Novartis lifts 2020 forecast as drugmakers see hospitals coping with Covid

By John Miller

ZURICH (Reuters) - Novartis joined rivals Merck, Johnson & Johnson and Roche in predicting the worst of the pandemic may be over for drugmakers, amid signs healthcare systems have learned how to cope with surging infections without shutting down all services.

The Swiss company nudged up its 2020 profit guidance on Tuesday, now expecting operating income growth in a low-to-mid double-digit percentage range, compared with a low double-digit rate forecast previously.

Merck also raised its profit outlook on Tuesday, following Johnson & Johnson, while Roche last week stuck to sales forecasts and predicted a rebound from pandemic disruptions would continue.

While Novartis CEO Vas Narasimhan acknowledged COVID-19 could still derail 2020 goals, he said hospitals, doctors and patients had learned from painful lockdowns earlier this year that delayed treatment and hit drug sales.

"There's a strong desire not to repeat that," he said, adding U.S. healthcare systems appeared to be "a bit more resilient" in maintaining services than in Europe as the second COVID-19 wave intensifies.

Novartis's third-quarter core net income climbed 8% to $3.47 billion, above analysts' mean forecast of $3.32 billion.

However, sales rose just 1% to $12.3 billion, missing a $12.7 billion forecast. Novartis shares were down 3.5% at 1420 GMT, the biggest fall on the benchmark Swiss Market Index.

Other firms echoed Novartis's view, even as global COVID-19 cases rise by more than 400,000 a day and some countries see intensive care units at capacity within weeks.

"Our confidence is further reinforced by the ability of the health care systems around the world to adapt and deliver care," Merck Chief Financial Officer Robert Davis told investors, adding a pick up in elective surgeries had lifted demand.

A week ago, Roche CEO Severin Schwan called a second "healthcare lockdown" unlikely.

Still, countries including Germany, France, Spain, Switzerland, and the Czech Republic are either enacting or preparing new restrictions.

So Novartis remains on alert.

"Of course, if there would be a resurgence of COVID-19 impact on the health care systems and prescribing behavior in our major markets, there is a scenario of lower sales growth," finance chief Harry Kirsch told investors.

 

(Reporting by John Miller; editing by Brenna Hughes Neghaiwi and Mark Potter)