Novartis AG (VTX: NOVN) is a holding company whose subsidiaries form one of the biggest Swiss pharmaceutical companies. They have activities all over the world and provide solutions to patients globally. The business activities are split into three main divisions: Sandoz (generics), Alcon (eye care), and Novartis Pharmaceuticals. All of these are coordinated from a central service group and form Novartis Biomedical Research.
Novartis has a strong footprint in Europe and the US, however, their focus in the years to come will be to expand its presence in the emerging markets. This will mean a focus on growth in Asia, Africa, and Latin America. This is because there is a fast-growing demand for access to high-quality medicines and healthcare supplies in these regions.
The company has agreed, in principle, to pay $390 million in order to settle a fine over serious allegations of kickbacks in the US. These kickbacks were used to incentivize medical professionals to push sales of their own pharmaceutical drugs. While the fine seems to be considerable, it should be considered that the US Department of Justice was seeking up to $3.35 billion as a settlement, therefore the damage could have been far worse.
While the outcome of their latest Earnings Report was disappointing, Novartis is not doing that bad if you look at their share price. Especially considering that we’re talking about the CHF (Swiss Franc) here, a currency that is mostly bought as a safe-haven currency to offset troubles around the world.
Speaking about the CHF, it should be mentioned that the SNB (Swiss National Bank) is one of the few central banks worldwide with “negative interest rates”. In other words, if an individual or corporation holds their funds in CHF and in a Swiss Bank, they will have to pay extra interest for that “privilege”. This can be considered a new concept for modern economics as once a central bank goes into the negative rate territory, the line is crossed and further dips into that area are most likely to happen.
As a Swiss company, Novartis enjoys both the benefits and problems that come from the SNB monetary policy. Since their eye-care division is in the United States and due to their diversification in Europe, I believe that NVS will strive to diminish the SNB’s issues. Add to this the aging population, which enhances the necessity for more and more drugs and high-quality medical care systems, and you’ll have a positive trend for a company like Novartis.
The current 89 CHF/share level comes after a possible double top at the 100 CHF level, and the measured move of this kind of double top is not quite done yet. However, it is interesting that the market tried for the 100 level for the second time in a row, as this is a bullish sign. I am favoring a call option from the 85-86 CHF level with a one-month expiration date.
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