Novartis Fourth-Quarter Net Drops on Job Cut Costs (Update4)
By Eva von Schaper
Jan. 17 (Bloomberg) -- Novartis AG, Europe's third-largest drugmaker, said fourth-quarter profit fell on job cut costs, missing analyst estimates. The company will spend 10 billion Swiss francs ($9.1 billion) in its largest-ever share buyback.
Net income dropped 45 percent to $904 million, or 41 cents a share, from $1.65 billion, or 67 cents, a year earlier, the Basel, Switzerland-based company said in a statement handed to reporters today. This fell short of the $1.5 billion median estimate of five analysts surveyed by Bloomberg News. Sales rose 5.7 percent, the maker of the Diovan heart medicine said.
Slowing sales pushed Chief Executive Officer Daniel Vasella to cut 2,500 posts over the next two years to save $1.6 billion annually by 2010. Novartis has struggled in the last year with the delay of the potentially best-selling diabetes medicine Galvus, the withdrawal of its irritable bowel treatment Zelnorm and failure to win approval for the Prexige painkiller. It's also facing generic competition to a number of drugs including the Lotrel heart pill.
``The share buyback is nice from an investor's point of view but why Vasella isn't putting more money into R&D beats me,'' said Joerg de Vries-Hippen, who oversees about $60 billion, including Novartis shares, as chief investment officer for European stocks at AllianzGlobal Investors in Frankfurt. ``I can't see how things are to improve soon either.''
Generic competition in the United States hurt the company's largest unit, pharmaceuticals, where sales growth slowed to 1.7 percent in the quarter, compared with 6.4 percent over the whole year. Sales of Lotrel fell 75 percent in the fourth quarter to $88 million and sales of the Lamisil antifungal medication fell 71 percent to $66 million.
Shares Drop
The Swiss drugmaker's shares dropped 12 percent in 2007, making it the third-worst-performing stock on the Bloomberg Europe Pharmaceutical Index. Novartis fell 1.45 francs, or 2.4 percent, to 59.80 Swiss francs as of 9:29 a.m. in Zurich.
The company repeated that it expects the first half of 2008 to be affected by an ``ongoing negative impact'' from the U.S. drug unit. Vasella expects a ``new growth cycle'' to start in the second half of 2008.
``I'm confident Novartis will deliver record results in 2008 and is well-positioned to benefit from current and future trends in health care,'' Vasella said.
Novartis, which also makes the Gleevec leukemia medicine, took a restructuring charge related to the planned job cuts of $444 million in the fourth quarter.
Job Cuts
In July, London-based AstraZeneca Plc announced plans to reduce its workforce by about 11 percent. Pfizer Inc., the world's biggest drugmaker, is cutting 10,000 positions. GlaxoSmithKline Plc, also based in London, is eliminating jobs in sales, manufacturing and research to save 700 million pounds ($1.37 billion).
Novartis announced a first round of cuts in October, and changed the head of its pharmaceuticals unit after regulatory delays to new diabetes and hypertension treatments. Joe Jimenez now runs the drug operation, replacing Thomas Ebeling, who moved to the smaller consumer-health business.
Novartis is pushing new products on to the market to replace revenue that will be lost to generic versions of the company's older medicines when their patents end.
Diovan, Novartis's best-selling drug with sales of $5 billion in 2007, loses patent protection in 2012. Tasigna, a drug to treat leukemia in patients who no longer respond to the company's best-selling cancer medicine Gleevec, was approved for sale in the U.S. in October and in Europe the following month.
Galvus, the diabetes drug that analysts expected to generate sales of more than $1 billion, may never reach the U.S. market Vasella said today.
``Approvable''
Novartis received an ``approvable'' letter from the U.S. Food and Drug Administration in February, which means the agency is prepared to clear the drug if some conditions are met. The company hasn't yet come to an agreement with U.S. regulators about what tests are needed to file for approval, Vasella said.
The U.S. delay has put Novartis more than a year behind Merck & Co.'s competing Januvia in a race to move diabetics to drugs that use the body's own mechanisms to control blood sugar, analysts say. Galvus was approved in the European Union in September.
Fourth-quarter group sales rose to $9.9 billion. An earlier- than-usual shipment of flu shots meant sales at the vaccines unit fell 13 percent in the fourth quarter. Sales at Sandoz, the company's generic drugs unit, rose 19 percent.
To contact the reporter on this story: Eva von Schaper in Munich at evonschaper@bloomberg.net .
Last Updated: January 17, 2008 03:30 ES |
Thread abonnieren
