Novartis posts strong growth, weaker outlook disappoints

27th January 2011, Comments 0 comments

Swiss pharmaceutical group Novartis said on Thursday that its annual net profit grew by 18 percent in 2010 with strong sales, but its weaker outlook disappointed analysts.

Novartis hinted that its performance this year might be affected by moves by cash-strapped governments to cut costs and US health reforms.

The group's share price dropped by 1.78 percent in early trading (0836 GMT) to 53.5 Swiss francs.

Net profit in 2010 reached 9.97 billion dollars (7.28 billion euros), the group said in a statement.

Sales grew by 14 percent year on year to 50.6 billion dollars.

Novartis acknowledged that its operating income, which grew by 15 percent, was nonetheless "impacted" later in the year by the drop in sales of special flu vaccines with the declared end of the H1N1 flu pandemic.

"Novartis achieved excellent results in 2010 as all divisions contributed to above-market growth," said chief executive Joseph Jimenez.

Annual net sales included a 2.4 billion dollar contribution from newly acquired eye care business Alcon, while other recently launched products accounted for a greater share of sales -- 21 percent -- than the year before.

The group forecast sales growth "around the double digit mark" in 2011 at constant exchange rates, compared to the low- to mid-teens it achieved last year, driven by growth in emerging markets.

Novartis cautioned that reported sales growth in its core pharmaceuticals business "will be lower as a result of the combined effect of price reductions seen in 2010, the full impact of healthcare reform in the United States and generic competition."

Jimenez said that guidance took into account the loss of patent cover on two "major compounds".

Analysts at CMC-CIC group acknowledged the company's growth dynamics but also underlined the prospect of increased competition from generic drugs in 2011 after patents on a key Novartis blood pressure and heart drug, Diovan, lapse.

Analysts at Swiss private bank Wegelin said the operational result was weaker than expected and pointed to the outlook on the core pharmaceutical business as well as a "disappointing" dividend payment.

Fourth quarter sales growth of seven percent in 2010 was already "partly offset" by a "negative pricing impact of 3 percentage points", mainly due to moves to by European governments to contain costs and a price cut in Japan, Novartis said.

The company recommended payment of an increased 2.20 Swiss franc per share dividend to shareholders.

© 2011 AFP

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