Novartis delivered growth across all divisions in second quarter (cc); raises guidance for full year 2013
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Novartis International AG /
Novartis delivered growth across all divisions in second quarter (cc); raises
guidance for full year 2013
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* Group net sales increased 1% (+3% cc[1]) versus year ago to USD 14.5 billion
in second quarter, up 2% (+4% cc) to USD 28.5 billion in first half
* Core operating income was USD 3.8 billion (-2%, +2% cc) in second
quarter, USD 7.5 billion (0%, +4% cc) in first half
* Core EPS was USD 1.30 (-4%, +1% cc) in second quarter, USD 2.62 (+1%,
+5% cc) in first half
* Free cash flow was USD 1.8 billion in second quarter, USD 3.1 billion in
first half
* Excluding impact of patent expiries, underlying performance demonstrates
strong growth
* Underlying net sales growth was 8% (cc) in second quarter and first half
* Underlying core operating income up 18% (cc) in second quarter and up
17% (cc) in first half
* Strong innovation continued, reinforcing growth prospects
* Phase III study of AIN457 in psoriasis demonstrated superiority to
current standard of care
* Lucentis received EU approval for myopic choroidal neovascularization;
FDA approved Ilaris in systemic juvenile idiopathic arthritis, Exelon
Patch in severe Alzheimer's disease and Simbrinza Suspension in glaucoma
* RLX030 granted Breakthrough Therapy designation from the FDA in acute
heart failure
* Successful execution on growth products and performance in Emerging Growth
Markets
* Growth products[2] including Gilenya, Afinitor, Tasigna, Galvus and
Jakavi grew 13% to USD 4.5 billion, accounting for 31% of Group net
sales in second quarter; achieved net sales of USD 8.7 billion (+14%) in
first half
* Emerging Growth Markets up 11% (cc) in the second quarter, led by China
(+25% cc), Russia (+18% cc) and South Korea (+16% cc)
* 2013 Group outlook increased: sales upgraded to low-single digit growth
versus year ago (cc); core operating income improved to low-single digit
decline (cc)
Key figures
% %
Q2 2013 Q2 2012[3] change H1 2013 H1 2012[3] change
USD m USD m USD cc USD m USD m USD cc
-----------------------------------------------------------------------
Net sales 14 488 14 303 1 3 28 504 28 038 2 4
Operating income 2 970 3 108 -4 1 5 866 5 844 0 5
Net income 2 548 2 675 -5 0 4 970 4 944 1 6
EPS (USD) 1.03 1.09 -6 -1 2.01 2.03 -1 5
Free cash flow 1 785 2 311 -23 3 083 4 367 -29
Core
Operating income 3 755 3 831 -2 2 7 469 7 438 0 4
Net income 3 227 3 298 -2 2 6 475 6 333 2 6
EPS (USD) 1.30 1.35 -4 1 2.62 2.60 1 5
-----------------------------------------------------------------------
[1] Core results, constant currencies and free cash flow are non-IFRS measures.
An explanation of these non-IFRS measures and reconciliation tables can be found
beginning on page 42 of the Condensed Financial Report.
[2] Growth products are defined on page 2.
[3]Restated as explained in the Condensed Financial Report on pages 34 and 68.
All product names appearing in italics are trademarks owned by or licensed to
Novartis Group Companies.
Basel, July 17, 2013 - Commenting on the results, Joseph Jimenez, CEO of
Novartis, said:
"Novartis delivered a solid second quarter, resulting in a good first half in
2013. Successful execution on growth brands allowed us to navigate patent
expiries and new competition, while deepening our footprint in Emerging Growth
Markets like China and Russia. Our underlying business showed strong growth
behind significant innovation, with sales up 8% and core operating income up
17% in constant currencies in the first half excluding the impact of generics."
GROUP REVIEW
Second quarter
Group net sales grew on strong execution of growth products[1]
Group net sales increased 1% (+3% cc) to USD 14.5 billion in the second quarter,
with all divisions contributing to growth in constant currencies. Currency had a
negative impact of 2 percentage points mainly from the weakening yen.
Excluding the impact of patent expiries, underlying sales grew 8% in constant
currencies. This performance was fueled by growth products such as Gilenya,
Afinitor, Tasigna, Galvus, Xolair, the Q Family[2] and Jakavi, which together
contributed USD 4.5 billion or 31% of Group net sales, up 13% over the prior-
year period. Generics impacted sales by approximately USD 0.8 billion, mainly
due to Diovan and Zometa. Sales continued to benefit from the delayed entry of
generic competition for Diovan monotherapy in the US.
Group operating income decreased 4% (+1% cc) to USD 3.0 billion. The negative
currency impact of 5 percentage points was mainly due to the weakening yen,
which represents a larger proportion of operating income than sales. Operating
income margin declined 1.2 percentage points to 20.5% of net sales.
Core operating income was USD 3.8 billion (-2%, +2% cc). Core operating income
margin in constant currencies decreased by 0.3 percentage points; currency had a
negative impact of 0.6 percentage points, resulting in a net decrease of 0.9
percentage points to 25.9% of net sales. The adjustments made to Group operating
income to arrive at core operating income amounted to USD 785 million (2012: USD
723 million).
Excluding the impact of generic competition, core operating income grew 18% in
constant currencies.
Group net income was down 5% (0% cc) to USD 2.5 billion, declining at a slightly
higher rate than operating income. EPS was down 6% (-1% cc) to USD 1.03.
Group core net income of USD 3.2 billion was 2% (+2% cc) below the previous
year. Core EPS declined 4% (+1% cc) to USD 1.30, largely in line with core net
income.
Free cash flow was USD 1.8 billion for the second quarter compared to USD 2.3
billion in 2012, mainly due to increased trade receivables from the timing of
collections in Spain and the US, as well as higher capital investments.
[1] In past quarters, we reported the net sales contribution and growth rate of
"recently launched products." As highlighted in January 2013, from the first
quarter of 2013, we moved to a new disclosure of "growth products," which
comprises products launched in 2008 or later, or products with exclusivity until
at least 2017 in key markets (EU, US, Japan) (except Sandoz, which includes only
products launched in the last 24 months). The definition of growth products is
maintained in all comparisons to prior year.
[2]The Q Family includes Arcapta Neohaler/Onbrez Breezhaler and Seebri
Breezhaler.
Pharmaceuticals delivered net sales of USD 8.1 billion (-2%, +1% cc) in the
second quarter, driven by strong volume growth (+10 percentage points), which
offset the impact of generic competition (USD 0.7 billion, -9 percentage
points). Pricing had a negligible impact. Growth products grew 26% (cc) to USD
3.0 billion, contributing 37% of division net sales compared to 30% in the same
period last year.
Pharmaceuticals operating income decreased 7% (-3% cc) to USD 2.6 billion. Core
operating income was USD 2.5 billion (-10%, -6% cc). Core operating income
margin in constant currencies decreased by 2.3 percentage points; currency had a
negative impact of 0.6 percentage points, resulting in a net decrease of 2.9
percentage points to 30.4% of net sales, mainly due to the impact of generic
competition and continued investments in key projects in Specialty Care and
Oncology.
Alcon net sales increased 3% (+6% cc) to USD 2.7 billion, led by strong growth
in the Surgical franchise (+5%, +8% cc). Surgical performance was driven by the
cataract segment, which experienced a slight procedural market rebound and
market share gains in the US, EU and Japan. Vision Care (+2%, +4% cc) also
contributed to growth, as solid sales in contact lenses offset soft growth in
contact lens care. Ophthalmic Pharmaceuticals (+2%, +4% cc) was impacted
negatively by generic prostaglandin competition and positively by the timing of
the otic season in the US.
Alcon operating income of USD 397 million (-5%, +5% cc) was impacted by
restructuring costs and the impairment of intangible assets. Core operating
income increased by 5% (+10% cc) to USD 1.0 billion. Core operating income
margin in constant currencies increased by 1.4 percentage points; currency had a
negative impact of 0.7 percentage points, resulting in a net increase of 0.7
percentage points to 37.5% of net sales.
Sandoz net sales increased 3% (+3% cc) to USD 2.2 billion in the second quarter
driven by the Fougera acquisition and double-digit increases in retail generics
and biosimilars sales in Western Europe (excluding Germany) and emerging
markets. Globally, biosimilars (USD 101 million, +19% cc) made a strong
contribution to sales growth. Price erosion was 12 percentage points, reflecting
significantly higher prior-year pricing for enoxaparin (generic Lovenox®).
Sandoz operating income was USD 259 million (0%, +2% cc). Core operating income
was USD 360 million, up 3% (+4% cc) from the previous-year quarter. Core
operating income margin in constant currencies increased by 0.1 percentage
points; currency had a negative impact of 0.2 percentage points, resulting in a
net decrease of 0.1 percentage points to 16.2% of net sales.
Vaccines and Diagnostics net sales reached USD 411 million, up 18% (+18% cc)
over the second quarter last year, driven by strong demand across the product
portfolio, especially for seasonal influenza vaccines and bulk pediatric
shipments. Operating loss was USD 83 million compared to USD 96 million in the
2012 period. Core operating loss was reduced to USD 20 million from USD 90
million in 2012.
Consumer Health, which comprises OTC and Animal Health, delivered net sales of
USD 1.0 billion (+11%, +12% cc) in the second quarter, driven by strong base
business growth as well as re-launches of several products that had been
impacted by supply issues in 2012. Operating income increased to USD 29 million
from a negligible amount in the prior-year period. Core operating income was USD
52 million compared to USD 18 million in 2012. Core operating income margin in
constant currencies increased 3.1 percentage points; currency had a positive
impact of 0.1 percentage points, resulting in a net increase of 3.2 percentage
points to 5.2% of net sales.
First half
Strong net sales performance offset impact of patent expiries and new
competition
Group net sales increased to USD 28.5 billion in the first half, up 2% (+4% cc)
over the prior-year period. Currency had a negative impact of 2 percentage
points, mainly due to the weakening yen against the US dollar.
Excluding the impact of patent expiries, underlying sales grew 8% in constant
currencies. Growth products contributed USD 8.7 billion or 31% of Group net
sales, up 14% over the prior-year period. Generics impacted sales by
approximately USD 1.3 billion, mainly due to Diovan and Zometa. US sales
continued to benefit from the delayed entry of generic competition for Diovan
monotherapy.
Group operating income was USD 5.9 billion (0%, +5% cc). As in the second
quarter, the negative currency impact of 5 percentage points in the first half
was mainly due to the weakening yen. Operating income margin declined 0.2
percentage points to 20.6% of net sales.
Core operating income was USD 7.5 billion (0%, +4% cc). Core operating income
margin in constant currencies increased by 0.1 percentage points; currency had a
negative impact of 0.4 percentage points, resulting in a net decrease of 0.3
percentage points to 26.2% of net sales. The adjustments made to Group operating
income to arrive at core operating income amounted to USD 1.6 billion (2012: USD
1.6 billion).
Excluding the impact of generic competition, core operating income grew 17% in
constant currencies.
Group net income was USD 5.0 billion (+1%, +6% cc), with constant currency
growth in line with operating income as lower income from associated companies
was compensated by lower net financial expenses due to hedging gains. EPS was
down 1% (+5% cc) to USD 2.01.
Group core net income of USD 6.5 billion was ahead of the previous year by 2%
(+6% cc). Core EPS was USD 2.62 (+1%, +5% cc), largely following the increase in
core net income.
Free cash flow of USD 3.1 billion was below the previous year, mainly due to
increased trade receivables from the timing of collections in Spain and the US,
higher capital investments and an increase in inventory as safety stock.
Pharmaceuticals net sales reached USD 16.0 billion (-1%, +2% cc) in the first
half, with strong volume growth (+10 percentage points) offset by the impact of
generic competition (USD 1.2 billion, -8 percentage points). Pricing had a
negligible impact. Growth products continued to drive sales expansion and
rejuvenate the portfolio, growing 26% (cc) to USD 5.9 billion over the first
half of 2012, contributing 37% of division net sales compared to 29% in the same
period last year.
Pharmaceuticals operating income was USD 5.1 billion (-1%, +3% cc). Core
operating income decreased 5% (-2% cc) to USD 5.0 billion. Core operating income
margin in constant currencies declined by 1.2 percentage points; currency had a
negative impact of 0.4 percentage points, resulting in a net decrease of 1.6
percentage points to 31.5% of net sales.
Alcon net sales expanded 2% (+4% cc) to USD 5.3 billion in the first half, with
all three franchises contributing to growth. Surgical franchise sales (+2% +5%
cc) were impacted by slower cataract procedure market growth in the first
quarter. Vision Care (+2%, +3% cc) benefited from solid sales in contact lenses,
balanced by soft growth in contact lens care. Ophthalmic Pharmaceuticals (+2%,
+4% cc) was impacted negatively by generic prostaglandin competition.
Alcon operating income of USD 809 million (+3%, +14% cc) was driven by sales
growth and productivity gains, partially offset by restructuring costs and the
impairment of intangible assets. Core operating income grew 5% (+9% cc) to USD
2.0 billion, generating strong operating leverage in the first half. Core
operating income margin in constant currencies increased by 1.7 percentage
points; currency had a negative impact of 0.8 percentage points, resulting in a
net increase of 0.9 percentage points to 37.1% of net sales.
Sandoz net sales grew 5% (+5% cc) to USD 4.5 billion in the first half, driven
by Fougera and double-digit increases in retail generics and biosimilars sales
in Western Europe (excluding Germany) and emerging markets. As in the second
quarter, biosimilars (USD 195 million, +21% cc) contributed strongly to sales
growth globally. Price erosion was 12 percentage points, driven primarily by
higher prior-year pricing for enoxaparin (generic Lovenox®).
Sandoz operating income declined 8% (-7% cc) to USD 510 million driven by
provisions for legal matters in the first quarter. Core operating income grew
8% (+9% cc) to USD 791 million. Core operating income margin in constant
currencies increased by 0.7 percentage points; currency had a negative impact of
0.1 percentage points, resulting in a net increase of 0.6 percentage points to
17.7% of net sales.
Vaccines and Diagnostics net sales were USD 738 million (+14%, +14% cc) in the
first half, up from USD 648 million in the previous-year period, primarily due
to a strong US late flu season and bulk pediatric shipments. Operating loss was
reduced to USD 240 million from the prior-year loss of USD 269 million. Core
operating loss was USD 118 million compared to USD 208 million in the 2012
period.
Consumer Health returned to growth in the first half as net sales increased 8%
(+10% cc) to USD 2.0 billion, driven by both the OTC and Animal Health
Divisions. Operating income increased to USD 40 million from USD 12 million in
the prior-year period. Core operating income reached USD 128 million compared to
USD 59 million in 2012. Core operating income margin increased 3.2 percentage
points to 6.4% of net sales with no currency impact.
Executing on innovation, growth and productivity
Underpinning our long-term growth strategy - which is based on leveraging our
science-based innovation across high-growth segments of the healthcare industry
- is a consistent focus on three core priorities: innovation, growth and
productivity. We continued to make solid progress in all these areas in the
second quarter.
Innovation: Pipeline progress with regulatory and clinical trial successes
across the portfolio
The second quarter saw solid pipeline progress with positive regulatory
decisions and significant clinical trial data released. Key developments are
included below.
New approvals and positive opinions
* Lucentis received EU approval to treat myopic choroidal neovascularization
The EMA approved Lucentis (ranibizumab) as a treatment for visual impairment
due to choroidal neovascularization secondary to pathologic myopia (myopic
CNV), following a positive CHMP opinion in the second quarter. This marks
the fourth major ocular indication for Lucentis in the EU.
* Ilaris approved by FDA to treat serious form of childhood arthritis
Ilaris (canakinumab) received FDA approval to treat active systemic juvenile
idiopathic arthritis (SJIA), a rare and debilitating disease with minimal
treatment options, in patients aged 2 years and older.
* FDA approved Exelon Patch to treat patients across all stages of Alzheimer's
disease
The FDA expanded the approved indication for Exelon Patch, which was already
approved for the treatment of mild to moderate dementia of the Alzheimer's
type and mild to moderate dementia associated with Parkinson's disease, to
include the treatment of patients with severe Alzheimer's disease.
* Simbrinza Suspension approved by the FDA in glaucoma
The FDA also approved Alcon's Simbrinza Suspension (Brinzolamide
1.0%/Brimonidine 0.2%) for the reduction of elevated intraocular pressure in
patients with primary open-angle glaucoma or ocular hypertension.
Regulatory submissions and filings
* FDA granted Breakthrough Therapy designation for RLX030 in acute heart
failure
The FDA designated RLX030 (serelaxin) as a Breakthrough Therapy for the
treatment of acute heart failure (AHF) based on data from the Phase III
RELAX-AHF trial, which showed that patients who received RLX030 had a 37%
reduction in mortality at 6 months after an AHF episode compared to those
who received conventional treatment. If approved, RLX030 has the potential
to be the first treatment breakthrough for AHF patients in 20 years.
Regulatory filing with FDA achieved in May.
Results from important clinical trials and other highlights
* Phase III psoriasis study supported superiority of AIN457 over standard of
care
Top-line results from the head-to-head Phase III FIXTURE trial of more than
1,300 moderate-to-severe plaque psoriasis patients demonstrated the
superiority of AIN457 (secukinumab) to Enbrel® (etanercept) in clearing
skin. AIN457 met all primary and secondary endpoints in the trial, expected
to support regulatory submissions in the second half of 2013.
* Pivotal study showed Xolair holds promise for chronic spontaneous urticaria
patients
Xolair (omalizumab) met all key efficacy endpoints in the Phase III GLACIAL
study, demonstrating significant improvement in itch in patients with
chronic spontaneous urticaria.
* Phase III trial showed Afinitor delays tumor growth in HER2+ advanced breast
cancer
Results from the pivotal BOLERO-3 study found that the addition of Afinitor
(everolimus) tablets to trastuzumab and vinorelbine after prior therapy
significantly extended progression-free survival in women with HER2+
advanced breast cancer.
* Phase III Jakavi results showed improved overall survival in myelofibrosis
patients
A Phase III three-year study of Jakavi (ruxolitinib) demonstrated improved
overall survival among myelofibrosis patients and sustained reductions in
spleen size compared to conventional therapy.
* New data highlighted potential of Breakthrough Therapy LDK378 in lung
cancer
Selective ALK inhibitor LDK378, an FDA-designated Breakthrough Therapy,
produced a marked clinical response in patients with ALK+ non-small cell
lung cancer, according to clinical trial results presented at the American
Society of Clinical Oncology annual meeting.
* IGNITE clinical trial program continued to demonstrate strength of COPD
portfolio
Data from the 26-week Phase III SHINE study, showing that investigational
once-daily dual bronchodilator QVA149 (indacaterol maleate 110
mcg/glycopyrronium 50 mcg) provided statistically significant improvements
in lung function compared to alternative treatments, were published in the
European Respiratory Journal. In addition, data from the Phase III SPARK
study were presented at the American Thoracic Society International
Conference. The results showed that QVA149 reduced the overall rate of
exacerbations, improved lung function and health-related quality of life
compared to alternative treatments in patients with severe and very severe
COPD.
* Gilenya shown to improve four key measures of multiple sclerosis
Data from the Phase III TRANSFORMS study demonstrated the efficacy of
Gilenya (fingolimod) across four key measures of multiple sclerosis (MS).
The findings showed an almost 50% increase in the proportion of patients who
were disease-free after switching to Gilenya from standard interferon and
annualized relapse rates reduced by more than 50% after one year for
patients who switched.
* Real-world data underscored Lucentis efficacy and safety across indications
New data presented at the Association for Research in Vision and
Ophthalmology annual meeting strengthened the well-established efficacy and
long-term safety profile of Lucentis (ranibizumab) across multiple retinal
disease areas.
* Sandoz reinforced leadership in biosimilars with launch of Phase III trial
for etanercept
Sandoz initiated a major Phase III clinical trial with its biosimilar
version of etanercept (biosimilar Enbrel®) in patients with moderate to
severe chronic plaque-type psoriasis.
Growth: Key growth products and Emerging Growth Markets continued to perform
strongly
In the second quarter, key growth drivers - including launch brands like
Gilenya, Afinitor, Tasigna, Galvus, Lucentis and Xolair, as well as biosimilars
and Emerging Growth Markets - continued to demonstrate the strength of our
portfolio across disease areas and geographies. Highlights are included below.
Key growth products
* Gilenya (USD 468 million in the second quarter, +66% cc; USD 889 million in
the first half, +68% cc) maintained strong growth in the second quarter as
new data continued to support its efficacy.
* Afinitor (USD 308 million in the second quarter, +77% cc; USD 611 million in
the first half, +94% cc), approved in the US and EU across five indications,
continued to grow across markets.
* Tasigna (USD 315 million in the second quarter, +38% cc; USD 599 million in
the first half, +38% cc), our second-generation targeted therapy for chronic
myeloid leukemia, drove 7% growth in our Bcr-Abl franchise (which includes
Gleevec/Glivec in addition to Tasigna) to USD 1.5 billion.
* Galvus (USD 289 million in the second quarter, +37% cc; USD 556 million in
the first half, +38% cc), which is approved in more than 100 countries for
type 2 diabetes, grew strongly worldwide.
* Lucentis (USD 576 million in the second quarter, -3% cc; USD 1.2 billion in
the first half, +1% cc) delivered strong double-digit volume growth in the
second quarter, driven by launches in new indications with high unmet need
(specifically, diabetic macular edema and retinal vein occlusion). Pricing
had a negative impact on sales in the quarter, mainly due to one-time
reductions required to secure reimbursement for new indications. Together
with competitive pressure in certain markets, particularly Japan and
Australia, this resulted in slightly lower sales than in the previous-year
quarter.
* Xolair (USD 148 million in the second quarter, +20% cc; USD 289 million in
the first half, +24% cc), our first-in-class antibody approved for the
treatment of persistent allergic asthma, continued to show strong growth.
* Biosimilars (USD 101 million in the second quarter, +19% cc; USD 195 million
in the first half, +21% cc), a key growth driver for Sandoz, continued to
deliver double-digit sales growth driven by strong momentum in its three in-
market products, each of which is the leading biosimilar in its respective
market segment.
Emerging Growth Markets
* Net sales in our Emerging Growth Markets - which comprise all markets except
the US, Canada, Western Europe, Australia, New Zealand and Japan - grew 11%
(cc) in the second quarter, contributing USD 3.7 billion or 26% to Group net
sales. In the first half, Emerging Growth Markets were up 10% (cc) to USD
7.2 billion.
* In China, net sales performance was strong across the portfolio, up 25% (cc)
in the quarter and up 23% (cc) in the first half.
* Russia and South Korea net sales were up 18% and 16% in the second quarter
and 25% and 16% in the first half, respectively (cc).
Productivity: Efficiency gains supporting reinvestment in the business
Ongoing productivity initiatives relate to procurement and resource allocation
across the portfolio, as well as our manufacturing network and supporting
infrastructure.
* In Procurement, our focus on leveraging our scale, generated savings of
approximately USD 340 million in the second quarter.
* We continued to optimize our manufacturing footprint in the second quarter,
increasing capacity utilization and shifting strategic production to
Technology Competence Centers. Related to this initiative, we recorded
exceptional charges of USD 20 million in the second quarter and USD 86
million in the first half. This brings total charges to USD 486 million
cumulatively since the program began in the fourth quarter of 2010.
In the second quarter, our productivity initiatives generated gross savings that
contributed approximately USD 650 million to operating income. We are on track
to achieve our productivity target of 3% to 4% of net sales in 2013.
Quality: Aggressive management of quality remediation
Novartis continues to focus on building technical capabilities and a sustainable
culture for quality and compliance across the network. There were a total of 63
health authority inspections during the second quarter, 8 of which were
conducted by the FDA. The vast majority were assessed as good or satisfactory,
reflecting our intense focus on quality remediation.
On May 28, 2013, the FDA issued a Warning Letter for the Sandoz site in
Unterach, Austria, which Novartis acquired through the acquisition of EBEWE
Pharma in 2009. The Warning Letter followed an October 2012 inspection and cited
two Current Good Manufacturing Practices (cGMP) violations, related to the
regulatory approval of a process change for two products and the visual
inspection process historically in use at the site. We submitted our response on
June 20, 2013, and are working closely with the FDA to address these concerns.
No supply disruption is expected.
Free cash flow
Free cash flow of USD 3.1 billion in the first half (USD 1.8 billion in the
second quarter) was below the previous-year level (USD 4.4 billion for first
half; USD 2.3 billion for second quarter), mainly due to increased trade
receivables from the timing of collections in Spain and the US, higher capital
investments and an increase in inventory as safety stock.
Capital structure and net debt
Strong cash flows and a sound capital structure have allowed Novartis to focus
on driving innovation, growth and productivity across its diversified healthcare
portfolio while keeping its double-A rating as a reflection of financial
strength. Retaining a good balance between attractive shareholder returns,
investment in the business and a strong capital structure will remain a priority
in the future.
During the first half of 2013, approximately 30 million shares were issued as a
result of options exercised related to employee participation programs and
repurchases of employee shares, resulting in a cash inflow of USD 1.4 billion.
Novartis is mitigating the dilutive impact of these programs on an ongoing basis
and has already re-purchased 13.4 million shares (USD 1.0 billion) on the SIX
Swiss Exchange first trading line year to date.
As of June 30, 2013, net debt stood at USD 13.6 billion, compared to USD 11.6
billion at December 31, 2012. Net debt increased as the dividend payment of USD
6.1 billion in the first quarter and year-to-date share repurchases of USD 1.0
billion exceeded free cash flow generation. In the second quarter, net debt
decreased by USD 1.3 billion to USD 13.6 billion as a result of free cash flow
generated. A USD 2.0 billion bond issued in 2010 was repaid at maturity during
the second quarter.
2013 Group outlook
Barring unforeseen events, 2013 Group outlook increased
We have raised our outlook for 2013 performance to reflect a smaller impact from
generic competition, now expected to be up to USD 2.7 billion compared to the
assumption of USD 3.5 billion in January. The reduction is mainly due to the
absence of generic competition for Diovan monotherapy in the US, and due to our
expectation that this absence is likely to continue in the third quarter. While
this delay is expected to provide upside in reported sales and operating profits
in 2013, we expect the benefit to reverse and result in higher generic erosion
in 2014, pending the launch of a generic Diovan monotherapy in the US.
Group net sales in 2013 are now expected to grow at a low-single digit rate in
constant currencies, including the absorption of the impact of generic
competition.
Group core operating income in 2013 is now expected to decline in constant
currencies at a low-single digit rate as a result of lower generic competition
and continued investment into our pipeline and launches.
During the second quarter, the US dollar strengthened against many currencies,
but principally against the yen. If June average exchange rates prevail for the
remainder of the year, there would be a negative impact of approximately 2% on
sales and approximately 6% on operating income for the full year (with core
operating income negatively impacted by approximately 4%).
Summary Financial Performance
Group
% %
Q2 2013 Q2 2012 change H1 2013 H1 2012 change
USD m USD m USD cc USD m USD m USD cc
--------------------------------------------------------------------
Net sales 14 488 14 303 1 3 28 504 28 038 2 4
Operating income 2 970 3 108 -4 1 5 866 5 844 0 5
As % of net sales 20.5 21.7 20.6 20.8
Core operating
income 3 755 3 831 -2 2 7 469 7 438 0 4
As % of net sales 25.9 26.8 26.2 26.5
--------------------------------------------------------------------
Pharmaceuticals
% %
Q2 2013 Q2 2012 change H1 2013 H1 2012 change
USD m USD m USD cc USD m USD m USD cc
--------------------------------------------------------------------
Net sales 8 121 8 255 -2 1 15 998 16 094 -1 2
Operating income 2 557 2 741 -7 -3 5 096 5 143 -1 3
As % of net sales 31.5 33.2 31.9 32.0
Core operating
income 2 472 2 746 -10 -6 5 045 5 335 -5 -2
As % of net sales 30.4 33.3 31.5 33.1
--------------------------------------------------------------------
Alcon
% %
Q2 2013 Q2 2012 change H1 2013 H1 2012 change
USD m USD m USD cc USD m USD m USD cc
--------------------------------------------------------------------
Net sales 2 736 2 648 3 6 5 302 5 189 2 4
Operating income 397 419 -5 5 809 782 3 14
As % of net sales 14.5 15.8 15.3 15.1
Core operating
income 1 025 974 5 10 1 969 1 876 5 9
As % of net sales 37.5 36.8 37.1 36.2
--------------------------------------------------------------------
Sandoz
% %
Q2 2013 Q2 2012 change H1 2013 H1 2012 change
USD m USD m USD cc USD m USD m USD cc
--------------------------------------------------------------------
Net sales 2 216 2 147 3 3 4 475 4 271 5 5
Operating income 259 259 0 2 510 557 -8 -7
As % of net sales 11.7 12.1 11.4 13.0
Core operating
income 360 349 3 4 791 731 8 9
As % of net sales 16.2 16.3 17.7 17.1
--------------------------------------------------------------------
Vaccines and Diagnostics
% %
Q2 2013 Q2 2012 change H1 2013 H1 2012 change
USD m USD m USD cc USD m USD m USD cc
--------------------------------------------------------------------
Net sales 411 349 18 18 738 648 14 14
Operating loss -83 -96 14 14 -240 -269 11 11
As % of net sales -20.2 -27.5 -32.5 -41.5
Core operating loss -20 -90 78 78 -118 -208 43 44
As % of net sales -4.9 -25.8 -16.0 -32.1
--------------------------------------------------------------------
Consumer Health
% %
Q2 2013 Q2 2012 change H1 2013 H1 2012 change
USD m USD m USD cc USD m USD m USD cc
----------------------------------------------------------------------
Net sales 1 004 904 11 12 1 991 1 836 8 10
Operating income 29 0 nm nm 40 12 233 216
As % of net sales 2.9 0 2.0 0.7
Core operating
income 52 18 189 186 128 59 117 118
As % of net sales 5.2 2.0 6.4 3.2
----------------------------------------------------------------------
nm - not meaningful
A condensed financial report with the information listed in the index below can
be found on our website at
http://www.novartis.com/downloads/investors/financial-results/quarterly-
results/2013-07-interim-financial-report-en.pdf.
Novartis Q2 and H1 2013 Condensed Financial Report - Supplementary Data
INDEX Page
-------------------------------------------------------------------------------
GROUP AND DIVISIONAL OPERATING PERFORMANCE Q2 AND H1 2013
Group 2
Pharmaceuticals 5
Alcon 10
Sandoz 13
Vaccines and Diagnostics 15
Consumer Health 16
-------------------------------------------------------------------------------
CASH FLOW AND GROUP BALANCE SHEET 18
-------------------------------------------------------------------------------
INNOVATION REVIEW 20
-------------------------------------------------------------------------------
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Condensed consolidated income statements 27
Condensed consolidated statements of comprehensive income 29
Condensed consolidated balance sheets 30
Condensed consolidated changes in equity 31
Condensed consolidated cash flow statements 32
Notes to condensed consolidated financial statements, including update
on legal proceedings 34
-------------------------------------------------------------------------------
SUPPLEMENTARY INFORMATION 42
CORE RESULTS
Reconciliation from IFRS to core results 44
Group 46
Pharmaceuticals 48
Alcon 50
Sandoz 52
Vaccines and Diagnostics 54
Consumer Health 56
Corporate 58
ADDITIONAL INFORMATION
Condensed consolidated changes in net debt / Share information 59
Free cash flow 60
Net sales of top 20 Pharmaceuticals products 61
Pharmaceuticals sales by business franchise 63
Net sales by region 65
Currency translation rates/Income from associated companies 67
Restatement information 68
-------------------------------------------------------------------------------
DISCLAIMER 70
-------------------------------------------------------------------------------
Disclaimer
This press release contains forward-looking statements that can be identified by
terminology such as "guidance," "prospects," "Breakthrough Therapy," "outlook,"
"strategy," "pipeline", "potential", "expected" promise," "momentum",
"ongoing", "expectation" "likely", "would," or similar expressions, or by
express or implied discussions regarding potential new products, potential new
indications for existing products, or regarding potential future revenues from
any such products; potential outcomes of our efforts to improve the quality
standards at any or all of our manufacturing sites; or regarding potential
future sales or earnings of the Novartis Group or any of its divisions; or by
discussions of strategy, plans, expectations or intentions. You should not place
undue reliance on these statements. Such forward-looking statements reflect the
current views of the Group regarding future events, and involve known and
unknown risks, uncertainties and other factors that may cause actual results to
be materially different from any future results, performance or achievements
expressed or implied by such statements. There can be no guarantee that any new
products will be approved for sale in any market, or that any new indications
will be approved for any existing products in any market, or that any approvals
which are obtained will be obtained at any particular time, or that any such
products will achieve any particular revenue levels. Nor can there be any
guarantee that the Group will be successful in its efforts to improve the
quality standards at any or all of our manufacturing sites, or that we will
succeed in restoring or maintaining production at any particular sites. Neither
can there be any guarantee that the Group, or any of its divisions, will achieve
any particular financial results. In particular, management's expectations could
be affected by, among other things, unexpected regulatory actions or delays or
government regulation generally; unexpected clinical trial results, including
additional analyses of existing clinical data or unexpected new clinical data;
the Group's ability to obtain or maintain patent or other proprietary
intellectual property protection, including the ultimate extent of the impact on
the Group of the loss of patent protection on key products which commenced last
year and will continue this year and in coming years; unexpected product
manufacturing and quality issues, including the resolution of the Warning
Letters issued to us with respect to certain Sandoz manufacturing facilities,
and the ongoing efforts to restart production of certain products formerly
produced at the Consumer Health manufacturing facility at Lincoln, Nebraska, and
the restructuring efforts at that site; government, industry, and general public
pricing pressures; uncertainties regarding actual or potential legal
proceedings, including, among others, actual or potential product liability
litigation, litigation and investigations regarding sales and marketing
practices, shareholder litigation, government investigations and intellectual
property disputes; competition in general; uncertainties regarding the effects
of the ongoing global financial and economic crisis, including the financial
troubles in certain Eurozone countries; uncertainties regarding future global
exchange rates; uncertainties regarding future demand for our products;
uncertainties involved in the development of new healthcare products; the impact
that the foregoing factors could have on the values attributed to the Group's
assets and liabilities as recorded in the Group's consolidated balance sheet;
and other risks and factors referred to in Novartis AG's current Form 20-F on
file with the US Securities and Exchange Commission. Should one or more of these
risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those described herein as
anticipated, believed, estimated or expected. Novartis is providing the
information in this press release as of this date and does not undertake any
obligation to update any forward-looking statements as a result of new
information, future events or otherwise.
About Novartis
Novartis provides innovative healthcare solutions that address the evolving
needs of patients and societies. Headquartered in Basel, Switzerland, Novartis
offers a diversified portfolio to best meet these needs: innovative medicines,
eye care, cost-saving generic pharmaceuticals, preventive vaccines and
diagnostic tools, over-the-counter and animal health products. Novartis is the
only global company with leading positions in these areas. In 2012, the Group
achieved net sales of USD 56.7 billion, while R&D throughout the Group amounted
to approximately USD 9.3 billion (USD 9.1 billion excluding impairment and
amortization charges). Novartis Group companies employ approximately 131,000
full-time-equivalent associates and operate in more than 140 countries around
the world. For more information, please visit http://www.novartis.com.
Important dates
October 22, 2013 Third quarter results 2013
November 22, 2013 Novartis Investor Day in London
January 29, 2014 Fourth quarter and full year results 2013
February 25, 2014 Annual General Meeting
Please find full media release in English attached and on the following link:
http://hugin.info/134323/R/1716888/570752.pdf
Further language versions are available through the following links:
German version is available through the following link:
http://hugin.info/134323/R/1716890/570754.pdf
French version is available through the following link:
http://hugin.info/134323/R/1716889/570753.pdf
Media release (PDF):
http://hugin.info/134323/R/1716888/570752.pdf
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Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: Novartis International AG via Thomson Reuters ONE
[HUG#1716888]
Unternehmensinformation / Kurzprofil:
Datum: 17.07.2013 - 07:01 Uhr
Sprache: Deutsch
News-ID 279048
Anzahl Zeichen: 50701
contact information:
Town:
Basel
Kategorie:
Business News
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"Novartis delivered growth across all divisions in second quarter (cc); raises guidance for full year 2013"
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