Swiss drug maker Novartis AG (NVS) reported Wednesday a higher profit in its first quarter as strong performance of growth products and emerging growth markets offset the impact of generic competition. Core earnings topped analysts' estimates, while top line came in line with their view. Going ahead, the company backed its cautious fiscal 2013 forecast for flat sales and lower operating income, which reflects the impact of generic competition.
Further, the company promoted Harry Kirsch, currently CFO Pharmaceuticals, to new Chief Financial Officer, effective May 1. Kirsch, who joined Novartis in 2003 from Procter & Gamble, succeeds Jon Symonds, who will become advisor to the CEO Joseph Jimenez until the end of the year.
Separately, Novartis said that Joerg Reinhardt, as its Chairman, would receive a total annual compensation valued at 3.8 million Swiss Francs through combination of cash and stock, effective August 1.
Commenting on the first-quarter results, Jimenez said, "Novartis delivered a solid quarter, with all divisions contributing to growth. Significant expansion in our growth products helped to offset the impact of patent expirations. Vaccines and Diagnostics performance improved, and achieved a key approval for Bexsero in the EU while Consumer Health returned to sales growth."
In its recently concluded first quarter, Novartis' net income increased 7 percent to $2.42 billion from last year's $2.27 billion. Earnings per share grew 5 percent to $0.98 from $0.93 a year ago. Core net income, which excluded certain items, grew 7 percent to $3.25 billion, and core earnings per share improved 6 percent to $1.32.
On average, three analysts polled by Thomson Reuters expected earnings of $1.28 per share for the quarter. Analysts' estimates typically exclude one-time items.
Group net sales reached $14.02 billion, a 2 percent increase from $13.74 billion generated last year. Analysts also expected for $14.02 billion in sales.
The company said that currency had a negative impact of 2 percentage points. On a constant currency basis, sales grew 4 percent.
Generics impacted sales by approximately $500 million, mainly due to Diovan hypertension drug. Excluding the impact of patent expiries, underlying sales grew 7 percent, fueled by growth products, including multiple sclerosis drug Gilenya, Afinitor, Tasigna, Galvus, Lucentis, among others, which together contributed 30 percent of total net sales.
For fiscal 2013, Novartis continues to expect group net sales to be in line with 2012 in constant currencies, after absorbing as much as $3.5 billion impact of generic competition. Excluding the impact of generic competition, net sales are expected to grow at least in mid-single digits in 2013.
Group core operating income in constant currencies is still projected to decline in 2013 in mid-single digits due to generic competition and continued investment in an unprecedented number of launches. Core operating income, excluding patent expirations, should grow ahead of underlying sales in 2013, the company said.
Novartis expects negative currency exchange impact of approximately 2 percent on sales and approximately 4 percent on operating income for the full year.
Novartis shares closed Tuesday's trading at $73.23, up 0.85 percent. In the extended trading, shares edged up 0.13 percent to reach at $73.32.
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