War, inflation, coronavirus and rising interest rates all left their mark on equity markets last year. Given the array of stumbling blocks, it is hardly surprising that Switzerland’s leading index finished 2022 with significant drops in share prices. The SMI posted an overall loss of 16.1%, the sharpest decline since the financial crisis of 2008. The domestic blue chips also trailed behind their European competitors, with the DAX falling 12.3% and the EURO STOXX 50 “just” 11.3%. Nevertheless, not all 20 SMI members finished up in the red: Zurich Insurance, UBS, Novartis and Holcim actually managed to close the year with gains, contrasting with Credit Suisse, which suffered the steepest drop of 67%.
The three heavyweights Nestlé, Novartis and Roche, who together account for the great majority of the SMI’s performance, trod different paths in the last twelve months. Whereas Novartis posted increases, as already mentioned, and hence had a positive impact on the index, its competitor Roche, down 23%, fell much more than the market as a whole. The different trajectories of the two pharmaceuticals giants have thoroughly home-grown causes. Some drug flops, for instance, have led to investors being cautious about Roche, with the failure of its great hope, “Gantenerumab”, sitting particularly ill with market players. The eagerly awaited phase III study of the Alzheimer antibody fell short of its targets, pulverising the prospects of billions of euros in revenue.
Things are going better with Novartis, on the other hand. After currency adjustments, the group is on course for growth and reckons it will hit its targets for the year, with mid-single digit percentage increases in sales and adjusted operating profit on the cards. The health specialist was also recently able to celebrate the success of a drug, when a late clinical study showed that “Iptacopan”, the experimental active agent against a specific blood disease, had lived up to hopes for phase III. Applications for licences are expected to be submitted later this year. Things are also going to get exciting for generics subsidiary Sandoz: Novartis is looking to carve out its with replica drugs business and list it on the Swiss stock exchange, the SIX. According to media reports, the ophthalmology and respiratory arm is also to be sold off in line with the reorientation to lucrative, patent-protected medicines. Bloomberg expects this process to start after the conclusion of the Sandoz transaction.
The share price of the third battleship in the SMI fleet, Nestlé, performed roughly in line with the overall market in 2022. The operating results of what is the world's largest food group are certainly respectable, with the management team led by CEO Mark Schneider raising its growth forecasts after the third quarter. It now expects to post an organic increase in sales for the expired financial year of between 8.0% and 8.5% compared with the roughly 8% anticipated previously. The forecast operating margin of some 17% was reaffirmed. Nestlé also presented hopeful medium-term targets: the group is expecting a sustained, organic rise in earnings in the mid-single digit range until 2025.
Source: Refinitiv