Summit News

Novartis grateful for J&J recalls

NEW YORK/ZURICH (Reuters) - Demand for Novartis AG NOVN.VX consumer health products has been bolstered by repeated recalls of Johnson & Johnson JNJ.N brands and the Swiss drugmaker expects to retain a chunk of the business when J&J brings its products back to market.

Jon Symonds, CFO of Swiss drugmaker Novartis addresses a news conference to present the company results for 2010 in Basel January 27, 2011. REUTERS/Arnd Wiegmann

“It can’t be a bad thing,” Novartis Chief Financial Officer Jon Symonds said on Wednesday, referring to J&J’s recalls in the past year and a half of more than 300 million packages of Tylenol, Motrin, Benadryl and other consumer brands.

“With our cough and cold portfolio and our pain portfolio, it’s had a big impact” Symonds told the Reuters Health Summit in New York.

Sales of Novartis’ consumer products jumped 11 percent in the first quarter to $1.64 billion, fueled by demand in the United States.

The recalls cost J&J about $900 million in lost sales last year, and will hurt its earnings again this year as scores of products remain unavailable to customers.

J&J recalled the products, including many children’s formulations, because of quality-control lapses at its factories in Pennsylvania and Puerto Rico. It is now trying to fix the problems under close supervision of U.S. regulators, and hopes to return its products to the market later this year and next year.

“J&J will come back with renewed vigor, so the competitive landscape will change,” Symonds acknowledged. But he expressed hope many consumers will stick with Novartis brands, which include cough and cold treatments Theraflu, Triaminic and Comtrex. The company also sells painkillers Bufferin and Excedrin, as well as Prevacid for heartburn.

“If we get our positioning right and customers appreciate the quality of the products that we’ve got, I think we’ll hold on to a chunk of it,” he said, referring to gains from the J&J recalls.

Symonds said over-the-counter products are a key part of Novartis’ growth strategy and the company is interested in acquiring other consumer brands.

He said Novartis would also like to boost its generic prescription drug business in key emerging markets such as Asia and Latin America, as well as Japan.

Novartis, which has just wrapped up its $51 billion purchase of U.S. eyecare group Alcon, is hoping the acquisition will help it better withstand looming generic competition for two of its biggest prescription medicines.

Symonds said he remains on the lookout for smaller deals to broaden the Novartis product line. “There are a number of areas we’d be interested in... We are able to test the value proposition of everything that comes up.”

The company is considered a potential bidder for diagnostic test maker Gen-Probe Inc GPRO.O, according to published reports. But Symonds declined to comment on the matter.

Novartis’ $6 billion-a-year blood pressure treatment Diovan will lose patent protection next year. And its Femara cancer drug, with $1.4 billion in annual sales, will also soon face cheaper generics.

Novartis has a better track record than most rivals in bringing new drugs to market. It is counting on growing sales of newer medicines -- such as multiple sclerosis pill Gilenya -- and approvals of new drugs to offset expected plunging sales of Diovan and Femara.

“We can talk about approvals, and so long as that continues we will be generating cash instead of generating hope,” Symonds said.

Faced with patent expirations, some companies have given long-term sales and profit forecasts to reassure investors.

But Symonds said he had no intention of following suit because it could constrain the company’s flexibility.

Reporting by Ransdell Pierson, Katie Reid, Ben Hirschler and Toni Clarke; Editing by Matthew Lewis and Tim Dobbyn