Novartis on Tuesday said it will spend as much as $15 billion buying back its stock over the next two-and-a-half years, after completing a similarly sized share repurchase program in June.
The drugmaker announced the new commitment alongside better-than-expected earnings for the second quarter, which showed net sales rose by 7% compared to the same period last year.
On the back of those results, Novartis also raised its financial outlook for the year, forecasting sales growth in the high single digits. Shares rose by nearly 5% in Tuesday morning trading on the New York Stock Exchange.
Between 2018 and 2022, Novartis returned about $59 billion to shareholders through previous share buybacks and dividends. That figure eclipses both the estimated $43 billion it spent on drug research and development, as well the approximately $30 billion invested in acquisitions.
“Given our strong cash flows and expected top- and bottom-line continued growth, we continue to have the flexibility to do both share buybacks and bolt-on M&A and [business development],” said Novartis’ CFO Harry Kirsch on a conference call with analysts.
The drugmaker has been busier on the latter front recently, announcing deals over the past two months to buy biotechnology companies Chinook Therapeutics and DTx Pharma. Both acquisitions are relatively small for a company of Novartis’ size, but in line with CEO Vas Narasimhan’s focus on finding early- to mid-stage medicines.
“We don’t want to overpay for very large deals where assets are fully valued and it’s difficult for us to find upside,” Narasimhan said on the call. He added that Novartis is looking “carefully” at whether assets it’s interested in might be affected by the new U.S. drug price negotiation process enacted via last year’s Inflation Reduction Act.
Novartis is also in the midst of preparing to separate its Sandoz generic drug business, and announced Tuesday that its board of directors had unanimously endorsed a spin-off later this year. Novartis shareholders will be asked to vote on the plan in a Sept. 15 meeting and, if they approve, the company expects to create a new independent company listed on the Swiss stock exchange.
The spin-off is the next major step in Narasimhan’s plan to recast Novartis as a “focused medicines company” after divesting its consumer health business, splitting off of its Alcon eye care unit and selling its $21 billion stake in Roche. The company has also reorganized its leadership ranks and laid off thousands of employees.
“Our goal, post the Sandoz spin, is to focus on driving the pipeline, driving the strong operational performance you’re seeing,” said Narasimhan.
The company’s pipeline plans were recently boosted by strong clinical trial results for its breast cancer drug Kisqali. Novartis has also seen rapid sales growth for other drugs like its heart failure medicine Entresto and prostate cancer treatment Pluvicto.
Earlier this month, a U.S. district court struck down a key patent protecting Entresto’s market exclusivity through 2025, a decision that Novartis aims to overturn. “We feel we have strong grounds to ultimately prevail on appeal,” said Narasimhan, who noted that no generic versions of the drug are currently approved in the U.S.