Novartis AG (NVS: Quote) on Tuesday reported a lower profit for the first quarter as sales were hurt by generic competition to its blood pressure pill Diovan and breast cancer drug Femara. Production suspension at a manufacturing site due to quality issues also affected the results. Despite this, the Swiss drugmaker maintained its outlook for 2012.
Net sales slid 2 percent to $13.74 billion from $14.03 billion in the prior year. Generic competition to Diovan and Femara dragged sales by 3 percentage points. Lower production volumes from Consumer Health segment pulled sales by another 2 percentage points due to the suspensions.
These were partially offset by sales gains from recently launched products, which now represent 28 percent of Novartis' sales, up from 24 percent a year ago.
Net income attributable to shareholders of the company declined to $2.31 billion from $2.77 billion in the previous year. Earnings per share dropped to $0.95 from $1.20.
The latest results included intangible asset amortization of $714 million, restructuring charges of $147 million as well as a sale gain of $51 million and provision releases of $88 million. Core earnings per share dropped to $1.27 from $1.41.
Currency hurt net sales of the quarter by 1 percent due to the strengthening of the dollar against many currencies. Volume growth improved 5 percentage points owing to products launched since 2007.
Sales of Diovan fell 15 percent to $1.19 billion. Chronic myeloid leukemia drug Gleevec/Glivec sales grew 6 percent to $1.13 billion. Multiple-sclerosis drug Gilenya's sales were $247 million, up from $59 million last year.
Joseph Jimenez, CEO of Novartis, said, "Group net sales performance was impacted by Sandoz, which was up against a strong year-ago base with enoxaparin exclusivity, and by Consumer Health, which was impacted by the suspension of production at the Lincoln, Nebraska manufacturing site."
The company recalled some over-the-counter products in the US in January, following consumer complaints of chipped and broken pills as well as mixed tablets due to inconsistent bottle packaging line clearance practices.
Novartis said today that sales from Consumer Health, comprising OTC and Animal Health, declined 20 percent to $932 million, impacted by the suspension of production at the Lincoln site. The company said it is remediating the quality issues at the site, as well as the three Sandoz production sites.
Pharmaceuticals division saw net sales growth of 2 percent at $7.8 billion, as strong volume growth of 9 percentage points more than offset the effect of generic entries of 6 percentage points.
Alcon net sales grew 5 percent to $2.5 billion, led by a 9 percent growth in Surgical business. Ophthalmic Pharmaceuticals sales grew 5 percent and Vision Care grew 1 percent. Comparative growth was dampened slightly by the inclusion in 2011 of certain lens care products divested at the end of the first quarter last year.
Sandoz net sales declined 10 percent to $2.1 billion, against a very strong first quarter last year. Price erosion was 8 percentage points, mainly due to increased competition for blood thinner enoxaparin.
Vaccines and Diagnostics net sales declined 19 percent to $299 million, mainly due to an exceptionally strong first quarter in 2011, which benefited from the release of bulk pediatric shipments.
Novartis also said the first four Novartis QVA149 Phase III studies in the treatment of chronic obstructive pulmonary disease, or COPD, all met their primary endpoints. The results of the SHINE, BRIGHT, ENLIGHTEN and ILLUMINATE studies, which are key components of the IGNITE program, demonstrate the potential of QVA149 in the treatment of COPD.
Looking ahead, Novartis continues to expect constant currency net sales in line with 2011. Group core operating income margin in constant currencies is expected to be slightly below 2011 core operating income margin.
The stock settled in Zurich on Monday lower by 0.58 percent at 50.90 Swiss francs on a volume of 4.72 million shares.
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by RTT Staff Writer
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