Novartis AG ADRNVS

Morningstar Rating

Stock Research and Analysis

by Damien Conover, CFA

In an industry plagued by stagnant growth, Novartis emerges as a juggernaut with diversified operating platforms and an industry-leading number of new potential blockbuster drugs. Strong intellectual property supporting multi-billion-dollar products Read more

Bulls Say

Novartis' industry-leading late-stage pipeline should propel long-term growth. The company should launch several new chemical entities during the next few years in critical therapeutic areas such as neurology and oncology.

Novartis operates across multiple segments, and this provides greater stability in earnings compared with firms that are focused on only one business.

The acquisition of Chiron launched Novartis into the vaccine business, where pricing power is increasing because there are fewer players.

The generic segment offers exposure to the billions of dollars in branded pharmaceuticals going off-patent during the next several years.

The company uses its cash beneficially for shareholders, as 100% of cash flow after acquisitions and dividends is used to buy back shares. Read more

Bears Say

In 2012, the company's leading drug Diovan will lose patent protection, creating a massive gap in sales as the drug represented more than 10% of the company's total sales in 2010.

Expectations for switching patients to Tasigna from Gleevec before Gleevec's 2015 patent expiration may prove too optimistic, as additional late-stage data may not confirm Tasigna's superior efficacy.

The major acquisitions during the last couple of years continue to face integration risks as the targeted companies are folded into Novartis.

The dual operations of branded pharmaceutical and generic pharmaceutical operations may diverge, leading to conflicting management direction. Read more

Strategy

Novartis focuses on expanding its health-care segments as well as aggressively pursuing external collaborations. Novartis shed its non-health-care baby food and nutritional business lines to focus on Read more

Management

In early 2010, Novartis announced that Joe Jimenez will take over as CEO, replacing 16-year CEO veteran Daniel Vasella who will remain as Chairman of the Board. Joe Jimenez brings a strong background that fits well with Novartis' operations. Early in Read more

Profile

Novartis develops and manufactures health-care products within its four main operating segments: branded pharmaceuticals, generic pharmaceuticals, diagnostic and vaccines, Read more

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