Novartis delivers strong financial performance in second quarter, underpinned by increased momentum in innovation
(Thomson Reuters ONE) -
Novartis International AG / Novartis delivers strong financial performance in second quarter, underpinned by increased momentum in innovation processed and transmitted by Hugin AS. The issuer is solely responsible for the content of this announcement.
* Double-digit growth in the second quarter with excellent contributions from
all divisions
* Net sales up 11% (+12% in constant currencies, or cc) to USD 11.7 billion;
first half up 18% (+15% cc) to USD 23.8 billion
* Operating income grows 25% (+24% cc) to USD 3.0 billion; core operating
income up 23% (+23% cc) to USD 3.3 billion
* Core margin improves by 2.7 percentage points to 28% of net sales
* EPS up 18% (+17% cc) to USD 1.06; core EPS rises 14% (+14% cc) to USD 1.20
* Free cash flow before dividends up 24% (USD 2.4 billion); first half free
cash flow up 54% to USD 5.3 billion
* Strong performance driven by continued portfolio rejuvenation and innovation
* Unanimous FDA Advisory Committee recommendation for FTY720 approval as
therapy for multiple sclerosis
* US approval of Tasigna as first-line therapy for chronic myeloid leukemia
* Group's recently launched products contribute 21% of net sales (USD 2.4
billion); USD 5.5 billion for first half
* Oncology franchise showcased at ASCO with 170 abstracts highlighting
investigational uses of current therapies and new agents
Key figures
% %
Q2 2010 Q2 2009 change H1 2010 H1 2009 change
USD m USD m USD cc USD m USD m USD cc
-----------------------------------------------------------------
Net sales 11 716 10 546 11 12 23 847 20 255 18 15
Operating income 2 961 2 364 25 24 6 472 4 711 37 33
Net income 2 437 2 044 19 18 5 385 4 019 34 29
EPS (USD) 1.06 0.90 18 17 2.34 1.76 33 28
Free cash flow[1]() 2 368 1 916 24 5 271 3 422 54
Core[2]
Operating income 3 276 2 663 23 23 7 141 5 274 35 32
Net income 2 771 2 394 16 15 6 080 4 696 29 25
EPS (USD) 1.20 1.05 14 14 2.65 2.06 29 24
-----------------------------------------------------------------
[1] Before dividends
[2] Core results for operating income, net income and earnings per share (EPS)
eliminate the amortization of intangible assets, the impact of
acquisition-related factors and other significant exceptional items. See page
44 for further information.
Basel, July 15, 2010 - Commenting on the results, Joseph Jimenez, CEO of
Novartis, said: "I am pleased that Novartis once again delivered strong
above-market, double-digit growth in the second quarter of 2010. Our results
were driven by our success in innovation across the portfolio, as recently
launched products comprised 21% of Group sales. We are making great progress on
all three strategic priorities of innovation, growth and productivity."
GROUP REVIEW
Second quarter
Novartis delivered a strong performance in the second quarter of 2010 - with the
rapid expansion of recently launched products and important regulatory approvals
achieved for new medicines - as the Group made progress on its agenda on
innovation, growth and productivity.
Net sales rose 11% (+12% cc) to USD 11.7 billion with currency movements
depressing the result by 1 percentage point. Rejuvenation of the portfolio
continued with recently launched products generating sales of USD 2.4 billion -
21% of total sales including A(H1N1) pandemic vaccines. For the Group, volume
grew by 12 percentage points, price was a negative 1 percentage point and
acquisitions contributed 1 percentage point. Pharmaceuticals (USD 7.7 billion,
+8% cc) advanced in all regions and maintained solid volume growth. Vaccines and
Diagnostics (USD 0.6 billion, +135% cc) achieved considerable gains, including
USD 0.2 billion from recognition of A(H1N1) pandemic vaccine sales. Sandoz (USD
2.0 billion, +13% cc) grew on successful new product launches and the
contribution of EBEWE Pharma. All Consumer Health businesses (USD 1.5 billion,
+7% cc) had strong performances.
Operating income rose 25% (+24% cc) to USD 3.0 billion including 1 percentage
point from favorable currency movements. Operating income includes a pension
gain of USD 265 million, offset by provisions for litigation and legal
settlements of USD 231 million and impairments of assets of USD 82 million. The
operating income margin improved 2.9 percentage points to 25.3% of net sales
from 22.4% in the 2009 period. Core operating income, which excludes exceptional
items and amortization of intangible assets in both periods, rose 23% (+23% cc)
to USD 3.3 billion, and the core operating income margin rose 2.7 percentage
points to 28.0% of net sales.
Earnings per share (EPS) increased 18% (+17% cc) to USD 1.06 while core EPS was
up 14% (14% cc) in the second quarter to USD 1.20.
First half
In the first half of the year, Novartis Group net sales rose by 18% (+15% cc) to
USD 23.8 billion. Recently launched products generated sales of USD 5.5 billion,
23% of net sales. Sales benefitted from 3 percentage points in currency
movements. Volume grew by 16 percentage points, price was negative 2 percentage
points and acquisitions contributed 1 percentage point. All regions of our
Pharmaceuticals organization advanced (USD 15 billion, +8% cc) and maintained
solid volume growth. Recognition of A(H1N1) pandemic vaccine sales provided USD
1.3 billion for Vaccines and Diagnostics, which achieved significant growth
overall (USD 1.9 billion, +287% cc). Sandoz had a strong first half and grew
(USD 4.0 billion, +11% cc) due to the successful launch of new products and the
acquisition of EBEWE Pharma. All Consumer Health businesses (USD 3.0 billion,
+7% cc) outperformed their markets.
Operating income rose 37% (+33% cc) to USD 6.5 billion including 4 percentage
points of favorable currency movements. Included in operating income is a
one-time pension gain of USD 265 million offset by litigation charges totaling
USD 237 million and impairments totaling USD 147 million. The first half of
2010 operating income margin improved 3.8 percentage points to 27.1% of net
sales, up from 23.3% in the first half of 2009. Core operating income, which
excludes exceptional items and amortization of intangible assets in both
periods, rose 35% (+32% cc) to USD 7.1 billion. The first half of 2010 core
operating income margin rose 3.9 percentage points to 29.9% of net sales.
Earnings per share (EPS) in the first half of 2010 increased by 33% (+28% cc) to
USD 2.34, while core EPS was up 29% (+24% cc) to USD 2.65 in the first half of
2010.
Delivering innovation, growth and productivity
Our above-market success in the second quarter of 2010 reinforces our focus on
three strategic priorities, which together enable us to deliver life-saving
medicines for patients and greater value for investors. These priorities are:
(1) extending our lead in innovation by focusing on diseases with significant
unmet need and delivering positive patient outcomes; (2) accelerating growth
across all divisions through tailored commercial models that leverage our broad
portfolio and expansion in emerging markets; and (3) driving productivity across
our business to continue improving margins and reinvesting for future growth.
By focusing on these three areas, Novartis achieved strong growth in the second
quarter despite challenges and volatility in the external environment. The
diversity of our portfolio and our capacity to innovate across it provides a
degree of insulation from dynamics such as the debt crisis and the increasing
drive by governments toward healthcare cost containment.
Novartis has continued to deliver above-market growth by capturing the
opportunities of rising global demand for medicines. At the core of this success
is a sustained commitment to innovation, which has resulted in breakthrough
products across our portfolio offering patients opportunities for improved
health outcomes. Our ability to thrive in a challenging environment is
consistent with our goal of becoming the world's most successful and respected
healthcare company.
Extending our lead in innovation
Consistent R&D investment, differentiated new medicines and an industry-leading
number of product approvals are the drivers of innovation at Novartis. We
continue to strengthen our pipeline and have 58 new molecular entities in
development.
We are encouraged by the recent unanimous recommendation by the US FDA Advisory
Committee for approval of FTY720, an oral therapy for the treatment of multiple
sclerosis, a life-long debilitating disease affecting 2.5 million patients
worldwide. Clinical trials demonstrated the efficacy and safety of FTY720, with
participants showing reduced relapses and delayed disease progression.
Our oncology franchise continues to strengthen its competitive position - 170
abstracts were presented at the American Society of Clinical Oncology (ASCO)
meeting - demonstrating the scale and breadth of our portfolio. Tasigna, our
second drug under priority review by the FDA this year, was approved for
first-line treatment of newly diagnosed chronic myeloid leukemia (CML),
providing a major advance for patients with blood cancer. At ASCO, we presented
strong data that showed Tasigna surpassing Glivec in slowing disease progression
for newly diagnosed CML patients. Demonstrating the potential efficacy of
Afinitor against multiple cancers, a study presented at ASCO showed successful
reduction of benign brain tumors (subependymal giant cell astrocytomas)
associated with tuberous sclerosis in 75% of patients, which led to filing in
the US and priority review designation. Separate Phase III study data released
July 1, 2010 showed that Afinitor more than doubles the time without tumor
growth in advanced pancreatic neuroendocrine tumor patients. Additionally,
RADIANT 2, a placebo-controlled Phase III study of Afinitor in combination with
Sandostatin LAR versus Sandostatin LAR alone in patients with advanced carcinoid
tumors missed the primary endpoint by a very small statistical margin
(progression-free survival Hazard Ratio = 0.77 in favor of Afinitor, p = 0.026
versus p=0.024 predefined). An imbalance in baseline between the two treatment
arms was observed and will be further investigated. Full data will be discussed
with the Health Authorities in the context of the upcoming submission. Another
key ASCO study demonstrated that the addition of Zometa to first-line
chemotherapy treatment improved survival by 16% for newly diagnosed patients
with multiple myeloma.
Our research strategy utilizes a unique disease pathways approach that can lead
to the discovery of medicines effective across many therapeutic areas. This
strategy generally starts with small indications where the pathway is best
characterized before branching out into commercially larger fields. Consistent
with this focused research strategy, new Phase II data demonstrates that ACZ885,
currently marketed as Ilaris for the rare disease cryopyrin-associated periodic
syndrome (CAPS), provided highly statistically significant risk reduction of
acute flares in gout patients compared to the anti-inflammatory standard of
care.
Sandoz continues to have success expanding its pipeline and portfolio of
differentiated products. In the second quarter, Sandoz completed the acquisition
of Oriel Therapeutics, providing exclusive rights to three promising projects
for asthma and chronic obstructive pulmonary disease (COPD) as well as access to
their novel FreePath(TM) drug delivery technology and Solis(TM) dry powder
inhaler. Completion of the EBEWE acquisition last year has also positioned
Sandoz to play a leading role in the rapidly growing market for generic oncology
injectables.
Sandoz is the only generics company with 3 biosimilar products on the market
providing invaluable insight into the successful exploitation of this major
strategic opportunity: Zarzio, a treatment for low white blood cell count
associated with chemotherapy treatment or advanced HIV infection, which was most
recently launched in France, extending Sandoz's presence in biosimilars;
Omnitrope, a treatment for children and adults with growth hormone deficiency,
and Binocrit, a life-saving anemia medicine for patients suffering from kidney
failure or undergoing chemotherapy. Sales of biosimilars grew by 66% in the
second quarter.
In Vaccines and Diagnostics, we held positive discussions with the EMA regarding
our multi-component meningococcal B vaccine (MenB) submission and are on track
for filing, while in the US discussions with the FDA regarding the Phase III
trial continue. MenB is important for Novartis, as the global meningitis market
is large (USD 1.1 billion) and growing (expected to reach USD 2.7 billion by
2016). More importantly, the vaccine, developed via Novartis' pioneering
"reverse vaccinology," has the potential, when approved, to fill a major unmet
need for a broadly protective vaccine for children and infants two months and
older.
Accelerating growth
Our momentum in innovation will sustain growth, with 21% of Group sales coming
from recently launched products, already exceeding the anticipated loss of sales
from products whose patents will be expiring over the next few years. As these
products and the pipeline develop, the Novartis portfolio will increasingly
become comprised of specialty care medicines.
To continue to win in a challenging environment with new pricing pressures, we
are tailoring our commercial model and leveraging our broad portfolio to address
the needs of and provide value to customers and patients in each market. We are
also developing new ways of partnering with governments and large payors to
realize shared objectives and improved patient outcomes.
Pharmaceuticals grew 8% (+8% cc) in the second quarter - growth in volume was
9% with an overall price effect of negative 1 percentage point. The rejuvenation
of the product portfolio continues strongly, with growth of recently launched
products reaching USD 1.6 billion, representing 43% growth over the second
quarter of 2009. In Europe, where pricing pressures have been most intense,
overall growth was 8 %, with volume gains of 12 percentage points demonstrating
the quality of the new product portfolio.
Sandoz continued to build momentum in the second quarter, achieving robust
double-digit growth in constant currencies. Much of the global growth was due to
strong performance by the recent launches of losartan and metaxalone and the
continued performance from tacrolimus. We also had particularly notable success
in the US this quarter, where growth was up 37%, representing a significant
turnaround from negative growth numbers in 2008. A key driver of growth for
Sandoz was our ongoing global strength in biosimilars; sales in the second
quarter were up 66% over the previous year.
While global sales of (A)H1N1 vaccines are now largely complete, our vaccines
business is maintaining momentum with the launch of Menveo, a vaccine for
meningococcal disease. In the second quarter, Menveo gained access to a majority
of public accounts in the US, resulting in promising early uptake. In Europe,
where Menveo is predominantly a travel vaccine, the first positive policy
recommendations were received within a few months of approval. Additional
approvals were achieved in Latin America and the first Asian markets.
Indication expansions are on track to further strengthen the brand in 2011.
The Novartis Consumer Health businesses continue to be driven by strong growth
of key brands. The Novartis Over-the-Counter (OTC) business unit generated
positive growth with pain medications including Voltaren, a treatment for joint
and muscle pain, which in the second quarter reached record market share as the
second largest in the German OTC market. The second quarter launch of Pantoloc
Control in 11 European countries combined with the Prevacid24HR achievement of a
25% share of the fast-growing proton pump inhibitors (PPI) market segment with
sales now annualizing in excess of USD 200 million, will help further establish
our gastrointestinal franchise. CIBA Vision, the fastest-growing lens care
business, continues its strong performance with AirOptix and its expansion in
all regions.
At the same time, all divisions are seeking to expand in emerging markets
where growth in the second quarter was 16%, with particularly strong
performances in South Korea (23%) and Russia (41%). In Russia, our
Pharmaceuticals business experienced dynamic performance (42%) in specialty
areas and new launches. Sandoz in Russia has been a key driver of generics
growth in the second quarter (40%).
Driving productivity
In order to free up resources to improve margins and assure continued investment
in innovation and growth, we are focused on improving efficiency and reducing
costs across the whole business. Second quarter productivity initiatives added
around 2 percentage points of margin improvement, of which approximately half
was reinvested. In Cost of Goods Sold solid productivity improvements were made
particularly in Sandoz and Consumer Health, but were insufficient overall to
offset the impact of price decreases and inventory reductions. Good progress
continues to be made with Sales & Marketing productivity initiatives, especially
in Pharmaceuticals, where productivity gains exceed reinvestment.
Cash flow
The sustainability of our strategy lies with the generation of cash flow which
provides the resources for reinvestment and creates shareholder return. Free
cash flow before dividends generated in the quarter totaled USD 2.4 billion, an
increase of 24% over the previous year, and for the six months amounted to USD
5.3 billion, rising 54% over the previous year.
Cash flow continues to be driven by increasing focus on the cash conversion
cycle and operational cash flow improvements. Cash flow from operating
activities increased to USD 3.0 billion in the second quarter (25.2% of net
sales and an increase of 13% over 2009) and in the first half increased to USD
6.3 billion (26.3% of net sales and an increase of 37% over 2009).
Alcon
We continue to make progress with the required regulatory approvals around the
world. As a result, closing of the acquisition of 77% majority ownership of
Alcon could be completed late in the third quarter or the fourth quarter of
2010. During the second quarter, an expanded commercial paper program was put in
place to complete the preparatory steps for financing the acquisition.
2010 outlook
(Barring unforeseen events)
Based on the strong first half, we are raising our sales guidance for the full
year. Novartis expects to deliver constant currency Group sales growth at mid-
to high-single-digits (excluding Alcon). This expectation includes sales of
A(H1N1) pandemic flu vaccines, which, year over year, is broadly neutral to
overall sales growth.
Group operating margin and core operating margin are expected to increase in
2010 following continued business expansion and sustained productivity
improvement. Sales of (A)H1N1 vaccines added around 1.5 margin points in both
2009 and 2010.
Reported sales and operating profit are affected by the current volatility in
exchange rates. The impact of 2010 rates on sales in the first quarter was
positive (+7%), the second quarter impact was slightly negative (-1%) and if
exchange rates remain where they are for the remainder of the year the impact on
the second half is expected to be negative. Overall for the year a small
negative impact is expected. As a result of the natural hedging effect that
partially exists between revenues and costs, the impact on operating income of
current rates, if they prevail for the remainder of the year, is expected to be
broadly neutral.
No account has been taken in these expectations for the acquisition of Alcon.
Modeling assumptions for the inclusion of Alcon will be clarified at the point
of completion.
HEALTHCARE BUSINESS REVIEW
Pharmaceuticals
% %
Q2 2010 Q2 2009 change H1 2010 H1 2009 change
USD m USD m USD cc USD m USD m USD cc
-------------------------------------------------------------------
Net sales 7 670 7 115 8 8 14 961 13 548 10 8
Operating income 2 337 2 213 6 5 4 664 4 275 9 6
As % of net sales 30.5 31.1 31.2 31.6
Core operating income 2 636 2 318 14 14 5 067 4 489 13 10
As % of net sales 34.4 32.6 33.9 33.1
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Second quarter
Net sales
Net sales expanded 8% to USD 7.7 billion (+8% cc) driven by 9 percentage points
volume expansion, partly offset by government cost-containment measures in
Europe and the biannual price cut in Japan. Recently launched products provided
USD 1.6 billion of net sales in the 2010 period, representing 21% of net sales
compared to 16% in the 2009 quarter. Products launched since 2007 - which
include Lucentis, Exforge, Exelon Patch, Exjade, Reclast/Aclasta,
Tekturna/Rasilez, Tasigna, Afinitor, Onbrez Breezhaler, Ilaris and Fanapt - grew
by 43% compared to the same period last year.
All regions continued to benefit from the product portfolio rejuvenation,
particularly Europe (USD 2.7 billion, +8% cc), generating 27% of its net sales
from recently launched products. Volume growth in Europe was 12 percentage
points with a negative price effect of 4 percentage points due to recent
government cost-containment measures. The US (USD 2.6 billion, +7% cc), as well
as Latin America and Canada (USD 0.7 billion, +15% cc), maintained solid growth
rates. Japan performance (USD 0.9 billion, +8% cc) was driven by strong momentum
from the regulatory approvals of the 9 new medicines launched since 2009. The
six top emerging markets (USD 775 million, +11% cc) were led by double-digit
gains in Russia, India and South Korea, more than offsetting the impact of
recent cost-containment measures in Turkey, as well as slower growth in China
due to stock-in-trade adjustments and the implementation of the new regional
structure.
All therapeutic areas contributed to the business expansion. Oncology (USD 2.5
billion, +11% cc), the largest franchise, was led by sustained growth of
Gleevec/Glivec (USD 1.1 billion, +8% cc), Femara (USD 338 million, +10% cc), and
Sandostatin (USD 312 million, +11% cc), and important contributions from the
recently launched products Exjade (USD 192 million, +11% cc), Tasigna (USD 89
million, +73% cc) and Afinitor (USD 55 million). Cardiovascular and Metabolism
(USD 2.0 billion, +8% cc) maintained strong momentum supported by Exforge (USD
227 million, +37% cc), Tekturna (USD 103 million, +56% cc) and Galvus (USD 90
million, +136% cc). Diovan sales (USD 1.6 billion, +1% cc) also held up well,
despite CozaarÒ generic entry in the US and the angiotensin II receptor blocker
(ARB) market slowdown in Japan. Neuroscience and Ophthalmics (USD 924 million,
+17% cc) saw rapid growth from Lucentis (USD 377 million, +29% cc) and Exelon
Patch (USD 168 million, +41% cc).
Operating income
Operating income rose 6% (+5% cc) to USD 2.3 billion. The operating income
margin of 30.5% of net sales declined by 0.6 percentage points, primarily
impacted by litigation charges of USD 178 million.
Core operating income grew 14% (+14% cc) to USD 2.6 billion. The core operating
income margin of 34.4% of net sales improved 1.8 percentage points compared to
the same period in 2009. Cost of Goods Sold (-0.7 percentage points) was
impacted by lower fixed overhead absorption, in addition to higher Lucentis
royalties. R&D improved 0.7 percentage points, mainly driven by phasing of
clinical trial activities. Marketing & Sales expenses fell 1.1 percentage points
to 28.5% of net sales and General & Administration expenses improved by 0.2
percentage points, both benefiting from continuing productivity efforts. Other
Income & Expense improved by 0.5 percentage points.
First half
Net sales
Net sales expanded 10% to USD 15.0 billion (+8% cc, driven by 9 percentage
points volume expansion). Recently launched products provided USD 3.1 billion of
net sales in the 2010 period, representing 20% of net sales compared to 15% in
the 2009 period.
Operating income
Operating income rose 9% (+6% cc) to USD 4.7 billion. The operating income
margin of 31.2% of net sales was impacted by litigation charges of USD 178
million in the second quarter, and in the first quarter by a PTZ601 impairment
charge of USD 152 million, in addition to the Famvir settlement with Teva which
included an asset write-up of USD 100 million and an exceptional settlement gain
of USD 42 million.
Core operating income grew 13% (+10% cc) to USD 5.1 billion. The core operating
income margin of 33.9% of net sales improved by 0.8 percentage points, including
lower sales to other divisions (-0.2 percentage points) as well as higher Cost
of Goods Sold (-0.9 percentage points). R&D improved 0.7 percentage points,
mainly driven by phasing of clinical trial activities. Marketing & Sales
expenses (+1.4 percentage points) and General & Administration costs (+0.1
percentage points) were driven by continuing productivity improvements. Higher
net costs from Other Income & Expense (-0.3 percentage points) were mainly due
to the first quarter in the 2009 period benefiting from provision reversals
related to launch product inventories.
Pharmaceuticals product review
Cardiovascular and Metabolism
% %
Q2 2010 Q2 2009 change H1 2010 H1 2009 change
USD m USD m USD cc USD m USD m USD cc
------------------------------------------------------------------------
Hypertension medicines
Diovan 1 552 1 533 1 1 2 994 2 935 2 0
Exforge 227 168 35 37 431 304 42 39
Tekturna/Rasilez 103 67 54 56 192 119 61 60
------------------------------------------------------------------------
Subtotal 1 882 1 768 6 6 3 617 3 358 8 6
Galvus 90 39 131 136 166 65 155 152
Lotrel 71 86 -17 -17 144 169 -15 -15
------------------------------------------------------------------------
Total strategic products 2 043 1 893 8 8 3 927 3 592 9 7
Mature products 277 346 -20 -20 572 677 -16 -18
------------------------------------------------------------------------
Total 2 320 2 239 4 4 4 499 4 269 5 3
------------------------------------------------------------------------
An expanding portfolio of high blood pressure medicines (USD 1.9 billion, +6%
cc) has enabled Novartis to continue to drive sales while increasing its
leadership of the global branded hypertension market segment, achieving a 15.9%
share by April 2010 compared to 14.4% during the same period last year (Source:
IMS Health). Single-pill combinations based on valsartan (Diovan) and aliskiren
(Tekturna/Rasilez) now provide over half of these sales, reflecting the
continuing shift toward use of combination therapies.
Diovan (USD 1.6 billion, +1% cc) sales increased in the second quarter 2010
versus last year. In the US, Diovan reached sales of USD 657 million (+0% cc),
maintaining its leadership of the ARB segment with a 40.03% share by April 2010
(+0.06 percentage points compared to April year-to-date 2009; source: IMS
Health). Diovan is the only medicine in the ARB class approved to treat the
three major cardiovascular indications: high blood pressure, high-risk heart
attack and heart failure. In April, Diovan gained approval of a new indication
from the European Commission for the treatment of children and adolescents (ages
6 to 18) with high blood pressure.
Exforge (USD 227 million, +37% cc) maintained solid growth in the second quarter
fueled by continued geographic expansion and the launch of Exforge HCT, which
adds a diuretic in a single pill, in the US and Europe. Exforge, a single-pill
combination of Diovan (valsartan) and the calcium channel blocker amlodipine,
has delivered consistent and sustained growth since its launch in 2007.
Tekturna/Rasilez (USD 103 million, +56% cc) maintained a solid growth rate
driven by single-pill combinations Tekturna/Rasilez HCT and Valturna in the US.
Tekturna/Rasilez, the only approved high blood pressure therapy known as a
direct renin inhibitor, was also approved in China in April for use alone or in
combination with other blood pressure medications. Other single-pill
combinations in development are a combination of aliskiren and amlodipine,
currently under regulatory review in the US and Europe, and a triple-combination
therapy with aliskiren, amlodipine and a diuretic, expected to be submitted for
US regulatory approval this year.
Galvus/Eucreas (USD 90 million, +136% cc), oral treatments for type 2 diabetes,
delivered very strong growth in many markets, particularly Spain, Greece,
Germany, Portugal, France, South Korea and India. Galvus was launched in Japan
in April under the brand name Equa.
Oncology
Q2 2010 Q2 2009 % change H1 2010 H1 2009 % change
USD m USD m USD cc USD m USD m USD cc
--------------------------------------------------------------------------------
Gleevec/Glivec 1 075 990 9 8 2 107 1 884 12 8
Zometa 378 359 5 6 753 701 7 5
Femara 338 310 9 10 682 596 14 13
Sandostatin 312 281 11 11 622 539 15 12
Exjade 192 173 11 11 371 295 26 23
Tasigna 89 53 68 73 164 88 86 84
Afinitor 55 11 nm nm 96 12 nm nm
Other 41 60 -32 -31 90 119 -24 -27
--------------------------------------------------------------------------------
Total 2 480 2 237 11 11 4 885 4 234 15 13
--------------------------------------------------------------------------------
nm - Not meaningful
Gleevec/Glivec (USD 1.1 billion, +8% cc) has sustained growth through continued
expansion in chronic myeloid leukemia (CML) as well as adjuvant (post-surgery)
treatment of gastrointestinal stromal tumors (GIST). Gleevec/Glivec, a targeted
therapy for certain forms of CML and GIST, was approved in 2009 for use in
adjuvant GIST and has since received approvals for this indication in more than
55 countries.
Tasigna (USD 89 million, +73% cc) has been growing rapidly through geographic
and market expansion with approvals in more than 80 countries as a second-line
therapy for patients with certain forms of CML resistant or intolerant to prior
therapy including Gleevec/Glivec. In June, following priority review, the US FDA
approved Tasigna for the treatment of adult patients with newly diagnosed CML in
the chronic phase. Regulatory submissions for Tasigna in first-line indication
are underway worldwide, with applications currently filed in the EU, Switzerland
and Japan. Trials are also underway examining the use of Tasigna in CML patients
with suboptimal response to Glivec and in patients with metastatic GIST.
Zometa (USD 378 million, +6% cc) expansion has come from improved compliance and
increased use of this intravenous bisphosphonate therapy in patients with
certain types of cancer which have spread to the bone. New data presented at
ASCO showed that the addition of Zometa to chemotherapy significantly improved
overall survival by 16% (p = 0.0118) in newly diagnosed multiple myeloma
patients. This survival advantage was also observed in addition to, and
independent of, the drug's effects on skeletal related events (SREs). The
potential use of Zometa for adjuvant breast cancer in premenopausal women is
being reviewed by US and European regulatory authorities with feedback
anticipated by year end. Zoledronic acid, the active ingredient in Zometa, is
also available under the trade names Reclast/Aclasta for use in non-oncology
indications.
Femara (USD 338 million, +10% cc) achieved ongoing double-digit growth on market
share gains in the US and other key markets, including Germany, France, Japan,
the UK and the Nordic countries. The US prescribing information for Femara was
updated to include long-term (73-month) follow-up data from the BIG 1-98 study
comparing Femara with tamoxifen in the initial adjuvant setting. The study
confirmed a significant benefit for Femara versus tamoxifen in reducing the risk
of distant metastases and the overall risk of breast cancer recurrence.
Sandostatin (USD 312 million, +11% cc) benefited from increasing use of
Sandostatin LAR in treating the symptoms of neuroendocrine tumors (NET).
Exjade (USD 192 million, +11% cc) has continued to expand with strong
double-digit growth on increased average dosing and improved adherence to
therapy in the US and key markets around the world. Exjade, currently approved
in more than 100 countries as the only once-daily oral therapy for transfusional
iron overload, received regulatory approvals in 2009 in the US, Europe,
Switzerland and other countries, extending the dose range to 40 mg/kg. In June
2010, Exjade received regulatory approval in China.
Afinitor (USD 55 million) received priority review status by the US FDA for the
treatment of patients with subependymal giant cell astrocytomas (SEGA)
associated with tuberous sclerosis (TS). An FDA decision is expected by the end
of the year with regulatory submissions underway in TS in the EU. Regulatory
filings are expected this year in pancreatic neuroendocrine tumors (pNET)
following data showing Afinitor met the primary endpoint of progression-free
survival in a Phase III study of pNET. RADIANT 2, a placebo-controlled Phase III
study of Afinitor in combination with Sandostatin LAR versus Sandostatin LAR
alone in patients with advanced carcinoid tumors missed the primary endpoint by
a very small statistical margin (progression-free survival Hazard Ratio = 0.77
in favor of Afinitor, p = 0.026 vs p=0.024 predefined). An imbalance in baseline
between the two treatment arms was observed and will be further investigated.
Full data will be discussed with the Health Authorities in the context of the
upcoming submission. Afinitor, an oral inhibitor of the mTOR pathway, is an
approved treatment for advanced renal cell carcinoma (kidney cancer) following
VEGF-targeted therapy. Afinitor is also being studied in other tumor types with
Phase III trials underway in tuberous sclerosis, breast cancer, gastric cancer,
hepatocellular carcinoma and lymphoma. Everolimus, the active ingredient in
Afinitor, is also available under the trade names Certican/Zortress for use in
non-oncology indications.
Neuroscience and Ophthalmics
% %
Q2 2010 Q2 2009 change H1 2010 H1 2009 change
USD m USD m USD cc USD m USD m USD cc
-----------------------------------------------------------------------
Lucentis 377 294 28 29 741 523 42 35
Exelon/Exelon Patch 252 233 8 9 503 436 15 13
Comtan/Stalevo 150 138 9 9 291 261 11 9
Extavia 38 9 nm nm 58 12 nm nm
Other 107 118 -9 -10 232 235 -1 -5
-----------------------------------------------------------------------
Total strategic products 924 792 17 17 1 825 1 467 24 20
Mature products 149 150 -1 -3 282 281 0 -5
-----------------------------------------------------------------------
Total 1 073 942 14 14 2 107 1 748 21 16
-----------------------------------------------------------------------
nm - Not meaningful
Lucentis (USD 377 million, +29% cc) has maintained strong growth reflecting its
position as the only approved medicine to significantly improve vision in
patients with wet age-related macular degeneration (AMD). Two clinical studies
recently confirmed rapid and sustained improvement in vision with Lucentis in
another debilitating eye condition, visual impairment due to diabetic macular
edema (DME), currently under regulatory review in the EU. In the US, where
Genentech holds the rights to Lucentis, the treatment of macular edema following
retinal vein occlusion (RVO) was approved in June. Novartis plans to file for
approval in this indication in the EU and other markets by the end of 2010.
Exelon/Exelon Patch (USD 252 million, +9% cc) has continued to grow based on
increasing demand for Exelon Patch, with the transdermal form of the medicine
generating more than 67% of total Exelon sales in the second quarter compared to
52% in the same period in 2009. Exelon Patch is approved for the treatment of
mild to moderate Alzheimer's disease dementia in more than 75 countries,
including more than 20 countries where it is also approved for dementia
associated with Parkinson's disease.
Extavia (USD 38 million) continued to grow from geographic expansion in key
markets, notably Germany, Russia, Italy, Spain and the US. Extavia, the
Novartis-branded version of Betaferon(®)/Betaseron(® )for relapsing forms of
multiple sclerosis, was launched in the US in 2009, and since then has been
approved in over 20 other countries.
Respiratory
%
Q2 2010 Q2 2009 change H1 2010 H1 2009 % change
USD m USD m USD cc USD m USD m USD cc
-------------------------------------------------------------------------
Xolair 90 79 14 18 170 140 21 20
TOBI 72 69 4 4 137 143 -4 -5
Onbrez 5 0 nm nm 8 0 nm nm
Other 1 2 nm nm 0 1 nm nm
-------------------------------------------------------------------------
Total strategic products 168 150 12 15 315 284 11 10
Mature products 40 43 -7 -5 89 96 -7 -11
-------------------------------------------------------------------------
Total 208 193 8 11 404 380 6 5
-------------------------------------------------------------------------
nm - Not meaningful
Xolair (USD 90 million, +18% cc) has continued to grow strongly in major
European countries and Latin America. In the US, Novartis co-promotes Xolair
with Genentech and shares a portion of the US operating income. In the first
half of 2010, US sales to Genentech were lower than in the same period of 2009
due to a change in ordering processes. Xolair, a biotechnology drug for moderate
to severe persistent allergic asthma in the US and severe persistent allergic
asthma in Europe, has approvals in more than 80 countries. Plans to commence
Phase III trials in China to support regulatory submissions there remain on
track for this year.
Onbrez Breezhaler (USD 5 million) has demonstrated strong performance following
EU approval and since first launching in late 2009 in Germany for adult patients
with chronic obstructive pulmonary disease (COPD). Onbrez Breezhaler has since
been launched in Ireland and Denmark in March 2010 with additional launches
expected this year in 20 markets, including the UK, Spain, Brazil and Mexico.
Regulatory submissions also are planned this year in Japan and China. In the US,
all clinical studies to support resubmission continue on track with re-filing
expected by year end.
Immunology and Infectious Diseases
% %
Q2 2010 Q2 2009 change H1 2010 H1 2009 change
USD m USD m USD cc USD m USD m USD cc
------------------------------------------------------------------------
Neoral/Sandimmun 217 227 -4 -5 429 448 -4 -7
Reclast/Aclasta 142 115 23 23 265 200 33 31
Myfortic 108 90 20 18 208 163 28 22
Certican 36 27 33 33 70 50 40 35
Ilaris 6 0 nm nm 10 0 nm nm
Other 73 57 28 30 140 103 36 32
------------------------------------------------------------------------
Total strategic products 582 516 13 12 1 122 964 16 13
Mature products 217 237 -8 -10 424 457 -7 -11
------------------------------------------------------------------------
Total 799 753 6 5 1 546 1 421 9 5
------------------------------------------------------------------------
nm - Not meaningful
Reclast/Aclasta (USD 142 million, +23% cc), the only once-yearly osteoporosis
treatment available in over 90 countries, maintained a steady pace of growth.
Approved in up to six indications worldwide, Reclast/Aclasta provides fracture
protection to a broad spectrum of patients ranging from those diagnosed with
early bone loss to patients with more severe forms of the disease and has been
used in more than one million infusions. It is also the only bisphosphonate
proven to reduce fracture risk and mortality after a low-trauma hip fracture.
Zoledronic acid, the active ingredient in Reclast/Aclasta, is also available
under the trade name Zometa for use in oncology indications.
Certican/Zortress (USD 36 million, +33% cc) is now available in more than 80
countries to prevent organ rejection in adult kidney transplantation, heart
transplantation, or both. In April, it was approved in the US under the brand
name Zortress (everolimus) for adult kidney transplantation. Everolimus is
currently in two Phase III studies: heart transplantation in the US, and a
worldwide study for liver transplantation. Everolimus, the active ingredient in
Certican/Zortress, is also available under the trade name Afinitor for use in an
oncology indication.
Ilaris (ACZ885) (USD 6 million), is the first medicine to treat adults and
children aged four years and older suffering cryopyrin-associated periodic
syndrome (CAPS), a group of rare auto-inflammatory disorders that affect one in
one million people. Ilaris selectively blocks the inflammatory protein
interleukin-1 beta. Following US and European regulatory approvals in 2009, it
is now approved in 40 countries to treat CAPS. Two Phase III trials are underway
studying ACZ885 in the treatment of acute flares associated with gouty
arthritis. Trials are also ongoing in other diseases in which IL-1 beta may play
an important role, including type 2 diabetes and systemic juvenile idiopathic
arthritis (SJIA).
Vaccines and Diagnostics
% %
Q2 2010 Q2 2009 change H1 2010 H1 2009 change
USD m USD m USD cc USD m USD m USD cc
---------------------------------------------------------------------
Net sales 564 247 128 135 1 925 494 290 287
Operating income -42 -167 75 72 797 -234 nm nm
As % of net sales -7.4 -67.6 41.4 -47.4
Core operating income 138 -45 nm nm 1 061 -36 nm nm
As % of net sales 24.5 -18.2 55.1 -7.3
---------------------------------------------------------------------
nm - Not meaningful
Second quarter
Net sales
Net sales were USD 564 million for the second quarter (+135% cc) compared with
USD 247 million in the prior period. Revenue of approximately USD 200 million
was recognized in the period relating to A(H1N1) pandemic flu contracts (mainly
Japan and US Health and Human Services), largely completing the campaign.
Excluding the impact of A(H1N1) pandemic, the business experienced strong growth
(+46% cc) driven by the expansion of the vaccines business in emerging markets
and the first sales of Menveo in the US.
The launch of Menveo represents an important step in building a meningitis
franchise. MenB vaccine is on track to be filed in Europe by the end of 2010 and
discussions regarding the phase III trial continue with the FDA. Based on the
unique reverse vaccinology technology, MenB has the potential to address a major
unmet need for a protective vaccine especially in Europe, Australia, South
America and Canada.
In April, Novartis signed a contract in Brazil forming a strategic partnership
with FUNED (Fundação Ezequiel Dias) to deliver MenC vaccines to children under
the age of two. In 2009 Novartis announced an agreement to acquire an 85% stake
in the Chinese vaccines company Zhejiang Tianyuan Bio-Pharmaceuticals Co., Ltd.
The transaction is on track for completion later in 2010.
Operating income
Operating loss was USD 42 million for the second quarter of 2010 (+72% cc)
compared to a USD 167 million loss for the second quarter of 2009, improved by
the strong sales performance. The quarter included an impairment charge of USD
71 million related to a financial asset as well as a legal settlement which
resulted in a final additional charge of USD 45 million.
Core operating income for the period was USD 138 million compared to a core
operating loss of USD 45 million in the prior year.
First half
Net sales
Net sales were USD 1.9 billion for the first half of the year (+287% cc)
compared to USD 494 million for the year-ago period. Deliveries for supply
contracts with governments around the world for A(H1N1) pandemic flu vaccines
and adjuvants generated net sales of USD 1.3 billion, significantly driving the
increase over the year-ago period. Excluding the impact of A(H1N1) pandemic, the
business showed strong growth (+22% cc).
Operating income
Operating income in the period was USD 797 million compared to an operating loss
of USD 234 million in the year-ago period, driven substantially by contributions
of A(H1N1) pandemic vaccines.
Core operating income was USD 1.1 billion, driven by a strong sales performance,
up from a core operating loss of USD 36 million for the same period in 2009.
Sandoz
%
Q2 2010 Q2 2009 change H1 2010 H1 2009 % change
USD m USD m USD cc USD m USD m USD cc
----------------------------------------------------------------------
Net sales 1 973 1 774 11 13 3 974 3 500 14 11
Operating income 289 247 17 16 599 538 11 7
As % of net sales 14.6 13.9 15.1 15.4
Core operating income 364 307 19 20 814 654 24 21
As % of net sales 18.4 17.3 20.5 18.7
----------------------------------------------------------------------
Second quarter
Net sales
Sandoz accelerated its growth (USD 2.0 billion, +11%, +13% cc) versus prior year
as 20 percentage points of volume expansion from new product launches, the
inclusion of EBEWE Pharma's specialty generics business (contributing 5
percentage points in the quarter) and continued strong results from the US,
Canada, Russia, Italy, Japan and biosimilars more than offset price erosion of
7 percentage points.
US retail generics and biosimilars (+43% cc) continued to deliver strong growth
due to successful recent first-to-market launches including tacrolimus,
lansoprazole, losartan and metaxalone. German retail generics and biosimilars
(-5% cc) declined compared to the prior year as a result of negative market
growth driven by the impact of statutory health insurance tenders, but Sandoz
expanded its leadership position in the German generics market. Emerging markets
growth accelerated, particularly in Asia-Pacific (+25% cc) and Central and
Eastern Europe (+17% cc). Biosimilars (+66% cc) continued to achieve strong
momentum, with key launches in the oncology indications of Binocrit (epoetin
alfa) and Zarzio (filgrastim) as well as continued growth in Omnitrope (human
growth hormone).
Operating income
Operating income grew 17% to USD 289 million, as the operating income margin
improved 0.7 percentage points to 14.6% of net sales. The lower improvement of
the operating margin as compared to the core operating margin increase of 1.1
percentage points reflected one-time charges related to the termination of a
co-development agreement and purchase price accounting for EBEWE Pharma.
Core operating income rose 19% to USD 364 million, resulting in the core
operating margin increase of 1.1 percentage points to 18.4% of net sales
including lower sales to other divisions
(-0.9 percentage points), other revenues (+0.1 percentage points) and Cost of
Goods Sold increased 0.4 percentage points as price erosion, inventory
write-offs and the impact of increased sales of lower margin products more than
offset continued Cost of Goods Sold productivity improvements. Marketing & Sales
costs (17.5% of net sales, +0.8 percentage points) rose slower than sales due to
productivity improvements, while fully funding investments behind growing
businesses. R&D costs (7.5% of net sales) decreased slightly (+0.4 percentage
points) as a percentage of sales as productivity savings funded the continued
investments in the development of differentiated generics, such as biosimilar,
oncological injectable and respiratory products. General & Administration costs
(4.3% of net sales, +0.8 percentage points) decreased due to ongoing
cost-containment measures. Other Income & Expense improved (2.1%, +0.3
percentage points) due to lower legal fees.
On June 1, Sandoz completed the acquisition of Oriel Therapeutics, a privately
held US pharmaceuticals company. The closure gives Sandoz rights to several
promising development projects, as well as to the novel FreePath(TM) drug
delivery system and Solis(TM) multi-dose dry powder inhaler. Regulatory
approvals, if achieved, would broaden access to affordable, high-quality
respiratory medicines and further reinforce Sandoz's position as a leader in
differentiated generics.
First half
Net sales
Sandoz achieved double-digit sales growth in the first six months (USD 4.0
billion, +14%, +11% cc) versus prior year supported by strong growth in US
retail generics and biosimilars (+31% cc) and in emerging markets such as
Central and Eastern Europe (+11% cc), Asia-Pacific (+21% cc) and Middle East,
Turkey and Africa (+10% cc). Sales volumes expanded 18 percentage points due to
new product launches, the inclusion of EBEWE Pharma's specialty generics
business (contributing 5 percentage points in the half year) and continued
strong results from biosimilars more than compensating price erosion of 7
percentage points.
Operating income
Operating income in the first half grew 11% versus prior year to USD 599
million. The operating margin declined by -0.3 points to 15.1% of net sales. The
reduction of the operating margin in the period as compared to the growth in
core operating margin reflected the acquisition-related charges for the EBEWE
Pharma integration, one-time charges for the termination of a co-development
agreement and provisions for legal settlements.
Core operating income rose 24% to USD 814 million, as the core operating margin
improved by 1.8 percentage points to 20.5% of net sales, including lower sales
to other divisions (-0.4 percentage points), other revenues (0.1 percentage
points), and higher Cost of Goods Sold (-0.2 percentage points). R&D costs
decreased 0.7 percentage points as productivity savings funded continued
investment in the development of differentiated generics. General &
Administration costs decreased (0.8 percentage points) due to ongoing cost
reduction measures. Other Income & Expense were positive at 0.8 percentage
points.
Consumer Health
% %
Q2 2010 Q2 2009 change H1 2010 H1 2009 change
USD m USD m USD cc USD m USD m USD cc
-------------------------------------------------------------------
Net sales 1 509 1 410 7 7 2 987 2 713 10 7
Operating income 294 271 8 10 558 506 10 7
As % of net sales 19.5 19.2 18.7 18.7
Core operating income 318 293 9 10 606 547 11 8
As % of net sales 21.1 20.8 20.3 20.2
-------------------------------------------------------------------
Second quarter
Net sales
All three Consumer Health businesses - OTC, Animal Health and CIBA Vision -
contributed to higher net sales in the second quarter of 2010 versus prior year
(USD 1.5 billion, +7%, +7% cc), as the three businesses continued growing ahead
of their respective markets.
Pain medicines were key growth contributors in OTC. In the US, Excedrin and
Triaminic gained share as a result of successful advertising and promotional
campaigns. In Europe, Voltaren was the key growth driver. In Germany, Voltaren
achieved a record 44% share in the topical analgesic category and currently
ranks as the second-largest brand in the German OTC market.
Novartis OTC is strengthening its portfolio by building a gastrointestinal
franchise in the fast-growing PPI category. Prevacid24HR achieved a 25%
year-to-date share of the US PPI category, which has grown 39% this year.
Pantoloc Control, a PPI to which Novartis acquired European marketing rights in
late 2009, was launched in 11 European markets in the PPI category during the
second quarter.
CIBA Vision continued its growth momentum, expanding in all regions, underpinned
by new product launches. In the US, AirOptix achieved a record 26% share of its
category.
Novartis Animal Health is one of the fastest-growing companies in the market,
mainly led by strong performance in the US business. Interceptor and Sentinel
gained market share and strengthened their positions within the heartworm and
flea categories. In Europe the new Milbemax chewable formulation is leading
growth.
In the US, the Consumer Health Division delivered strong performance (USD 0.5
billion, +12%) and gained share, while in Europe (USD 0.6 billion, +5% cc) solid
growth was achieved, most notably in France, the UK and Germany. All top six
emerging markets grew and together achieved 26% (+19% cc) net sales growth.
Operating income
Operating income rose 8% (+10% cc) to USD 294 million with operating income
margin improving by 0.3 percentage points in the second quarter of 2010 to
19.5% of net sales from the 2009 period.
Core operating income grew 9% (+10% cc) to USD 318 million, increasing the
operating income margin 0.3 percentage points in the second quarter of 2010 to
21.1% of net sales. The core gross margin (68.0% of net sales, +1.0 percentage
points) improved as a result of productivity gains and product pricing.
Marketing & Sales expenses (35.0% of net sales, -0.4 percentage points), were
higher than the prior year primarily driven by promotional support for new
product launches as well as sales force expansion across all of the businesses.
R&D (5.6% of net sales, +0.5 percentage points) remained largely unchanged in US
dollars to support product development across all Consumer Health businesses.
General & Administration costs (6.2% of net sales, +0.1 percentage points) were
largely unchanged versus prior year and Other Income & Expense (-0.1% of net
sales, -0.9 percentage points) rose as a result of a one-off provision reversal
in 2009.
First half
Net sales
Sales grew 10% (+7% cc) to USD 3.0 billion and all Consumer Health businesses
delivered good growth, outperforming their respective markets.
OTC grew on the back of Prevacid24HR and Excedrin in the US and Voltaren in
Europe. Animal Health growth was mainly led by the strong performance of
Interceptor and Sentinel in the US and Milbemax in Europe. CIBA Vision grew in
all regions led by new product launches.
Operating income
Operating income rose 10% (+7% cc) to USD 558 million, with the operating margin
stable at 18.7% of net sales versus the same period in 2009.
Core operating income grew 11% (+8% cc) to USD 606 million, representing a
faster pace of growth than net sales. The operating income margin rose 0.1
percentage points to 20.3% of net sales versus the same period in 2009. Gross
margin improvements from productivity gains have been mostly reinvested to
support the Prevacid24HR launch in the US and sales force expansion across all
businesses.
FINANCIAL REVIEW
Second quarter and first hal
Unternehmensinformation / Kurzprofil:
Datum: 15.07.2010 - 07:04 Uhr
Sprache: Deutsch
News-ID 23925
Anzahl Zeichen: 0
contact information:
Town:
Basel
Kategorie:
Business News
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"Novartis delivers strong financial performance in second quarter, underpinned by increased momentum in innovation"
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