Novartis Q1 earnings hit by stoppage at US site

SWISS DRUGMAKER Novartis has stuck to its outlook for lower profitability this year, as a stoppage at a US manufacturing site and tough annual comparisons for its Sandoz division hit first-quarter core earnings.

Chief executive Joseph Jimenez said he expected production at a consumer health manufacturing site in Lincoln, Nebraska – which has annualised sales of $1 billion – to restart in May, with shipments resuming mid-year.

The stoppage to sort out quality issues sent net sales in the consumer health division down 20 per cent in the first quarter. First-quarter sales fell 2 per cent to $13.74 billion, just below analysts’ average forecast of $13.85 billion.

“A good performance in pharma made up for the vaccines and consumer shortfalls, with the clear message being that the Lincoln . . . plant restart is going to be a slow process extending well into 2013,” Jefferies analysts said in a note.

Novartis shares fell 0.6 per cent in early trading, versus a flat European pharmaceuticals sector.

Novartis is racing to develop new drugs as patent expiries on some of its best-selling drugs to start to bite. It got some relief last week when European and US health regulators decided to back the use of its big drug hope, multiple sclerosis pill Gilenya, albeit with stronger heart risks warnings.

Gilenya posted sales of $247 million in the first quarter, despite being blighted by safety warnings.

Mr Jimenez said he expected Gilenya to achieve sales of more than $1 billion – this year.

Another promising development was that Novartis’s lung drug QVA149, which it is developing in partnership with Vectura, met its primary end point in the first four late-stage studies in patients with chronic obstructive pulmonary disease (COPD).

Novartis expects to file the drug for regulatory approval in the United States at the end of 2014.

Novartis is also pinning its hopes on its eyecare group Alcon, plus its presence in emerging markets, its strong Sandoz generics unit and its newest products to shield margins in the face of growing price pressure from cheaper copies of its drugs. Its high blood pressure drug Diovan, which sells $6 billion a year, went off-patent in Europe last year and it will lose exclusivity in the United States this September.– (Reuters)