UPDATE 4-Novartis Q3 net up 32 pct, raises drug sales forecast

* Q3 net profit $2.08 billion vs forecast $2.11 billion

* Raises drug sales forecast, to cut 550 jobs

* Shares fall 2.5 percent, retrace some of recent gains

* Reshuffles management, creates COO position

(Adds updated shares)

By Sam Cage

ZURICH, Oct 20 (Reuters) - Novartis AG (NOVN.VX) said net profit rose 32 percent to $2.08 billion in the third quarter, helped by strong sales of top-selling blood pressure medicine Diovan, and raised its full-year drug sales forecast.

The Swiss drugmaker expects drug sales to expand at a mid-single-digit rate in 2008, having previously forecast low single-digit growth. It also said on Monday it would cut 550 jobs in the United States, about 0.6 percent of its global workforce, as part of a reorganisation of its operations there.

Like many pharma stocks, Novartis has found favour in the financial crisis, with its shares almost unchanged over the last month due to the group's fairly secure earnings and dividend profile.

"Novartis delivered a solid performance in Q3," said DZ Bank analyst Thomas Maul. "We continue to recommend the Novartis shares as a 'buy' and a defensive long-term investment."

Its shares fell 2.3 percent to 58.15 Swiss francs by 0855 GMT, behind the European sector .SXDP, which traders said was a partial correction from a gain of some 12 percent on Friday, when the stock was helped by anticipation of strong results.

"The numbers are good, but they are not above expectations. On top of that, a lot of it was already anticipated on Friday," a trader said.

Novartis is also seen as a sound investment due to its diversified business and promising portfolio of new drugs, qualities which mean it trades at a premium to GlaxoSmithKline Plc (GSK.L) and France's Sanofi-Aventis SA (SASY.PA), Europe's two largest drugmakers.

It underlined its solid business on Monday, saying it had no equity or bond investment exposure to any insolvent financial institution and saw minimal impact from the crisis on its treasury operations.

LOOMING THREATS

But just like other pharma companies, Novartis also faces looming threats from copy-cat competition and more difficulties getting new products to market.

Third-quarter sales were $10.75 billion.

Novartis had been expected to post net profit of $2.11 billion and sales of $10.71 billion, according to a Reuters poll of 18 analysts.

The figures were helped by comparisons with a weak year-ago quarter, when Novartis was hit by generic competition with products like blood pressure tablet Lotrel and herpes treatment Famvir, as well as the withdrawal of bowel drug Zelnorm in the United States.

The company's pharmaceuticals unit is recovering from a series of setbacks in 2007, which also included its Galvus diabetes drug - once seen as a potential billion-dollar seller - which it now does not plan to resubmit for U.S. approval.

Drug sales rose 14 percent in U.S. dollar terms to $6.71 billion, just ahead of forecasts and underpinned by top-sellers Diovan and cancer drug Glivec.

But Novartis cut full-year forecasts for its Sandoz unit, which makes generic versions of patented drugs, saying it now saw sales growth at a low-single-digit rate from a previous target in the mid-single-digits.

It expected to launch a generic version of Sanofi's blood thinner Lovenox, called enoxaparin and developed with Momenta Pharmaceuticals Inc (MNTA.O), in the United States during 2009.

Basel-based Novartis also announced a management reshuffle, appointing vaccines chief Joerg Reinhardt as chief operating officer, a new position.

Sandoz head Andreas Rummelt will take up a new position as head of quality assurance and technical operations, being replaced at the generics unit by Jeff George. Thomas Ebeling, head of consumer health, will leave the company. (Additional reporting by Rupert Pretterklieber; Editing by Chris Wickham and David Holmes)