UPDATE 2-Novartis names new chairman to deliver growth from 2014

Wed Jan 23, 2013 6:35am EST

* Q4 core EPS rises to $1.27, vs average $1.31 forecast

* Sees mid-single digit decline in 2013 core operating income

* Sales expected to grow in mid-single digits from 2014

* Chairman, former CEO Vasella to step down next month

* Shares rise 3.3 pct, outperform sector (Recasts, adds quotes, detail)

By Caroline Copley

ZURICH, Jan 23 (Reuters) - Daniel Vasella will step down next month as chairman of Novartis after 17 years leading the Swiss drug company which on Wednesday forecast a return to growth in 2014.

The Basel-based company, grappling like others with a wave of patent expiries, named Bayer healthcare head and previous contender for the CEO role at Novartis, Joerg Reinhardt, as its new chairman from August 1.

In a sign of growing confidence about the future, Novartis gave mid-term guidance on its earnings prospects for the first time, saying it expected reported sales growth of at least mid-single digits in 2014 and 2015 while core operating income should grow ahead of sales.

That compares with flat sales in 2012 and a two percent drop in core operating profit as the company lost exclusivity on its blockbuster blood-pressure drug Diovan.

"The long awaited mid-term guidance will be welcomed by the market as it will give investors with a longer investment horizon more confidence in the expected return to solid growth," said David Kaegi, an analyst at Sarasin.

On Wednesday, Novartis also guided investors to expect a mid-single digit fall in profit in 2013 as competition from generic copies is expected to knock $3.5 billion off full-year sales, leaving turnover flat.

Results in 2013 will be hit by the full impact of the loss of patent on Diovan in the U.S., and lingering manufacturing problems at its Consumer Health factory in Lincoln, Nebraska, but analysts hope this year will be a turning point.

Fourth quarter core net profit was in line with forecasts, up five percent to 3.1 billion francs, while sales inched up two percent to 14.8 billion francs, also meeting expectations. Core earnings per share rose to $1.27 in the fourth quarter, compared with the average estimate of $1.31 forecast in a Reuters poll of analysts..

Shares in Novartis, which have risen 8.4 percent in the last six months, were trading up 3.7 percent by 1000 GMT at 62.30 Swiss francs, compared to a 0.6 percent rise in the European healthcare sector.

Novartis's figures, which kick off the Big Pharma earnings season in Europe, come a day after U.S. rival Johnson & Johnson posted better-than-expected fourth-quarter results, but forecast 2013 earnings below forecasts.

CHANGING OF THE GUARD

Vasella's resignation after 25 years with the company, 17 as chairman or CEO, came as a surprise and he makes way for 56-year-old Reinhardt, a former COO of Novartis.

Reinhardt's return means he will oversee Joe Jimenez, the person he lost out to for the chief executive's job in 2010.

During his 2-1/2 year tenure at Bayer, Reinhard led a promising pipeline, seen by many as the envy of the industry. Its five most promising new drugs now have an annual peak sales potential of more than 5.5 billion euros, according to Germany's largest drugmaker.

Bayer shares have risen more than 36 percent in the past 12 months, outperforming the European healthcare sector's 15 percent gain.

Novartis is banking on sales of its newest products, like multiple sclerosis pill Gilenya and cancer drug Tasigna to help plug the gap.

Sales of products launched since 2007 grew 26 percent in constant currencies to $3.1 billion helping to offset the $2 billion in sales lost to competition from generic drugs.

Jimenez told a conference call the company expects its portfolio of new products to help it grow in 2015, even as its cancer drug Glivec, which overtook Diovan as the group's top seller in the fourth quarter, goes off patent mid-way through that year.

He expects cancer drug Afinitor, which won EU approval for advanced breast cancer in July last year, to achieve peak sales of $2 billion around 2016 or 2017.

Novartis is also pinning its hopes on emerging market and its eye care division Alcon to drive growth. Sales in the division rose 8 percent in constant currencies in the fourth quarter to $2.6 billion.

This helped offset an 11 percent sales decline in its Consumer Health business, dragged down by the ongoing closure of its Lincoln manufacturing site.

Jimenez said Novartis was using third-party manufacturers to help ship over-the-counter products and expected an inspection from U.S. regulators at the Lincoln site in the first quarter.

The company said it would pay a dividend of 2.30 Swiss francs per share, up from the 2.25 francs it paid last year.

($1 = 0.9296 Swiss francs)

(Reporting by Caroline Copley, additional reporting by Ludwig Burger in Frankfurt; Editing by Elaine Hardcastle)

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