ZURICH--Swiss drug maker Novartis AG (NOVN.VX) Wednesday posted
a rise in first-quarter net profit, as new product launches and
strength in emerging markets helped offset declining sales of the
blockbuster heart drug Diovan.
In an unexpected move, Novartis also said Chief Finance Officer
Jon Symonds is resigning and will be replaced by Harry Kirsch, head
of finance at the company's flagship pharmaceutical division. The
departure marks the second major change in the management structure
this year, after the retirement of Daniel Vasella, the company's
chairman.
Basel-based Novartis said recently launched drugs, including
cancer treatment Afinitor and multiple sclerosis pill Gilenya,
picked up speed during the quarter, generating $4.2 billion in
revenue that contributed almost a third of total sales. The strong
starts helped to compensate for a steep decline in sales of Diovan,
the company's No. 2 drug by revenue, which lost patent protection
in the U.S. in September.
Growth in China and Russia also helped to bolster the company's
performance, offsetting slowdowns in Canada and Latin America.
Chief Executive Joe Jimenez called the quarter "solid" and said
the company's innovation had continued to pay off.
The first-quarter results suggest Novartis is making progress in
its efforts to return to growth as it looks for drugs that can
replace the revenue lost by older drugs that are losing patent
protection. New drugs, such as Afinitor and Gilenya, take time to
catch on with doctors, even as revenue from drugs losing patent
protection drops off quickly.
In the three months ended March 31, net profit rose 6.7% to
$2.42 billion from a confirmed $2.25 billion a year earlier. The
result was below the $2.49 billion forecast in a survey of eight
analysts conducted by The Wall Street Journal.
Analysts said the results show Novartis can weather patent
expirations and may be on the brink of a new growth phase. David
Kaegi, an analyst with Sarasin in Zurich, said the
better-than-expected results were driven in part by improved
margins. Mr. Kaegi has a buy rating on the stock.
Net sales rose 2.0% to $14.02 billion, compared with
expectations of $14.04 billion.
Novartis estimated the impact of patent losses at about $500
million in the quarter, and said competition from cheaper rival
drugs could hurt annual sales this year by as much as $3.5
billion.
Sales of Diovan, a hypertension treatment that has powered
Novartis's revenue for years, dropped 23% to $918 million. The drug
will likely lose more revenue later this year when a delayed copy
of the drug made by Ranbaxy Laboratories Ltd. is expected to be
launched.
Novartis said it is still dealing with manufacturing issues at a
facility in Lincoln, Neb., that have crimped its ability to get
products to market. The company will now cut around 300 jobs at the
plant.
Also Wednesday, Mr. Jimenez said Novartis's U.S. unit, Novartis
Pharmaceuticals Corp., is disputing allegations made by federal
prosecutors who filed a civil-fraud lawsuit alleging that the
company paid kickbacks to get pharmacies to switch
kidney-transplant patients from generic drugs to the company's
brand-name product.
"The company will defend itself in the litigation," Mr. Jimenez
said in a conference call with reporters.
Novartis shares were trading 0.72% lower at 68.75 Swiss francs
($73.23) around midday in Zurich.
Write to Marta Falconi at marta.falconi@dowjones.com
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