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Novartis profit falls on generic competition and charges

Pharma company saw first quarter sales dip by two per cent

Novartis day

Novartis' first quarter net profit fell 18 per cent to $2.3bn on the back of a dip in sales and $147m in charges related to the downsizing of its operations in the US.

Revenues fell 2 per cent to $13.7bn thanks to generic competition to blood pressure drug Diovan (valsartan), which slipped 15 per cent to $1.2bn, as well as weaker performances by the firm's generics unit Sandoz and its consumer health operations.

Novartis' chief executive Joe Jimenez said on a conference call that the Sandoz suffered by comparison with a strong first-quarter a year ago when it benefitted from US market exclusivity for its generic version of anti-thrombotic drug Lovenox (enoxaparin).

But he added that the business is seeing positive growth in emerging markets and now has more than a 50 per cent share of the small but growing biosimilars markets.

Meanwhile, the consumer health business was affected by supply shortages following the closure of a manufacturing plant in Nebraska, with over-the-counter (OTC) medicine sales down 20 per cent in the quarter.

Production at the plant is expected to resume in May, with shipments starting mid-year, but the recovery will be slower than expected and the portfolio will be limited through the end of 2012, said Jimenez, who noted that Novartis is hiring contract manufacturers to help alleviate the shortfall. Overall, the unit had revenues of $932m, down 20 per cent.

On the plus side, diabetes treatment Galvus (vildagliptin), which won a new European indication in December and added a monotherapy indication in Europe earlier this year, put in a robust performance, with sales rising 60 per cent to clear the $200m level for the first time in the quarter,

Meanwhile, Afinitor (everolimus) for kidney cancer grew by the same margin to add $143m to Novartis' coffers in the quarter. Novartis is hoping to win approval for the latter in breast cancer later this year, an indication which could add more than $1bn a year to sales.

Cancer drug Tasigna (nilotinib) also did well, up 40 per cent to $209m, while Lucentis (ranibizumab) for age-related macular degeneration rose 30 per cent in the quarter to $567m, topping $2bn in sales in the last 12 months.

Also doing well was Novartis ophthalmology unit Alcon, with sales up 5 per cent to $2.5bn led by its surgical products franchise.

Jimenez said on the call that despite the "challenging" first quarter, "we made good progress in the first quarter in innovation".

He pointed to the approvals for Cushing's disease drug Signifor (pasireotide) - cleared in the US in February with a green light just awarded in the EU this week - as well as Jakavi (ruxolitinib) for myelofibrosis in the US.

Positive phase III data for chronic obstructive pulmonary disease (COPD) drug QVA149 was also a major boost as this will be "an important drug for Novartis going forward", said Jimenez.

25th April 2012

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