Novartis Share Price: Drugmaker Posts 5% Drop in Q2 Net Income

on Jul 17, 2013
Listen Wednesday July 17th: Novartis’ share price (VTX:NOVN) today declined by 0.87 percent to 68.50 Swiss francs in Zurich after the Swiss pharmaceutical company posted a drop in second quarter net income.

Net income declined to $2.548 billion (₤1.69 billion), down from $2.675 billion (₤1.77 billion) in the same period a year ago, the Basel-based company said in a statement. It attributed the fall to loss of patents, pricing pressure and a weaker Japanese yen.
In the statement, Novartis raised its full-year outlook thanks to the lack of generic competition for its Diovan blood-pressure medicine. The company said that earnings would fall by a low-single-digit percentage, while sales would rise by a similar amount. Previous forecasts had predicted a mid-single-digit percentage drop in profit and sales same as in 2012. About $2.7 billion (₤1.79 billion) in lost sales will come from generic competition this year, 23 percent less than previously forecast as Ranbaxy Laboratories failed to market a copycat version of Diovan.

“Management looks like it is taking advantage of the Diovan windfall to invest in marketing and R&D,” Jeffrey Holford, Jefferies International analyst, said in a note to clients today. He has a “buy” rating on the shares.
The multiple sclerosis treatment Gilenya helped sales in the second quarter, Joseph Jimenez, Novartis’ chief executive officer, told reporters. “Despite having new competition in that space, Gilenya was up 66 percent versus a year ago.”

Novartis board has decided to pay former chairman Daniel Vasella about 2.7 million Swiss francs (₤1.9 million) and give him shares worth 2.2 million Swiss francs (₤1.55 million) for the consulting services he has provided to the company since he stepped down in February. The drugmaker has abandoned plans for a $78 million (₤52 million) payoff after they were criticised by investors, politicians and the public.

Onyx Pharmaceuticals has been rumoured as a potential acquisition target for Novartis but Jimenez declined to comment today. The CEO said his company was focusing on bolt-on purchases in the range of $2-$5 billion (₤1.3-₤3.3 billion). “I’m not ruling anything out. Any acquisition would have to be a very good deal for Novartis shareholders.”

!m[Full-Year Outlook Improves with No Generic Competition to Diovan in Sight](/uploads/story/4064/thumbs/pic1_inline.jpg)
Chinese authorities have contacted Novartis in relation to investigations of bribery and corruption among pharma giants. On Monday GlaxoSmithKline’s vice president of operations in China confessed on television of bribing doctors and health officials to prescribe the company’s treatments to patients (Chinese VP of Operations Confesses to Bribery).
Novartis’ sales in China increased by 25 percent in the second quarter compared to last year and CEO Jimenez said that the company would at least match the growth of the market in the Asian country in the future.
**Novartis’ share price was 68.15 Swiss francs as of 17.07.2013, 10.37 BST.**

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