Novartis boosts profit and market share

Novartis says it has a "rich pipeline" of new drugs. Novartis

The Novartis pharmaceuticals group has reported that first-half net income rose by 19 per cent over the same period last year to $2.8 billion (SFr3.44 billion).

Group sales reached $13.6 billion – up by 14 per cent – fuelled by pharmaceuticals growth and increased sales in its Consumer Health division.

Pharma sales, which climbed 17 per cent, were driven by demand for the hypertension treatment Diovan and the leukaemia drug Gleevec/Glivec.

“Our strategy has delivered strong organic sales growth and productivity gains for the first six months of the year,” commented chairman and CEO Daniel Vasella in a statement on Monday.

“I am also pleased that we have gained market share, marking ten consecutive quarters of growth above the market average, with margin improvements ahead of plan,” he added.

Higher net income

Novartis, which is the first large European pharma company to report its first-half figures, said it expected “markedly higher” operating and net income for the year.

It said this would be spurred by high single to low double-digit growth in sales at its pharmaceuticals division.

“All key projects of our rich pipeline are progressing on schedule,” commented Vasella.

Novartis, which had flirted with the idea of acquiring France’s Aventis in April before losing out to Sanofi-Synthélabo, plans to use its $8 billion in cash to acquire generic drug makers in a bid to become a world leader.

Generic drugs are copies of branded medicines which can generally only be made after patent protection has expired.

Vasella told journalists earlier this month that Novartis was evaluating ten companies as possible future purchases.

However, the prospect of a major acquisition seems to have left investors wary.

Worried markets

“If you look at Novartis’s performance, markets seem to be a bit worried that they’ll acquire a company,” commented Eric Bernhardt, who manages Novartis shares at the Clariden Bank in Zurich.

“They have quite a good pipeline, and an acquisition could lead to dilution,” he added.

But Vasella said in a television interview on Tuesday that the company would not make a value-destroying acquisition.

He said the group was no more or no less likely than its peers to seek mergers, adding that Novartis was constantly screening potential candidates.

“The reassurance I can give is that when we do analysis of potential candidates, we are looking at it with an eye on financial and value creation,” he said.

“We are not getting into a frenzy of having to conclude or make a deal.”

No frenzy

Last month Novartis agreed to buy the Canadian generic drugmaker Sabex for $565 million in cash. In 2002 the Basel-based group bought Slovenia’s Lek for about $1 billion to boost its capacity to make generics.

Novartis also has a one-third stake in cross-city rivals Roche, which it sees as a strategic investment.

Roche, which is majority controlled by the founder’s heirs, has repeatedly rejected Vasella’s overtures for a merger.

Roche is due to report its first-half figures on Wednesday.

swissinfo with agencies

Key facts

Novartis made a profit of $5 billion last year on sales of $24.9 billion.
The company was created in 1996 by the merger of Ciba and Sandoz.
It invested $3.8 billion in research and development.
Novartis employs about 80,000 and operates in more than 140 countries.

In brief

Novartis made a profit of $2.8 billion (SFr3.44 billion) from January to June, a rise of 19 per cent over the same period last year.

It expects “markedly higher” operating and net income for the year as a whole.

The company says it is not in a “frenzy” to make major acquisitions.