UPDATE 4-Novartis Q3 tops poll, new products sell well

* Novartis Q3 core EPS rises 16 pct to $1.36

* Beats average estimate of $1.29 in Reuters poll

* Excluding Alcon stake, sticks to sales growth guidance

* Shares rise 0.6 percent, outperform weaker sector

(Adds details, updates shares)

By Katie Reid

ZURICH, Oct 21 (Reuters) - Switzerland's Novartis AG NOVN.VX posted forecast-beating quarterly results as its newest drugs sold well, strengthening its position in the battle for a full takeover of U.S. eyecare group Alcon Inc ACL.N.

Novartis, seeking to buy out the rest of Alcon, said on Thursday core earnings per share rose to $1.36 in the third quarter, beating the average estimate of $1.29 in a Reuters poll. [ID:nLDE69H131]

“This is a good quarter for Novartis, and shares should continue to perform and help Novartis put further pressure on Alcon’s (Independent Directors Committee) IDC,” Vontobel analyst Andrew Weiss said.

At 1233 GMT Novartis shares were trading 0.6 percent higher, outperforming a 0.9 percent drop in the European healthcare sector index .SXDP.

A raft of upbeat data, including U.S. approval for multiple sclerosis drug Gilenya, has boosted sentiment in Novartis, which is now trading at a premium to cross-town rival Roche ROG.VX.

“Data on new medicines such as MenB, our meningococcal vaccine candidate, give me confidence that our pipeline will continue to deliver,” Novartis Chief Executive Joe Jimenez said.

Its newest products generated 20 percent of quarterly sales and the group saw strong demand for its new generic version of Sanofi-Aventis' SASY.PA blood thinner Lovenox as well as for cancer drug and blockbuster hopeful Afinitor.

Sales of key blood pressure drug Diovan held up despite competition from generics -- a generic version of Merck & Co's MRK.N rival drug Cozaar was launched recently.

Basel-based Novartis is sticking to its full-year sales guidance of mid- to high-single-digit growth rates in constant currencies, but this target is boosted to the low to mid teens when the recently secured 77 percent stake in Alcon is included.

Its third0quarter sales rose 13 percent to $12.58 billion, beating expectations. This contrasts with other drugmakers, including Roche, GlaxoSmithKline GSK.L and Eli Lilly LLY.N whose sales fell short of expectations. [ID:nLDE69J1NA] [ID:nLDE69C1FI] [ID:nN21267529]

Novartis said Alcon would be slightly negative to operating income margin and slightly positive to core operating income margin.

“We see this quarter as building on strong momentum from the current portfolio as well as providing a solid base for growth from recent pipeline successes,” Deutsche Bank analyst Tim Race said.

“We expect the share to better reflect this following completion of the last step of the Alcon acquisition,” Race said, adding he expected the buyout would be completed in the fourth quarter of this year.


Novartis stuck to its offer to Alcon minority shareholders of 2.8 Novartis shares for each Alcon share -- a bid Alcon’s IDC has repeatedly rebuffed as too low.

The recent rise in Novartis shares as well as a strong rise in the Swiss franc means that its stock offer for the remaining 23 percent is now looking more attractive. [ID:nLDE69H0HY]

But Jimenez said he could not speculate on what either the Alcon board or the IDC now thought about the offer.


GRAPHIC on how deal value has fluctuated, click on:

GRAPHIC on pharma sector:

Story on Novartis biosimilar sales [ID:nLDE69K10V] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

The bid is worth around 9 percent more than when it was first announced and is very close to the average price of $168 it paid Nestle for the 77 percent stake, but is still shy of the $180 some shareholders have said they would be willing to take.

Novartis is buying Alcon to diversify and insulate itself from the effects of losing patent protection on big selling medicines such as Diovan.

Novartis trades at around 11 times expected 2011 earnings, while Roche, which has been hit by a string of disappointing pipeline developments, trades at about 10 times. [ID:nLDE69C1FI] (Editing by Michael Shields)