Is the Uncertainty at Novartis a Game-Changer for Investors?

It's all change at Novartis (NYSE: NVS  ) . The head of its cancer business, Herve Hoppenot, has left the business to go to a new job. He will be replaced on an interim basis by Alessandro Riva, who was previously in charge of the oncology unit's development and medical affairs.

This is a significant development for Novartis and, more importantly, for its shareholders. Oncology is one of the company's biggest divisions and contributed the biggest-selling drug of 2012, with the leukemia treatment, Gleevac, generating $4.7 billion in sales. Meanwhile, total sales for the therapeutic area are roughly one-third of the company's total pharmaceutical sales of $32 billion.

Therefore, while the job is not as senior as a CEO position, its impact on the stock could prove to be significant.

However, since the news was released a week ago, shares have been firm and are up more than 4%. This is welcome news for shareholders and shows that the market appears willing to give the firm the time it needs to find a successor.

Furthermore, its progress in recent years in terms of top- and bottom-line growth appear to be keeping it on the right side of the market. While many of its competitors have struggled to deliver top-line growth, Novartis has been able to grow total sales from $41.5 billion in 2008 to $56.7 billion in 2012.

This equates to an annualized growth rate of more than 8%, which is well-ahead of the likes of AstraZeneca (NYSE: AZN  ) , Johnson & Johnson (NYSE: JNJ  ) , GlaxoSmithKline (NYSE: GSK  ) and Bristol-Myers Squibb (NYSE: BMY  ) , all of which have struggled to grow their top line over the same period, with AstraZeneca experiencing a marked decline as it experiences a "patent cliff," in which many of its blockbuster drugs are going off-patent without adequate replacements.

In addition, GlaxoSmithKline continues to experience severe problems in China, while Johnson & Johnson and Bristol-Myers Squibb are going through a period of significant change, as they seek to simplify their business models and move away from slower-growing products and into faster-growing spaces.

In addition, Novartis seems to hold its own versus the aforementioned health-care sector peers in terms of earnings-per-share forecasts in 2014 and 2015.

Indeed, Novartis is forecast to increase EPS by 6% in 2014 and by 10% in 2015. This is highly impressive, especially when revenue is expected to increase by only 2.8% per annum over the same period.

The forecast EPS figures compare favorably versus other global health-care stocks, with only GlaxoSmithKline from the aforementioned group matching the anticipated EPS growth rate of Novartis in 2014 and 2015, although GlaxoSmithKline has been unable to keep up with Novartis over the past five years.

Meanwhile, Johnson & Johnson is set to post EPS growth of 7% in 2014 and in 2015, while Bristol-Myers Squibb is expected to deliver growth of 3% in 2014 and a reduction in EPS in 2015 of 6%. AstraZeneca, still on its road to recovery, is likely to post EPS declines of 9% in 2014 and 2% in 2015.

So while Novartis is undoubtedly experiencing a period of uncertainty while it seeks to replace the head of its important oncology business, it does seem to have time on its side and, more importantly, compares favorably versus other global health-care stocks.

Of course, the likes of Johnson & Johnson, GlaxoSmithKline, AstraZeneca, and Bristol-Myers Squibb remain relatively attractive for health-care investors. The uncertainty surrounding Novartis and its head of oncology appears to do little to prevent it from being added to that list.

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