Novartis profits exceed forecasts

NOVARTIS, Switzerland’s largest drugmaker, reported first-quarter profits above analysts’ forecasts as sales increased for its biggest product, hypertension drug Diovan.

Net income was $1.06 billion, or 43 cents a share, little changed from a year earlier, after a loss on Novartis’s stake in Swiss rival Roche Holding. A 21% increase in sales boosted profit above the $933 million average estimate of 10 analysts surveyed by Bloomberg News.

Novartis chief executive officer Daniel Vasella is relying on older products like the seven-year-old Diovan, whose sales rose 58% to $565 million, because the company has no new drugs with similar market potential to introduce this year. Novartis expects sales to grow by 10% in local currencies this year and net income and operating profit to exceed 2002 levels.

“With these results they’re on track to outperform the market,’ said Birgit Kulhoff, an analyst at Bank Sal Oppenheim in Zurich with a “neutral’ rating on Novartis shares.

“If you take into account that there are no major launches this year, then 10% local growth is very impressive.’ Revenue rose to $5.72 billion from $4.74 billion as Novartis gained market share in the US for Diovan, helped by research showing the drug can prolong the lives of patients with chronic heart failure.

Pharmaceutical sales rose 18% to $3.61 billion. In local currencies, revenue rose 13% and drug sales rose 10%. The company is reporting results for the first time in US dollars instead of Swiss francs.

Novartis’s shares rose 1.3 Swiss francs, or 2.5%, to 54.35 francs as of 12:11pm in Zurich trading. The shares have risen 6.7% this year, while the 17-member Bloomberg Europe Pharmaceutical Index has fallen 3.3%.

Loss on Roche Stake Novartis, Europe’s third-largest drugmaker, took a $277 million charge for its stake in Roche after Roche reported a second-half loss of 5.8 billion Swiss francs ($4.2 billion) from writing down the value of investments and boosting reserves to settle vitamin price-fixing cases. Vasella has said the company’s 32.7% Roche stake is a “strategic, long-term investment.”

“Novartis is now at a lucky point in the cycle in that drugs that have patent expirations are minor compared to the other players in the market and that certainly helps,” said Denise Anderson, a pharmaceutical analyst at Bank Julius Baer in Zurich, who recommends buying shares of Novartis.

Diovan Growth Thomas Ebeling, head of Novartis’s drug division has said he expects Diovan to become the company’s first medicine to top $2.2 billion in peak sales if it wins approval for new uses. Sales of the drug last year reached $1.8 billion.