Oct. 22, 2009 (Hugin AS) -- Corporate news announcement processed and transmitted by Hugin AS.
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announcement.
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* Strong underlying growth in first nine months of 2009 from
healthcare portfolio:
* Net sales of USD 31.3 billion rise 8% in local currencies
(lc), led by double-digit expansion in Pharmaceuticals
* Operating income of USD 7.3 billion up 1%, but advances 11% in
constant currencies and excluding exceptional items
* Net income of USD 6.1 billion down 8% due to negative currency
impact, Alcon-related (NYSE:ACL) financing costs and USD 189 million of
associated companies charges;
but net income in constant currencies rises 2%
* Basic EPS: USD 2.69 in first nine months of 2009 vs. USD 2.93
in 2008
* Free cash flow before dividends advances 20% to USD 6.1
billion
* Progress in innovation: 2009 approvals for Afinitor (US/EU),
Ilaris (US) and H1N1 pandemic flu vaccines; positive Phase III
data for QAB149 (COPD) and FTY720 (MS)
* Novartis (NYSE:NVS) on track for record sales and earnings in constant
currencies in 2009
Key figures - Continuing operations
Nine months to September 30
YTD 2009 YTD 2008 % change
% of % of
USD m net sales USD m net sales USD lc
Net sales 31 341 31 382 0 8
Operating income 7 345 23.4 7 284 23.2 1
Net income 6 131 19.6 6 656 21.2 -8
Basic earnings per
share USD 2.69 USD 2.93 -8
Third quarter
Q3 2009 Q3 2008 % change
% of % of
USD m net sales USD m net sales USD lc
Net sales 11 086 10 747 3 7
Operating income 2 634 23.8 2 335 21.7 13
Net income 2 112 19.1 2 082 19.4 1
Basic earnings per
share USD 0.93 USD 0.92 1
Basel, October 22, 2009 - Commenting on the results, Dr. Daniel
Vasella, Chairman and CEO of Novartis, said: "I am pleased with our
strong underlying performance, led by the momentum of our
Pharmaceuticals business, outpacing the competition and benefiting
from innovative product growth rejuvenating the portfolio. Our
investments in R&D show excellent results, with many key approvals in
2009, most notably the anti-cancer therapy Afinitor and the
biotechnology medicine Ilaris. Deliveries of H1N1 pandemic flu
vaccines are underway as Novartis works at full capacity to meet
public health demands. The Sandoz generics business also made good
progress, coupled with a turnaround in the US. We expect record
full-year underlying results based on the significant progress to
date in 2009."
OVERVIEW
Nine months to September 30
The sustained underlying business expansion in Pharmaceuticals, with
net sales rising 11% in local currencies (+4% in US dollars),
strengthened the Group's healthcare portfolio in the first nine
months of 2009.
Group net sales rose 8% in local currencies, but were steady at USD
31.3 billion in US dollars. Sandoz (+4% lc) and Consumer Health (+3%
lc) also provided contributions. Top-performing regions included
Europe (USD 12.9 billion, +7% lc) and the United States (USD 10.1
billion, +5% lc) as well as the top six emerging markets (USD 2.8
billion, +16% lc). Higher volumes provided seven percentage points of
growth, while net price changes added one percentage point. However,
the stronger US dollar compared to the 2008 period offset the
underlying business expansion by eight percentage points.
Operating income rose 1% to USD 7.3 billion, and at a faster 11% pace
when adjusted for the impact of currency movements, exceptional items
and amortization of intangible assets in both periods.
Pharmaceuticals, where operating income rose 8%, and productivity
gains in all divisions provided resources for business expansion and
led to the Group operating income margin improving 0.2 percentage
points to 23.4% of net sales.
Net income, however, fell 8% to USD 6.1 billion from the impact of
Alcon-related financing costs as well as significantly reduced income
from investments in Roche and Alcon in the third quarter of 2009 and
a higher tax rate. Basic earnings per share (EPS) fell to USD 2.69 in
the first nine months of 2009 from USD 2.93 in the 2008 period.
Third quarter
Novartis maintained the strong underlying momentum of 2009 as
third-quarter net sales grew 7% in local currencies, while reported
net sales rose 3% to USD 11.1 billion as four percentage points of
growth were lost to adverse currency movements. Pharmaceuticals (+11%
lc) led the performance, while Consumer Health (+5% lc) and Sandoz
(+4% lc) achieved local-currency gains in challenging markets.
Vaccines and Diagnostics (-16% lc) fell on sharply lower sales of
H5N1 (avian flu) pandemic vaccines in 2009.
Operating income advanced 13% to USD 2.6 billion, while the Group's
operating income margin rose 2.1 percentage points to 23.8% of net
sales on margin improvements in Pharmaceuticals, Sandoz and Consumer
Health. Operating income was up 9% when adjusted for currency
movements, exceptional items and amortization of intangible assets.
Net income rose 1% to USD 2.1 billion as the 13% increase in Group
operating income was largely offset by a loss from associated
companies due to USD 189 million of charges for Roche's restructuring
of Genentech and an Alcon-related R&D project impairment, increased
financing costs and a higher tax rate. As a result, basic earnings
per share (EPS) only climbed to USD 0.93 from USD 0.92 in the 2008
quarter.
Achieving success with long-term R&D investments
Novartis has been reaping the benefits of long-term, disciplined
investments in innovation, achieving more than 30 major regulatory
approvals and significant progress in the Group's R&D pipeline so far
in 2009.
Important approvals include the anti-cancer medicine Afinitor, the
high blood pressure combination therapy Valturna, the biotechnology
drug Ilaris and the H1N1 pandemic flu vaccines. The late-stage
pipeline is also progressing quickly: European regulatory approval
expected soon for QAB149 (COPD), while further positive Phase III
data presented in September 2009 reaffirmed the potential of FTY720
(MS).
R&D investments complement other strategic initiatives as Novartis
seeks to deliver long-term sustainable growth from a focused
portfolio addressing broad healthcare needs. In addition to
investments in innovation, Novartis is selectively strengthening its
businesses, expanding in high-growth markets and improving
organizational efficiency.
High-growth markets are increasingly contributing to the business
expansion. Net sales in the top six emerging markets rose 16% lc to
USD 2.8 billion in the first nine months of 2009, with only limited
signs to date of adverse impact from global economic conditions.
These six markets - Brazil, China, India, Russia, South Korea and
Turkey - represented 9% of the Group's net sales for the 2009 period.
New products are transforming Pharmaceuticals and positioning
Novartis as one of the industry's fastest-growing companies. Recently
launched products provided dynamic growth (+88% lc) and USD 3.3
billion of net sales in the first nine months of 2009, boosting their
share of net sales to 16% from 9% in the 2008 period. New product
approvals in 2009, such as Afinitor and Ilaris, are set to support
business expansion. In Japan, approvals of five new medicines to date
in 2009 - Tasigna, Xolair, Co-Dio, Lucentis and Rasilez - are
expected to underpin momentum in this important market.
Vaccines and Diagnostics began delivering vaccines in the last week
of September for the new H1N1 influenza strain as US and European
regulatory approvals were received. Large-scale antigen production
continues at all sites in Europe. Approximately 90 million to 120
million doses are expected to be produced by the end of 2009, with
expected fourth-quarter net sales contributions of approximately USD
400 million to USD 700 million. In early October, Novartis also
completed its shipment of 27 million seasonal influenza vaccines for
the US market, ahead of original plans, to allow for earlier
vaccination.
Sandoz completed in September the acquisition of EBEWE Pharma's
specialty generics injectables business for EUR 0.8 billion (USD 1.2
billion), creating a new global growth platform and improving access
to oncology medicines. This acquisition is set to further drive
expansion in the fast-growing injectables market and represents an
important extension of the Sandoz portfolio. In addition, the
manufacturing site in Wilson, North Carolina, has a renewed focus on
new product launches following the successful completion of an FDA
inspection in the third quarter of 2009.
Consumer Health is preparing the upcoming US launch of Prevacid 24HR,
the first OTC version of this prescription drug for frequent
heartburn pain and an important addition to the division's current
portfolio of 15 global brands with annual sales of more than USD 100
million. Novartis aims to make Prevacid 24HR a top-five OTC brand in
the US, where this proton pump inhibitor has three years of market
exclusivity.
Group outlook
(Barring any unforeseen events)
Novartis expects to deliver a strong operational performance in 2009.
Group net sales are now set to grow at a high-single-digit rate in
local currencies, even excluding anticipated H1N1 pandemic flu
vaccines sales in the fourth quarter of 2009. Pharmaceuticals net
sales in local currencies are now expected to expand at a
double-digit rate in 2009. Operating and net income are expected to
reach record levels in constant currencies for the full year, even
excluding the contribution from H1N1 pandemic flu vaccine sales.
However, currency-related losses could significantly reduce growth in
reported results.
BUSINESS REVIEW
Nine months to September 30
Net sales
YTD 2009 YTD 2008 % change
USD m USD m USD lc
Pharmaceuticals 20 765 19 901 4 11
Vaccines and Diagnostics 1 037 1 268 -18 -13
Sandoz 5 350 5 753 -7 4
Consumer Health continuing operations 4 189 4 460 -6 3
Net sales from continuing operations 31 341 31 382 0 8
Pharmaceuticals: USD 20.8 billion (+4%, +11% lc)
Sustained dynamic performance achieved in local currencies thanks to
rapid expansion of recently launched products and double-digit growth
in all regions. The global rollouts of new products, including
Lucentis, Exforge, Exjade, Exelon Patch, Reclast/Aclasta and
Tekturna/Rasilez, are transforming the portfolio and provided USD 3.3
billion of net sales in the 2009 period. These products accounted for
16% of net sales, up from 9% in 2008, and eight percentage points of
the division's 11% local currency net sales growth.
All therapeutic franchises advanced at double-digit rates in local
currencies. Oncology (USD 6.5 billion, +13% lc), the largest
franchise, grew thanks to Gleevec/Glivec (USD 2.9 billion, +12% lc),
Femara (USD 925 million, +16% lc) and Exjade (USD 469 million, +30%
lc). The strategic Cardiovascular and Metabolism franchise (USD 5.4
billion, +12% lc) was led by the new medicines Exforge (USD 475
million) and Tekturna/Rasilez (USD 202 million) as well as the
flagship product Diovan (USD 4.4 billion, +5% lc). The diabetes
medicine Galvus (USD 115 million) outpaced competition in some key
markets in Europe, Latin America and Asia. Neuroscience and
Ophthalmics (USD 3.3 billion, +13% lc) gains were led by Lucentis
(USD 858 million, +48% lc) and Exelon (USD 687 million, +24% lc).
Europe (USD 7.6 billion, +11% lc) as well as Latin America and Canada
(USD 1.8 billion, +14% lc) showed strong performances. Gains were
also seen in the US (USD 7.1 billion, +10% lc), while Japan (USD 2.2
billion, +9% lc) benefited from new product launches. The six top
emerging markets of Brazil, China, India, Russia, South Korea and
Turkey (USD 1.8 billion, +19% lc) kept up a good growth pace.
Vaccines and Diagnostics: USD 1.0 billion (-18%, -13% lc)
A sharp reduction in deliveries of H5N1 avian pandemic flu vaccines
compared to the 2008 period as well as lower sales of TBE (tick-borne
encephalitis) vaccines in Europe were among reasons for the decline.
Seasonal influenza vaccines sales were down in the 2009 period,
mainly due to price pressure in the US.
Sandoz: USD 5.4 billion (-7%, +4% lc)
Sandoz achieved three quarters of consistent 4% lc growth in 2009
compared to only 1% lc in 2008. Retail generics in Germany (+5% lc)
grew in a declining market, reaching a 29% share as launches offset
the switch to tenders by some government health insurance providers.
US retail generics and biosimilars (+1%) delivered 18 new launches so
far in 2009 (vs. 17 in all of 2008), but price erosion offset some of
the volume gains. Other regions were higher, led by Asia-Pacific
(+20% lc) on growth in China and Japan.
Consumer Health: USD 4.2 billion (-6%, +3% lc)
CIBA Vision is the industry's fastest-growing contact lens and lens
care company, driven by the expansion of new products that have
fueled solid local currency growth. Animal Health grew ahead of its
global market and gained share in the US parasiticide market, while
OTC delivered an increasingly positive underlying performance during
the year.
Operating income
YTD 2009 YTD 2008 Change
% of % of
net net
USD m sales USD m sales %
Pharmaceuticals 6 486 31.2 6 017 30.2 8
Vaccines and Diagnostics -211 52 4.1
Sandoz 850 15.9 884 15.4 -4
Consumer Health continuing operations 809 19.3 858 19.2 -6
Corporate Income & Expense, net -589 -527
Operating income
from continuing operations 7 345 23.4 7 284 23.2 1
Pharmaceuticals: USD 6.5 billion (+8%)
Operating income grew 8%, well ahead of sales, and advanced at a
faster 16% pace when adjusted in both periods for adverse currency
movements (-10 percentage points) and exceptional items (+2
percentage points). The double-digit sales expansion and productivity
gains of more than USD 700 million in the 2009 period fueled
operating income growth and enabled significant investments in new
product launches as well as accelerated investments in Oncology
projects, particularly Afinitor, and targeted emerging markets such
as China. Marketing & Sales expenses fell to 29.0% of net sales in
2009 from 30.0% in the 2008 period while supporting the global
rollouts of a range of new products, including Galvus, Exelon Patch,
Tekturna/Rasilez and Afinitor. R&D investments were 20.3% of net
sales in 2009 while supporting ten new Phase III trials started in
2009, but declined from 21.3% in the 2008 period that included an
exceptional charge of USD 223 million for impairment of the Aurograb
development project.
Vaccines and Diagnostics: USD -211 million
Core operating income, which excludes exceptional items and
amortization of intangible assets, fell to USD 66 million from USD
254 million in the year-ago period. Investments were made in clinical
trials for H1N1 pandemic vaccines and late-stage meningitis vaccine
development projects. Results in 2009 included exceptional legal
charges of USD 45 million, while the 2008 period benefited from a USD
49 million exceptional gain for a diagnostics license.
Sandoz: USD 850 million (-4%)
Strong performance realized with 8% growth in constant currencies on
volume expansion in key markets and major productivity gains, but
these were more than offset in reported results by negative currency
movements (-12 percentage points).
