Why Novartis (NVS) Stock Is Higher Today

NEW YORK (TheStreet) -- Shares of Novartis AG  (NVS) are up 4.24% to $85.06 as the company plans to seek approval of a medicine for chronic heart failure sooner than it had anticipated.

The drugmaker announced today that "the Data Monitoring Committee unanimously recommended early closure of the PARADIGM-HF study, indicating patients with chronic heart failure with reduced ejection fraction (HF-REF) who received LCZ696 lived longer without being hospitalized for heart failure than those who received standard care with ACE-inhibitor enalapril."

"Based on the compelling efficacy and primary endpoint having been met, the trial will now close early," its statement continued. "This follows two previous interim analyses that showed the safety profile of LCZ696 was acceptable." 

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A Barclays analyst estimated that LCZ696 has the potential to earn at least $1 billion in peak annual sales, Bloomberg reported.

Novartis plans to introduce additional new cardiac medicines. However, last week a U.S. advisory panel recommended against approval of the company's serelaxin, another experimental heart-failure drug.

TheStreet Ratings team rates NOVARTIS AG as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate NOVARTIS AG (NVS) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in stock price during the past year, reasonable valuation levels, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • NVS's revenue growth has slightly outpaced the industry average of 1.6%. Since the same quarter one year prior, revenues slightly increased by 1.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • NVS's debt-to-equity ratio is very low at 0.24 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.81 is somewhat weak and could be cause for future problems.
  • The gross profit margin for NOVARTIS AG is rather high; currently it is at 64.82%. Regardless of NVS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 13.45% trails the industry average.
  • You can view the full analysis from the report here: NVS Ratings Report

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