Novartis profits increase by 2.3%

NOVARTIS AG, Europe’s third-biggest drugmaker, said second-quarter profit rose 2.3% as the company boosted sales of its top two products, the hypertension drug diovan and leukemia medicine gleevec.

Net income at Novartis, which employs more than 500 people in Cork, rose to $1.32 billion from $1.29bn a year earlier. That’s in line with the $1.31bn forecast by 11 analysts surveyed by Bloomberg News. Sales rose 19% to $6.2bn, the Basel, Switzerland-based company said in an e- mailed statement. Sales of diovan rose 35% and gleevec sales almost doubled, helping pay for higher spending on marketing, research and acquiring new products. Novartis also benefited from the depreciation of the dollar against the Swiss franc, after the company started reporting results in dollars this year.

“We’re positively surprised about the results, in particular about the sales increases of key pharmaceutical products such as gleevec and diovan,” said Denise Gugerli-Etter, an analyst at Bank Sarasin & Cie. “So far, the company delivered what it promised.” The shares gained 20 centimes, or 0.4%, to 52.20 Swiss francs as of 10.08am in Zurich. Novartis stock, which accounts for 22% of Switzerland’s benchmark index, has gained 3.9% this year.

Sales were lifted by revenue from generics, which rose 76% to $702m after Novartis acquired Lek Pharmaceutical and Chemical Co last year. Sales of seven of its top 10 brand products rose in the second quarter, with cancer and cardiovascular treatments accounting for the largest increase. Operating profit increased 10% to $1.46bn, a smaller increase than sales. Novartis had expenses of $126m to acquire a stake in Idenix Pharmaceuticals Inc, products from Regeneron Pharmaceuticals Inc and a potential $250m incontinence drug called enablex from Pfizer Inc.

The drugmaker expects to win US regulatory approval for enablex and arthritis pain medicine prexige by the end of this year, chief financial officer Raymund Breu said.

The company is interested in further acquisitions to boost its product range, Breu said.

“Despite indications that major markets may be slowing down, Novartis is maintaining its 2003 outlook for group and pharmaceuticals sales to grow in the high single to low double digit percentage range in local currencies,” Novartis said in the statement.

Breu said income on its investments will decline this year. Full-year operating profit and net income will exceed last year’s levels, helped by sales of its top two products, Diovan and Gleevec, he said.

Costs to market the irritable bowel syndrome medicine zelnorm and eczema treatment elidel held down margins in the second quarter. Operating margins, or operating profit as percentage of sales, dropped to 23.6% from 25.6% in the second quarter. The pretax loss on its 32.7% stake in rival Roche Holding AG was $310m in the first half. Novartis said $269m of that was for Roche’s loss in 2002, for which Novartis took a provision in the first quarter.

The remaining $41m is for losses on the Roche investment.