* Q2 core EPS down 4 pct at $1.30 vs $1.34 in Reuters poll
* Sales at $14.5 bln vs forecast for $14.3 bln
* Raises full-year outlook due to weaker generic impact
* Says no contact from Chinese officials, in light of GSK
By Caroline Copley
ZURICH, July 17 Novartis raised its
full-year outlook on Wednesday after generic competition to its
best-selling blood pressure pill was delayed, granting the Swiss
drugmaker a temporary reprieve from patent losses.
The Basel-based firm lost its patent rights on Diovan in the
United States last year and faced competition from a copycat
version of its monotherapy from Ranbaxy Laboratories.
But the lab has so far failed to get a green light for
production from U.S. regulators.
"This is good news, but only short term, as the sales impact
is merely delayed into 2014," said analyst David Kaegi of
J.Safra Sarasin bank.
He said he was cheered by quarterly growth in underlying
sales and operating income of 8 percent and 18 percent
respectively, excluding the impact of generics.
Novartis said it expected full-year sales to grow at a
low-single digit rate in constant currencies and core earnings
to decline in the low single digits. It had previously guided
for a mid-single digit drop in core earnings and flat net sales.
Second-quarter core earnings per share fell 4 percent to
$1.30, undershooting the Reuters analyst consensus of $1.34. Net
sales inched up 1 percent to $14.488 billion, compared to the
average poll forecast of $14.314 billion.
Helping to compensate for patent losses was the strong
performance of new drugs which contributed to one third of group
net sales. Despite competition from rival products, sales of
multiple sclerosis pill Gilenya shot up 65 percent, while
revenues from cancer drug Afinitor jumped 76 percent.
The group was also pinning its hopes for growth in emerging
markets, where sales in China rose 25 percent in constant
currencies in the quarter.
"I would expect that Novartis could at least grow at the
market levels as the access to healthcare in China continues,
maybe not at 25 percent but definitely double digits," Chief
Executive Joe Jimenez told reporters on a conference call.
He said Novartis had not been contacted by Chinese
authorities regarding the investigation into British drugmaker
GlaxoSmithKline on allegations of bribery.
Shares in Novartis, which trade at 13.7 times estimated
earnings over the next 12 months - a discount to rival Roche's
15.3 times, were flat at 69.10 Swiss francs by 0753 GMT,
compared with a 0.3 percent firmer European healthcare sector
The imminent arrival of Novartis' new chairman Joerg
Reinhardt on Aug. 1 has prompted some analysts and investors to
wonder whether the company may spin off some of its smaller
units or sell its stake in Roche.
Jimenez said the company viewed its one-third voting stake
in its rival as a strategic investment which had value beyond
the market price.
Novartis said former chairman Daniel Vasella would be paid
2.7 million Swiss francs ($2.87 million) and be given shares
worth roughly 2.2 million francs for advising the company since
he stepped down in February.
The drugmaker was forced to scrap plans for a $78 million
payoff after news of the package was criticised by politicians
and investors. Outrage over the deal fed support for a national
vote in March to impose strict controls on corporate pay.
Novartis has been rumoured as a potential bidder for Onyx
Pharmaceuticals Inc but Jimenez declined to comment.
People familiar with the matter have told Reuters the drugmaker
has decided not to pursue a deal.
Jimenez said the company was focusing on bolt-on buys in the
range of $2-$5 billion.