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Business News/ Companies / Novartis profit beats estimates as new drugs offset Diovan
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Novartis profit beats estimates as new drugs offset Diovan

Earnings excluding some items increased 9% to $3.35 billion, or $1.37 a share, from $3.06 billion, or $1.24

Third-quarter sales rose 4% to $14.7 billion, compared with the average analyst estimate for revenue of $14.5 billion.Premium
Third-quarter sales rose 4% to $14.7 billion, compared with the average analyst estimate for revenue of $14.5 billion.

Geneva: Novartis AG, the world’s biggest drugmaker by sales, reported third-quarter profit that beat analysts’ estimates as revenue growth in new drugs more than offset sales lost to generic competition for the hypertension pill Diovan.

Earnings excluding some items increased 9% to $3.35 billion, or $1.37 a share, from $3.06 billion, or $1.24, Basel, Switzerland-based Novartis said in a statement on Tuesday. Analysts forecast profit of $1.32 a share, the average of 12 estimates compiled by Bloomberg. Novartis repeated its full-year sales and profit forecasts.

The company’s top-selling drug, Gleevec for leukemia, faces generic competition in 2016 while sales of Diovan dropped by half in the third quarter as patients in the US switched to a cheaper copy from Ranbaxy Laboratories Ltd. Still, revenue from three new drugs — Gilenya for multiple sclerosis and the cancer drugs Afinitor and Tasigna — each expanded by more than 20%.

“It looks like quite a strong beat on first glance, but then peeling back things, it’s still a beat, but it’s not quite as strong," said Tim Race, an analyst at Deutsche Bank AG in London. “It just shows decent progression."

Full-year sales will grow at a low- to mid-single digit percentage in constant currencies and core operating income will expand more than sales, Novartis said, reiterating the forecast it made in January and has maintained all year.

Stock climbs

Novartis rose 1.8% to 87.20 Swiss francs at 9:10 am in Zurich. The stock has climbed 24% this year including dividends through Monday, compared with an 18% gain in the Bloomberg Europe Pharmaceuticals Index.

Novartis said on Monday it was selling its flu vaccine business to Australia’s CSL Ltd. for $275 million, the final piece of a $28.5 billion restructuring that involves selling its vaccines and animal health units and buying GlaxoSmithKline Plc’s cancer unit.

Novartis said in April it would buy Glaxo’s cancer unit for as much as $16 billion, while selling its vaccines business, excluding flu shots, to the London-based company for $7.1 billion. Novartis is also selling its animal-health unit to Eli Lilly & Co. for $5.4 billion. The Lilly deal will close in the first quarter of next year, while the Glaxo transactions will close in the first half, Novartis said on Monday.

Roche stake

The company is focused on making its new structure work smoothly, though it will continue looking for small acquisitions to complement its pharmaceuticals, eye care and generics businesses, Jimenez said.

“Nothing has changed" in Novartis’s plans for its 33% of voting shares in cross-town rival Roche Holding AG, Jimenez said.

“We’re not in a position where we need those funds today," Jimenez said on the call. “They’re earning a decent return, we’re not in any hurry. At the same time it is a financial investment with somewhat of a strategic element to it."

Third-quarter sales rose 4% to $14.7 billion, compared with the average analyst estimate for revenue of $14.5 billion. Currency swings wiped 4 percentage points from sales because of the strength of the Swiss franc and dollar, Novartis said.

Novartis last month reported results from a trial of a new heart failure drug, LCZ696, that combines Diovan with another medicine. The combination reduced the risk of death and hospitalization because of heart failure by 20% compared with enalapril, the standard therapy. The treatment may reach peak annual sales of between $2 billion and $5 billion, Jimenez said. Estimates that it may reap $8 billion to $10 billion a year are “too optimistic," he said. Bloomberg

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Published: 28 Oct 2014, 02:34 PM IST
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