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Novartis Profit Dips; Plans $5 Bln Buyback; Mulls Options For Alcon; Stock Up

Shares of Novartis AG (NVS) were gaining around 2 percent in the morning trading after the Swiss drug giant said it is initiating share buyback of up to $5.0 billion in 2017, and also announced higher dividend. The company also said it is reviewing options for the Alcon Division to maximize shareholder value.

In its fourth quarter, the company reported lower profit, mainly reflecting generic competition largely due to Gleevec/Glivec, as well as weak Alcon sales. For fiscal 2017, the company sees flat net sales and in line or lower core operating income.

Joseph Jimenez, CEO of Novartis, said, "Novartis delivered a solid performance in 2016, absorbing Gleevec US loss of exclusivity while investing in key launches and the Alcon Division turnaround. Cosentyx reached blockbuster status in 2016, and the conditions are now in place for Entresto sales to accelerate in 2017."

For fiscal 2017, Novartis forecast net sales to be broadly in line with the prior year in constant currencies, after absorbing the impact of generic competition. This includes the continued genericization of Gleevec/Glivec in the U.S. and Europe. The company also forecast group core operating income in 2017 to be broadly in line with prior year to a low single digit decline.

In 2016, net sales were $48.52 billion, and core operating income was $11.31 billion.

The Novartis board of directors has proposed a dividend payment of 2.75 Swiss franks per share for 2016, up 2 percent from 2.70 francs per share in 2015.

Regarding Alcon, Novartis said the options being considered range from retaining the business to separation via a capital markets transaction. The review of the business would take place during the course of 2017

For the fourth quarter, Novartis' net income declined 11 percent to $936 million from $1.05 billion in the prior year, with earnings per share decreasing 9% to $0.40 from $0.44 last year.

Core net income, which excluded certain items, was $2.66 billion or $1.12 per share, compared to $2.71 billion or $1.14 per share a year ago.

Core operating income declined 1 percent to $3.01 billion, but rose 1 percent on constant currencies basis.

Net sales from continuing operations decreased 2 percent to $12.32 billion from 12.52 billion in the prior year.

Net sales of Innovative Medicines, formerly named the Pharmaceuticals Division, were $8.3 billion, down 3%. Generic competition had a negative impact of 6 percentage points and pricing had a negative impact of 1 percentage point, both largely due to Gleevec/Glivec genericization in the US.

Sandoz net sales grew 2% in the fourth quarter. Alcon Division net sales were $1.4 billion, down 2% as surgical sales were down, mainly due to lower sales of Cataract and Refractive equipment, as well as competitive pressures in IOLs. Vision Care sales returned to growth.

In fiscal 2016, net income dropped 5 percent, and core net income fell 6 percent with a 2 percent decline in sales.

In Zurich, Novartis shares were trading at 71.05 Swiss francs, up 2.16%.

by RTT Staff Writer

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