or intentions. You should not place undue reliance on these statements. Such forward-looking statements reflect the current views of the Group regarding future events, and involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any future results, performance or achievements expressed or implied by such statements. There can be no guarantee that any new products will be approved for sale in any market, or that any new indications will be approved for any existing products in any market, or that any approvals which are obtained will be obtained at any particular time, or that any such existing or potential new products will achieve any particular revenue levels, or at any particular time. Nor can there be any guarantee that the Group, or any of its divisions, will achieve any particular financial results. In particular, management's expectations could be affected by, among other things, the inherent difficulties and uncertainties involved in making predictions about events expected to take place in the medium- to long-term future; unexpected clinical trial results, including additional analyses of existing clinical data or unexpected new clinical data; unexpected regulatory actions or delays or government regulation generally; government, industry, and general public pricing pressures; uncertainties regarding future demand for our products; uncertainties involved in the development of new healthcare products; competition in general; the Group's ability to obtain or maintain patent or other proprietary intellectual property protection, including the ultimate extent of the impact on the Group of the loss of patent protection on key products which commenced last year and will continue this year; uncertainties regarding actual or potential legal proceedings, including, among others, actual or potential product liability litigation, litigation and investigations regarding sales and marketing practices, shareholder litigation, government investigations and intellectual property disputes; unexpected product manufacturing and quality issues, including the potential outcomes of the Warning Letter issued to us with respect to three Sandoz manufacturing facilities, and the potential outcome of efforts to restart production of products formerly produced at the Consumer Health manufacturing facility at Lincoln, Nebraska; uncertainties regarding the effects of the ongoing global financial and economic crisis, including the financial troubles in certain Eurozone countries; uncertainties regarding future global exchange rates; the impact that the foregoing factors could have on the values attributed to the Group's assets and liabilities as recorded in the Group's consolidated balance sheet; and other risks and factors referred to in Novartis AG's current Form 20-F on file with the US Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated or expected. Novartis is providing the information in this presentation as of this date and does not undertake any obligation to update any forward-looking statements as a result of new information, future events or otherwise. These materials include discussions of investigational products and investigational indications for existing products. The efficacy and safety of such products and indications have not been established.
[1] Decision Resources Oct’11, 1st-listed diagnosed events
[2] Gheorghiade al. JAMA 2006; 18: 22217-226
[3] Maggioni et al. Eur J Heart Fail 2010: 12: 76-1084
[4] Tuberous sclerosis complex presentations: subependymal giant cell astrocytoma, angiomyolipoma and seizures
[5] Neuro-endrocrine tumors including pancreatic and carcinoid tumors
[6] Based on incidence estimations from G7 government surveillance, tallied by Kantar Health Cancer Impact
[7] Probability of success (PoS) from Preclinical to approval calculated multiplying the PoS at each phase. PoS at each phase calculated as: [Number of molecule successes in phase] / [(Number of molecule terminations in phase) + (Number of molecule successes in phase)]; Source: KMR
