Opinions
Mark Grammer
Novartis AG
NVS-N
BUY
Mar 22, 2018
Stock price when the opinion was issued
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$200 billion market cap. Fifty + drugs. None of them s over 6.5% of their revenue. They are spinning their ophthalmology business. Some positives there. He struggles to understand why the stock is down. Wouldn’t be his favorite European exposure but still well diversified solid business.
If the economy slows down, you need a good pharma stock. Novartis was stuck in a rut until the current CEO started in 2018. He made a number of key acquisitions without paying and including smaller companies (they had overpaid in the past), focusing on their most lucrative divisions: drugs to treat cancer and immunology. he also fired a lot of executives, and hired some outsiders including a smart drug analyst from Wall Street. They sold Roche and pocketed the cash. Bought DTx Pharma, Chinnok Therapeutics, Calypso Biotech and other pharmas offering drug that boast positive trial results. Smart pick-ups, yet disciplined spending, like nixing a deal that cost too much. Their Q1 saw 10% net sales growth and 18% core operating income growth.
He likes it because of its exposure to Entresto, which cardiologists often call a wonder drug. The drug is relatively expensive ($9 per day) so the issue is getting insurance companies to pay for it. He thinks the runway for the drug is excellent and that it will become a blockbuster within a year or two. Pharma companies are under pressure because Trump is currently talking about reducing drug prices, but he (Grammer) is willing to wait on this stock.