Switzerland-based Novartis lost patent protection for its best-selling cancer drug, Gleevec, last year—a product once worth nearly $5 billion in annual sales. Yet while sales of Gleevec have fallen sharply—to $506 million in the second quarter, down 42% from the prior-year period—Novartis is plugging the revenue gap with other medicines, including its heart drug Entresto and immunology drug Cosentyx, used to treat psoriasis and inflammatory arthritis.
Novartis is also making strides in gene therapy—a potentially revolutionary new method to treat cancer. The treatment involves extracting a patient’s cells, genetically altering them to attack the disease, and then reinjecting them into the patient. The technique is expensive and, so far, limited to a small number of patients with rare forms of leukemia. But it appears close to winning full FDA approval and could transform cancer care, extending to more patients with different types of cancer.
Another growth area for Novartis is generic versions of biotech drugs. The firm’s Sandoz unit recently won approval in Europe to make a generic version of Enbrel, a best-selling drug used to treat rheumatoid arthritis. Novartis is now working on generic versions of Humira and Remicade—some of the biggest biotech drugs on the market, both used to treat arthritis, Crohn’s disease and other conditions—with approvals likely over the next year or two.
Overall, Novartis’s strong development lineup, and sales of generics and other products “should translate to steady growth over the long term,” says Morningstar analyst Damien Conover. Investors can also count on Novartis’s dividend staying intact, supported by the firm’s steady revenues and long-term earnings growth.