ZURICH (Reuters) - Swiss drugmaker Novartis NOVN.VX said sales and profits would rise at a faster pace this year as recent drug successes and its portfolio overhaul help it weather competition from cheaper generic medicines.
Stripping out the impact of currency fluctuations, the Basel-based firm said it expected mid-single digit sales growth in 2015 while core operating income would increase at a high-single digit rate.
Still, a surge in the Swiss franc following the Swiss central bank’s (SNB) decision to scrap its cap on the currency’s value may complicate Novartis’ efforts to improve margins.
Chief Executive Joe Jimenez said he would review Swiss costs following the franc rise, but would continue to invest in the country, reiterating comments made to Reuters in Davos last week.
He said the franc’s surge would not derail efforts to increase margins since the company would take a hard look at procurement and other services it has in Switzerland.
Novartis, which generates just 2 percent of sales but has about 13 percent of its costs in Switzerland, said it expected the stronger franc to knock about 12 percentage points off core operating income this year and 7 percentage points off sales.
To eke out further savings, Novartis has consolidated some back-office functions, which are spread across all divisions and account for around $5 billion in expenses, into one shared service organisation.
Shares in Novartis, which slumped as much as 16 percent on the day the SNB scrapped the cap, gained 1.6 percent by 1350 GMT, outperforming a flat European healthcare sector .SXDP.
Novartis unveiled a series of deals last year which will see it focus on a smaller number of higher-margin businesses once it concludes a $20 billion asset swap with GlaxoSmithKline (GSK.L) in the first half.
The company hopes the restructuring, as well as the recent approval of its new psoriasis drug Cosentyx which could bring in annual sales of more than $1 billion, will help it buffer cheaper copycat competition to blood pressure medicines Diovan and Exforge.
The anticipated launch of heart failure treatment LCZ696 should also generate multi-billion-dollar revenues. Analysts expect the drug to gain approval in the United States by the middle of this year.
Net sales fell 2 percent in the fourth quarter to $14.63 billion, slightly ahead of the average forecast for $14.6 billion in a Reuters poll. Core net income rose 1 percent to $2.9 billion in line with forecasts.
The company said it would raise its dividend to 2.60 Swiss francs per share for 2014 from 2.45 francs last year. This was below the average forecast for 2.67 francs in a Reuters poll.
Additional reporting by Ben Hirschler; editing by Jason Neely and David Clarke