Novartis posts 7% rise in Q1 net profit

BASEL, SWITZERLAND: Pharmaceuticals maker Novartis AG reported a 7 percent rise in first-quarter net income on Monday on the back of a declining dollar and solid performance in its vaccines and diagnostics division.

Earnings rose to US$2.32 billion (euro1.47 billion) in the three months ending March 31, compared with US$2.17 billion in the same quarter last year. Earnings per share increased by 11 percent to US$1.02 (euro0.65) from US$0.92 in the first quarter of 2007.

Novartis benefited from the currency effect of a weakening dollar in relation to other major currencies. In local currencies, earnings appeared more modest or even declined. Analysts said reported earnings beat expectations. Novartis shares closed 3 percent higher on the Zurich exchange at 49.84 Swiss francs (US$49.28; euro31.00).

The company has been hit by strong competition from generics, particularly in the US. This, combined with the withdrawal of its bowel drug Zelnorm from the US market, contributed to a 19 percent drop in US sales.

The maker of Zelnorm, a medicine that treats constipation-related irritable bowel syndrome, stopped selling the drug in the US after federal drug officials concluded that it might cause heart attacks and strokes.

Novartis has said it plans to regain market share in the US by launching a number of new drugs under its own generic brand Sandoz, including the anticoagulant Lovenox and anemia drug Metaxolone.

"Lovenox and Metaxolone are the two big launches in the US,'' Sandoz CEO Andreas Rummelt told investors during a conference call. "Our growth rate, especially in the US, is dependent on this launch, no doubt."

In its core pharmaceuticals business, hypertension drug Diovan accounted for US$1.4 billion (euro890 million) on overall sales of US$6.26 billion (euro3.97 billion).

Group sales, including vaccines and diagnostics, generics and consumer health products, reached US$9.91 billion (euro6.28 billion) in the first quarter, a 9 percent rise in U.S. dollar terms but unchanged in local currencies compared with the previous year.

Novartis Chairman and CEO Daniel Vasella said he was pleased with the growth in vaccines and diagnostics, the company's smallest division.

Vasella said Novartis was working on promising new treatments for cancer and multiple sclerosis, and that the US$39 billion (euro24.7 billion) takeover of eye care company Alcon will help boost future growth.

The purchase of Alcon confirmed the Basel, Switzerland-based company's focus on pharmaceuticals following last year's sale of its medical nutrition business and Gerber baby food unit to Nestle.

"I am confident Novartis will once again achieve record sales and earnings in 2008 from continuing operations now fully focused on health care," Vasella said in a statement.