The past six months have been reasonably kind to big-cap pharmaceutical companies, what with Pfizer
Results for the first quarter were once again solid. Total revenue rose 13% as reported (up 17% in local currencies), with about 8% of that growth coming courtesy of acquisitions. Pharmaceuticals, the biggest and most profitable business, saw reported revenue climb 5%, with the top 10 drugs growing just slightly faster.
Profitability, too, was improved. Although gross margins eased off a bit, reported operating profits rose 31%. While it's true that a good bit of this improvement was from acquisitions in the generics business and a favorable divestment, pharmaceutical operating income was nevertheless up 19%.
To put it simply, Novartis has been a busy company of late. Not only did it finalize its deal to buy Chiron -- it also added several new products to the pipeline, with deals with the likes of Servier, Identix Pharmaceuticals
Furthermore, it made meaningful clinical progress as well. Filings for Galvus (for diabetes) and Rasilez (for hypertension) are now into the FDA, and the company is in discussions to begin phase 3 studies of FTY720 -- a promising oral therapy for multiple sclerosis.
Although I don't own Novartis shares and have about as much drug exposure as I want for the time being, I still think this is a solid idea in the big-cap pharma world. The company not only has a good pipeline, but the valuation is still attractive without needing to make particularly aggressive assumptions. While there's always the risk of clinical disappointment and/or management distraction (these folks seem to like doing deals), the shares are still worth a look.
For more pharm-fresh Foolishness, pop one of these:
Pfizer is a Motley Fool Inside Value recommendation, whileMerck and GlaxoSmithKline are Motley Fool Income Investor recommendations. Take the newsletter that best fits your investing style for a 30-day free trial.
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).