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Novartis Q4 Profit Surges, Above Estimates; Sees Growth In FY18; Stock Up


Shares of Novartis AG (NVS) were gaining around 3 percent in the morning trading after the Swiss drug major reported Wednesday that its fourth-quarter profit more-than-doubled with higher sales and the absence of prior year's charge. Looking ahead, for fiscal 2018, the company expects net sales to grow low to mid single digit, and core operating income to grow mid to high single digit, both at constant currency rates.

In early 2017, the company announced a strategic review of the Alcon Division in order to explore all options to maximize value for shareholders. The company said Alcon returned to growth in 2017, with fourth-quarter sales up 8 percent.

Joe Jimenez, CEO, said, "Novartis had a good year in 2017. Cosentyx reached multi-blockbuster status, Entresto delivered over USD 500 million in sales and Alcon returned to growth. … With several key launches on the horizon and our new operating model in place, Novartis is poised for sustainable growth."

For the fourth quarter, net income was $1.98 billion, up 111 percent from last year's $936 million, driven by the strong operating income growth and higher income from associated companies. The prior year included exceptional charges related to a revaluation loss in Venezuela of $0.3 billion.

Earnings per share grew 113 percent to $0.85 from $0.40 a year ago.

Core net income was $2.82 billion or $1.21 per share, compared to $2.66 billion or $1.12 per share last year.

On average, nine analysts polled by Thomson Reuters expected earnings of $1.19 per share. Analysts' estimates typically exclude special items.

Operating income was $2.1 billion, up 42%, mainly driven by growth drivers, productivity, lower impairments and a gain from achievement of a sales milestone related to the 2015 Vaccines divestment to GSK, which were partly offset by generic erosion. Core operating income was $3.2 billion, up 7%. Core operating income margin in constant currencies increased 0.7 percentage points.

Net sales were $12.92 billion, up 5 percent from prior year's $12.32 billion. Analysts expected sales of $12.79 billion.

Sales grew 2 percent in constant currency rates. Volume grew 7 percentage points, including growth from Cosentyx and Entresto, partly offset by the negative impacts of generic competition of 3 percentage points and pricing of down 2 percentage points.

Innovative Medicines net sales grew with higher volume. Generic competition had a negative impact of 4 percentage points largely due to Gleevec/Glivec genericization in Europe and the US. Pricing had a negative impact of 1 percentage point.

Sandoz net sales were flat as 8 percentage points of price erosion, mostly in the US, was partly offset by volume growth of 4 percentage points. US sales declined 17% due to increased industry-wide pricing pressure and continued customer consolidation. Excluding the US, net sales grew 4%.

Further, the company announced a dividend of 2.80 Swiss francs per share, an increase of 2%, for 2017.

Novartis said Elizabeth Barrett has been appointed CEO Novartis Oncology and Robert Kowalski, Head of Global Regulatory Affairs, will assume ad interim leadership of the Drug Development Organization, both effective February 1, 2018.

In Switzerland, Novartis shares were trading at 85.78 francs, up 2.61%.

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