Zurich: Swiss drugmaker Novartis AG reported a better than expected first-quarter net profit, down 14% due to a stronger US dollar as it warned ongoing currency losses could hit its full-year results.
Novartis said net sales fell 2% to $9.7 billion, but rose 8% in local currencies due to a strong performance by new products from its pharmaceuticals division where sales rose 3% to $6.43 billion.
Net profit fell to $2.0 billion, which Novartis said was hit by a drop in average net liquidity and financing costs for its purchase of a 25% stake in eyecare group Alcon as well as currency effects.
Analysts in a Reuters poll had on average expected net profit to fall 19% to $1.878 billion on net sales down 1.8% at $9.73 billion. Net pharma sales had been expected to rise 1.5% to $6.358 billion.
Pharmaceutical makers like Novartis have proved relatively resilient in the economic downturn as healthcare is usually one of the last areas where consumers cut back spending.
But Novartis said its consumer health division, where sales fell 11% to $1.3 billion, was feeling the pinch with over-the-counter sales down in some emerging markets and the United States, while animal health sales were also off.
“The uncertain economy and currency market volatility create an opportunity to continue to enhance productivity and manage costs,” chief executive Daniel Vasella said in a statement.
Novartis said a cost-cutting project launched in late 2007 was ahead of schedule, delivering $329 million of savings in the first quarter. It said it expects to exceed goals of $1.3 billion of savings in 2009 and $1.6 billion in 2010.
Novartis reiterated its full-year target for net sales growth at a mid-single-digit rate and pharmaceuticals net sales growth at a mid- to high-single-digit rate, both in local currencies.
But it warned currency-related losses could more than offset underlying operating and net income gains to record levels in 2009 if recent exchange rates continue during the year.
Novartis said in February adverse currency movements could cut 8-10 percentage points off its first-quarter operating and net income.
Novartis said its Sandoz generics unit did well with sales up 4% in local currencies on sustained growth in many regions, although sales fell 9% in US dollars.
Novartis, which faces the looming loss of patent protection for its top-selling Diovan blood pressure drug, said new products fuelled growth in the pharmaceuticals division, with market share gains in 11 of the top 15 countries.
Novartis shares have been trading at about 8 times forecast 2010 earnings, a premium to other big drugmakers Sanofi-Aventis SA and AstraZeneca Plc and in line with GlaxoSmithKline Plc thanks to its promising new drugs.
But it is still at a discount to local Swiss rival Roche Holding AG, which is less exposed to copy-cat generic competition and the economic downturn.