Novartis Profit Misses Analyst Estimates, Shares Drop
Net income rose to $1.5 billion, or 68 cents a share, from $904 million, or 40 cents, a year earlier, the Basel, Switzerland-based company said. Product withdrawals and generic-drug competition had depressed earnings a year ago. Sales were little changed overall, while drug revenue increased 5 percent. Novartis shares fell as much as 4.3 percent.
“The pharma unit didnt deliver,” said Joerg De Vries- Hippen, chief investment officer in European equities at Allianz Global Investors in Frankfurt. “Pharma is supposed to be a safe haven in the current environment.”
Chief Executive Officer Daniel Vasella has cut jobs and reined in spending as Novartis prepares for the patent expiration on its hypertension drug Diovan. Europes fourth- largest drugmaker reduced its dependence on prescription medicines by developing its own generic treatments and vaccines and acquiring a stake in eye-care company Alcon Inc. last year.
Profit from continuing operations last quarter was $1.51 billion, falling short of the $1.78 billion median estimate of seven analysts surveyed by Bloomberg News.
Drug Mergers
Novartis fell 1.97 francs, or 3.8 percent, to 49.48 Swiss francs at 9:31 a.m. in Zurich trading. The drugmakers shares fell 10 percent in 2008, making it the eighth-worst-performing stock on the Bloomberg Europe Pharmaceutical Index.
A year ago, earnings were held back by generic competition and product withdrawals. Sales of five products, including the Famvir herpes medicine and the irritable bowel treatment Zelnorm had fallen by almost half to $1.7 billion from 2006 after the medicines either faced generic competition or were pulled from the market.
Vasella said Novartis will continue to make small acquisitions but probably wont take part in a bigger wave of industry mergers.
“The most important thing is to grow organically,” he said in a televised interview. “But you have to act with your eyes wide open” after Pfizer Inc.s $68 billion bid for Wyeth earlier this week. He said he doesnt view the enlarged Pfizer as a competitive threat.
This year at Novartis, sales from continuing operations will probably rise at a mid-single-digit rate this year. Drug sales will likely grow at a mid-to-high-single-digit rate in local currencies, Novartis said.
The companys experimental drug for multiple sclerosis fingolimod, a pill aimed at making treatment less painful for patients, is still expected for submission to regulators at the end of 2009, Novartis said.