Novartis AG’s first-quarter profit beat analyst estimates on higher prescription-drug sales, sending the shares up the most in a month.
Net income dropped 15 percent to $1.96 billion, or 87 cents a share, hurt by the dollar’s strength against the euro and emerging-market currencies, the Basel, Switzerland-based company said in a statement today. Analysts predicted $1.89 billion, the median of seven estimates compiled by Bloomberg News.
Increased revenue from the hypertension drug Diovan and the cancer treatment Gleevec countered some of the effect from currency shifts. Chief Executive Officer Daniel Vasella confirmed the company’s forecast and said 2009 profit may fall because of the higher dollar.
“The profit was significantly better than expected, despite negative currency effects,” Karl-Heinz Koch, an analyst at Helvea SA, said in a telephone interview today. “The profit contribution from pharma especially and the generics unit Sandoz were higher than forecast, compensating for a lower performances in the consumer and vaccine divisions.”
Sales fell 2 percent to $9.71 billion. The company earned $2.32 billion, or $1.02, in last year’s first quarter, helped by a one-time gain of $115 million from a product divestment and an inventory adjustment of $45 million.
Novartis, which will lose patent protection starting in 2012 on its two biggest-selling products, Diovan and Gleevec, sees future growth fueled by sales of its Afinitor cancer pill and the Menveo meningitis vaccine. The company also is counting on expansion in emerging markets and renewed growth in the U.S. generics and over-the-counter units.
Share Rally
Novartis gained 1.62 Swiss francs, or 3.9 percent, to 43.22 Swiss francs at 9:35 a.m. in Zurich trading. The stock rose as much as 4.4 percent, the biggest intraday advance since March 12. The shares fell 18 percent in the first quarter, making it the second-worst-performing stock on the Bloomberg Europe Pharmaceutical Index.
Profit may drop this year if exchange rates remain where they are, Novartis said. The company aims to “again deliver record underlying net sales and earnings excluding currency effects,” Vasella said in the statement.
Sales at the drug unit rose 3 percent to $6.43 billion. A clutch of new products, including the hypertension drug Exforge and the cancer treatment Tasigna, added $872 million in revenue.
Vaccines, Generics
Revenue from vaccines slipped 12 percent to $247 million, mainly because of lower sales of tick-borne encephalitis shots. Sales at the generic drug unit Sandoz fell 9 percent to $1.73 billion, while consumer health lost 11 percent to $1.3 billion.
Novartis, Europe’s second-largest drugmaker, reports earnings in dollars. From the end of the 2008 first quarter through March 31 this year, the dollar gained 19 percent against the euro, reducing the value of Novartis’s sales in the euro region. The Hungarian forint, the Polish zloty, and the Russian ruble also slumped against the dollar.
Carrying costs for bonds issued in February and lower income from Novartis’s stake in Swiss rival Roche Holding AG hurt profit further, the company said. Novartis earned $83 million from eye-care company Alcon Inc. and Roche this quarter, down from $137 million a year earlier. Interest expense rose to $86 million from $57 million, the company said.
Sales from continuing operations will probably rise at a mid-single-digit percentage rate this year. Drug sales will likely grow at a mid-to-high-single-digit rate in local currencies, Novartis repeated.
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