* Q1 sales $14 bln vs $14.25 bln forecast
* Q1 net profit $2.97 bln vs $2.7 bln in Reuters poll
* To consolidate back room functions to boost profitability
* Confirms full-year outlook
(Adds analyst, shares, details on Afinitor)
By Caroline Copley
ZURICH, April 24 Swiss drugmaker Novartis
posted a weaker-than-expected 1 percent rise in
quarterly sales, underscoring the pressures from generic
competition and tighter healthcare budgets that led it to
announce a radical business overhaul earlier this week.
On Tuesday, Novartis unveiled a series of deals worth over
$25 billion aimed at strengthening its cancer business and
exiting underperforming operations - part of a wider trend among
drugmakers to focus on their best assets.
The group said on Thursday it made first-quarter sales of
$14.02 billion, below analysts' average forecast of $14.25
billion and including a worse-than-expected 1 percent drop in
sales at its pharmaceutical division.
It blamed cheap generic competition for its bone repair drug
Zometa, as well as a slowdown of sales of leukemia drug Glivec
and cancer drug Afinitor in the United States.
"The slight disappointment was a 2 percent sales miss in
pharma," said Berenberg analyst Alistair Campbell.
Shares in Novartis, up more than 7 percent so far this year,
were down 0.9 percent to 75.55 Swiss francs at 0840 GMT, lagging
a slightly firmer European healthcare sector.
Novartis also reported a 24 percent jump in first-quarter
net profit to $2.97 billion, beating analysts' mean estimate of
$2.7 billion. The figure was boosted by higher operating income
which included a $900 million pretax gain from the divestment of
its diagnostics unit to Spain's Grifols last November.
Core earnings per share rose 1 percent to $1.31, in line
with expectations and blunted by the stronger Swiss franc and
weaker emerging market currencies.
Novartis' business overhaul, which includes buying
GlaxoSmithKline's cancer drugs as well as selling the
British company its vaccines business and also divesting its
animal health arm to Eli Lilly, marks the conclusion of
a year-long portfolio review.
In a further move to boost profitability, the group said on
Thursday it would consolidate some back office functions - which
are currently spread across its divisions - into one shared
These include IT, financial reporting and procurement
services. A spokesman for Novartis said the number of employees
in back office functions would remain stable at around 7,000.
The group said the performance of cancer drug Afinitor was
hit by shorter treatment times in the United States. It now
forecasts peak sales for the drug of $1.5-$1.7 billion, which
Deutsche Bank analyst Tim Race said was below its previous
expectation for $2 billion.
Novartis is banking on new products such as Afinitor and
multiple sclerosis pill Gilenya to help it grow sales through
the upcoming patent expiry of leukemia drug Glivec.
It is already facing cheaper, copycat competition for its
once best-selling blood pressure pill Diovan. However, it has
been granted some reprieve by the lack of a generic competitor
for the monotherapy form of the drug since Ranbaxy Laboratories
has faced delays with U.S. regulators.
The Swiss firm now assumes a U.S. launch of the drug at the
start of the third quarter.
Novartis confirmed its guidance for sales to grow in the
low-to-mid single digits this year in constant currencies, while
core operating income is expected to grow ahead of sales.
(Editing by Mark Potter)