New Heart Failure Drug Marketing Costs to Alleviate Novartis’ 2016 Profit

Novartis revealed on Tuesday that the company is boosting its expenditure on marketing a new heart failure drug called Entresto subsequent to disappointing initial sales of the medicine. This increase in expenditure might have a dampening impact on the profit of Novartis in 2016.

The Swiss company explained that this additional expenditure, coupled with decline in sales of leukemia treatment Gleevec, will result in core operating income in 2016 being equivalent to that of 2015 or slightly less than that at constant currencies. Novartis is the biggest prescription drugmaker across the world and its profit in the second quarter was slightly more than the expected level.

The company is relying on its new medications like Entresto and Cosentyx, used in the treatment for psoriasis, to compensate for the adverse impact of generic competition on sales of Gleevec. Entresto was launched in the summer of 2015, but has not been able to experience growth in its most important market of the US, while its sales in Europe are better.

The drug is considered to have enormous potential, with annual sales expectations of $5 billion or more. Its sales reached $32 million during the second quarter, during which sales of Cosentyx was $260 million. Novartis again claimed that it anticipates the sales of Entresto for the full year of 2016 to reach nearly $200 million.

The forecasts for Entresto were enhanced in May after it was strongly recommended for the treatment of heart failure under the new medical guidelines. Joe Jimenez, the Chief Executive Officer of Novartis, aims to benefit from this endorsement by assigning an additional expenditure of $200 million for marketing the medication during the second half of 2016.

The company’s decision to boost expenditure on sales representatives is being supported by industry analysts. "We see this as a necessary spend and one that should have been made earlier", said Tim Race, an analyst at Deutsche Bank.