Novartis Raises Full-Year Outlook
By Marta Falconi
ZURICH--Novartis AG (NVS) raised its full-year outlook for the second consecutive quarter after a generic version of its blockbuster blood-pressure drug was delayed, giving the Swiss pharmaceutical giant a reprieve from competition to one of its most important products.
Diovan, which generated $4.42 billion in sales last year, has lost patent protection in the key U.S. market and is already exposed to some generic competition there. However, the Basel, Switzerland-based company said Tuesday that the launch of another generic version of Diovan being developed by a bigger competitor won't happen this year.
"While this delay is expected to provide upside in reported sales and operating income in 2013, we expect the benefit to reverse and result in higher generic erosion in 2014," Novartis said in a statement that accompanied its third- quarter earnings. Novartis didn't name the competitor, but India'sRanbaxy Laboratories Ltd. (500359.BY) is developing a generic version of the drug, which was Novartis's second-biggest seller last year.
As a result, Novartis said full-year net sales will now likely grow in the low-to-mid single digits as measured in constant currencies, a stronger forecast than the low-single-digit growth forecast it provided in July. The company said full-year core operating income, which excludes one-off items, would likely be in line or better than in the previous year, an improvement over the low single-digit drop it had expected.
In the quarter ended Sept. 30, net income attributable to shareholders slipped to $2.23 billion from a restated $2.39 billion a year earlier. The company's net sales grew 4% to $14.34 billion, slightly above expectations of $14.31 billion.
Core operating income dropped 5% to $3.62 billion from a restated $3.81 billion in the same period a year earlier-- below analysts' expectations of $3.67 billion as polled by Dow Jones Newswires.
Novartis, like many other drug companies, is struggling with the so-called patent cliff, which refers to the drop-off in revenue a drug experiences after its patent expires and cheaper generics can enter the market.
Diovan sales in the quarter dropped 14% to $835 million and are expected to fall further when Ranbaxy's version of the drug reaches the market. U.S. regulators haven't yet approved the Ranbaxy version.
Novartis's situation is compounded by the looming expiration of the patent for Gleevec, a leukemia drug which will begin losing protection in the U.S. by 2015.
The drug maker said it expects the impact from generic competition to amount to $2.3 billion, compared with an assumption of $2.7 billion in July.
Novartis said it benefited during the quarter from strong performances of new drugs, including cancer treatment Afinitor and multiple-sclerosis pill Gilenya, as well as rising sales in emerging markets, including China and Russia, which contributed $3.6 billion, or 25%, to group sales.
Write to Marta Falconi at firstname.lastname@example.org
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires 10-22-130418ET Copyright (c) 2013 Dow Jones & Company, Inc.