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Novartis posts increased Q1 profits

Novartis has posted a 49 per cent increase in net profit for the year's first financial quarter

Novartis has posted a 49 per cent increase in net profit for the year's first financial quarter, rising to $2.9bn from $2.0bn in the same period last year.

The strong results follow record growth for the Swiss pharma giant in 2009, as well as a restructuring of the company's executive positions at the beginning of 2010. This saw Joe Jimenez take over as CEO from Dr Daniel Vasella, who remains as chairman, and Jon Symonds become CFO. 

"I am pleased with the strong growth generated in the first quarter of 2010 across our entire healthcare portfolio," said Jimenez. "All of our businesses are making good progress, particularly the sustained expansion in pharmaceuticals and the strong contributions from supply contracts for A (H1N1) pandemic flu vaccines. We are focusing on extending our lead in innovation, driving growth and improving productivity, which we believe will generate greater sustainable value from our portfolio."

These contracts for A (H1N1) pandemic flu vaccines were one of the key contributions to the company's growth, with net sales in the vaccines and diagnostics division increasing 451 per cent from $247m in Q1 2009 to $1.4bn in Q1 2010. A (H1N1) pandemic flu vaccines accounted for $1.1bn of these sales, with Novartis delivering more than 150 million doses of the vaccine in the first quarter of 2010.

Overall sales figures rose too, with total net sales for the company up 25 per cent from the same period last year, rising from $9.7bn to $12.1bn. The success of recently launched products has proved significant in this growth, with new additions to Novartis' product range accounting for 16 per cent ($1.9bn) of net sales, an increase in revenue of 68 per cent for new launches from Q1 2009.

Approvals in foreign markets helped Novartis deliver strong results, with drugs such as Tasigna (nilotinib), for chronic myeloid leukaemia, and Galvus (vildagliptin), for type 2 diabetes, seeing considerable sales rises.

The increase in revenue was also put down to successfully targeted expansion in emerging markets. Net sales in the top six emerging markets, including China, India, Brazil and Russia, increased 38 per cent to $1.2bn.

More streamlined productivity contributed to the total net profit, with Novartis implementing its 'geo-tailoring' strategy to adapt sales forces to local markets, as well as sustaining reductions in inventory and increasing efficiency, creating excess capacity and lower fixed overhead absorption. The company has also said a simplification of manufacturing operations is "under review".

Further strategies for the future include adapting to changing healthcare markets, including that of the US, with the company saying it has "further streamlined its US business in pharmaceuticals to maximise the potential of the changing portfolio in both primary care and speciality markets". Plans include the creation of three national speciality businesses focused on multiple sclerosis, respiratory diseases and neuroscience to complement the existing Oncology business unit.

Novartis are also seeking to complete the acquisition of leading eyecare company, Alcon, from Nestle. An agreement to acquire a 77 per cent majority stake of the company is "on track for completion in the second half of 2010" according to Novartis.

Speaking on the future of the company, and the purchase of a stake in Alcon, Jimenez said: "We are intensifying productivity efforts to improve profitability as well as to enable continued investments in drug discovery and expansion into new markets. As we prepare for the integration of Alcon, which will create a new growth platform in eyecare, we are building momentum in 2010 and achieving continued success."

20th April 2010

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