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Novartis Q4 Net Profit Weak, But Operating Income Up; Sees Growth In FY20

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Swiss drug major Novartis AG (NVS) reported Wednesday that its fourth-quarter net profit declined, while operating income climbed on strong sales growth.

Looking ahead, for fiscal 2020, the company expects net sales to grow mid to high-single digit and core operating income to grow high-single to low double digit, both in constant currency. The outlook excludes Alcon and the Sandoz US oral solids and dermatology business from both 2019 and 2020.

On a divisional basis, the company projects Innovative Medicines net sales would grow mid to high-single digit, and Sandoz sales would grow low-single digit.

Further, the company announced a dividend of 2.95 Swiss francs per share for 2019, an increase of 4 percent from the prior year.

Vas Narasimhan, CEO of Novartis, said, " Significant margin expansion puts us on track to reach mid to high 30s core margin for Innovative Medicines in the mid-term.... Looking ahead, we expect to sustain our long-term growth and margin expansion driven by our in market growth drivers and the 15 ongoing or upcoming major launches, while advancing our rich pipeline."

Novartis also announced that it is nominating Bridgette Heller, for election to the Board at the Annual General Meeting on February 28.

For the fourth quarter, Novartis' net income declined 7 percent to $1.13 billion from last year's $1.22 billion. Earnings per share were $0.50, 6 percent lower than $0.53 in the prior year.

Core net income was $2.99 billion, compared to $2.68 billion a year ago. Core earnings per share were $1.32, compared to $1.16 a year ago.

Operating income climbed 34 percent from last year to $1.82 billion, and core operating income increased 11 percent to $3.46 billion. Core operating margin was 27.9 percent, a growth of 0.8 percentage points.

Net sales grew 8 percent to $12.40 billion from last year's $11.48 billion. Sales grew 9 percent in constant currency.

Net sales were driven by volume growth of 13 percentage points, mainly from Entresto, Zolgensma, Cosentyx and Kisqali. These were partly offset by the negative impacts of pricing and generic competition.

Innovative Medicines net sales were $9.9 billion, up 10 percent, and Sandoz net sales grew 1 percent to $2.5 billion. Emerging Growth Markets sales grew 12 percent at constant currency rates, driven by China.

In Switzerland, Novartis shares were trading at 93.84 Swiss francs, up 1.35 percent.

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