Swiss drugmaker Novartis raised its full-year forecast for drug sales today, betting on income from cancer and heart medicines after second-quarter net profit met expectations.
Novartis, which faces loss of exclusivity on its top-selling blood pressure drug Diovan in 2012, now sees sales in local currencies at its drugs unit growing at a high single-digit rate. It had previous forecast growth in the mid-to-high single digits.
The strong results follow forecast-beating numbers from diversified health care group Johnson & Johnson, but contrast with disappointing sales and outlook from US drugmaker Abbott Laboratories.
The pharma unit is Novartis' largest business, where sales rose 3 per cent to $7.1 billion, some two thirds of the group total. Novartis confirmed previous group guidance for sales growth in 2009 at a mid single-digit rate.
The pharmaceuticals sector initially coped better than many others with recession but has recently begun to underperform, hit by prospects of more competition, problems getting new drugs to market and cheaper medicines from generics manufacturers.
The prospect of US health reform -- and hence cheaper medicines -- has also pressured the sector and Novartis said it expected the impact on its business to be "moderate but manageable".
Novartis shares have underperformed both the DJ Stoxx European pharma index and the Swiss blue chip index this year, but rose 2.6 per cent to 44.86 Swiss francs today, outpacing a 1 per cent gain in the DJ Stoxx European healthcare index.
The Basel-based firm now trades at about 9 times forecast 2010 earnings, a premium to some of Europe's other big drugmakers like AstraZeneca and Sanofi-Aventis but a discount to local rival Roche, which has less exposure to generic competition.
Novartis' second-quarter net profit fell 10 per cent to $2 billion due to the stronger dollar and higher financing costs and the group repeated an earlier warning that currency-related losses could hit full year profit.
Because Novartis reports in dollars it has suffered from the weakness of the Swiss franc against the greenback compared with the same period last year.
Profit was also hit by higher financing costs -- partly due to its purchase of a stake in eye care company Alcon from Nestle -- after it issued a €1.5 billion euro bond in the second quarter. Group sales fell 2 per cent -- but rose 8 per cent in local currencies -- to $10.5 billion, helped by new products like cancer medicine Afinitor and blood pressure drugs Exforge and Tekturna.
Novartis had been expected to post a net profit of $2 billion and sales of $10.3 billion, according to a Reuters poll.
Reuters
