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Novartis delivers confident outlook despite Chiron costs

Vasella denies move for AstraZeneca as Swiss firm reassures market with strong sales of cardiovascular and cancer drugs

Novartis has forecast record sales and earnings for the year despite second-quarter profit rising by just 4.1 per cent due to charges associated with its acquisition of vaccine maker, Chiron.

Net income at the Swiss firm was below analysts' expectations, rising to $1.71bn, or 72 cents a share, on the back of solid sales of hypertension drug, Diovan and cancer medicine, Glivec. However, net income would have risen by 15 per cent and operating profit would have grown 23 per cent without the Chiron costs, which Novartis said came to ?209m for the quarter.

Analysts said they were surprised by how large the impact of Chiron had been on earnings.

ìThe hope is though that once those [Chiron] charges are out of the way, Novartis will be able to turn Chiron around,î said Luis Correia at Clariden Bank in Zurich.

While Chiron is expected to add about $1bn in sales in 2006, Novartis said the acquisition would reduce net income by between $400m and $450m this year.

Pharmaceutical sales achieved double-digit growth in the quarter, rising 11 per cent to $5.7bn. Cardiovascular sales rose 13 per cent to $1.6bn while oncology sales also rose 13 per cent to $1.5bn.

Novartis CEO Daniel Vasella has recently set about replenishing the Novartis pipeline with acquisitions. In June, Novartis offered to buy UK firm, NeuTec Pharma for ?305m ($560m) to gain two experimental treatments for drug-resistant infections.

The company has also been busy developing its own products - so far this year it has submitted four new medicines for regulatory approval. Blood pressure drugs, Rasilez and Exforge, diabetes treatment, Galvus, and Lucentis for age-related macular degeneration all have sales potential of more than $1bn each.

Novartis also said its FTY720 once-daily oral treatment for multiple sclerosis had recently started final phase III clinical studies.

Sales of Novartis' recently expanded generics unit, Sandoz, rose 74 per cent to $1.5bn in the second quarter, after last year's acquisition of generics firms, Hexal and Eon Labs.

Vasella told a post-result webcast he had no plans to make a major acquisition and scotched rumours that Novartis is set to make an approach for Anglo-Swedish firm, AstraZeneca.

30th September 2008

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