Novartis delivers strong sales performance in third quarter driven by growth products' momentum; innovation newsflow reinforces growth prospects
(Thomson Reuters ONE) -
Novartis International AG /
Novartis delivers strong sales performance in third quarter driven by growth
products' momentum; innovation newsflow reinforces growth prospects
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The issuer is solely responsible for the content of this announcement.
* Group net sales up 4% (+6% cc[1]) to USD 14.3 billion in third quarter and
up 2% (+4% cc) in first nine months; all divisions contributed to growth
* Core operating income of USD 3.6 billion (-5%, +1% cc) in the quarter;
USD 11.1 billion (-1%, +3% cc) in nine months
* Negative currency impact of 6 percentage points on third quarter core
operating income from weakened yen and weakening emerging market
currencies
* Core EPS was USD 1.26 (-4%, +1% cc) in the quarter, USD 3.88 (-1%, +4%
cc) in nine months
* Strong free cash flow of USD 3.5 billion (+1%) in the quarter; USD 6.6
billion (-16%) in nine months
* Underlying business (excluding the impact of patent expiries[2])
demonstrated strong growth
* Underlying net sales grew 10% (cc) in third quarter, 8% (cc) in nine
months
* Underlying core operating income up 12% (cc) in third quarter, 16% (cc)
in nine months
* Positive regulatory decisions and data highlight industry-leading R&D
productivity and pipeline potential
* EU and Japan approved Ultibro (QVA149) in COPD and EU approved
Ilaris in active systemic juvenile idiopathic arthritis; FDA expanded
age indication for Menveo
* Novartis received third FDA Breakthrough Therapy designation in 2013
with BYM338 in sporadic inclusion body myositis, a degenerative muscle
disease
* Phase III data on omalizumab in chronic spontaneous urticaria, AIN457 in
psoriasis, RLX030 in acute heart failure, and QVA149 in COPD demonstrate
progress in areas of high unmet need
* Strong execution on growth products and expansion in Emerging Growth Markets
help mitigate competitive pressure and drive performance for the Group
* Growth products[3] grew 17% to USD 4.6 billion or 32% of Group
net sales in third quarter; up 15% to USD 13.3 billion in nine months
* Emerging Growth Markets up 9% (cc) in the quarter, led by China (+18%
cc), Russia (+15% cc)
* 2013 Group outlook increased: Sales outlook upgraded to low to mid-single
digit growth (cc) and core operating income increased to be in line or
better than previous year (cc)[4]
Key figures
% %
Q3 2013 Q3 2012[5] change 9M 2013 9M 2012[5] change
USD m USD m USD cc USD m USD m USD cc
-----------------------------------------------------------------------
Net sales 14 338 13 807 4 6 42 842 41 845 2 4
Operating income 2 671 2 948 -9 -2 8 537 8 792 -3 3
Net income 2 264 2 417 -6 1 7 234 7 361 -2 5
EPS (USD) 0.91 0.99 -8 0 2.92 3.01 -3 4
Free cash flow 3 543 3 503 1 6 626 7 870 -16
Core
Operating income 3 621 3 810 -5 1 11 090 11 248 -1 3
Net income 3 103 3 201 -3 3 9 578 9 534 0 5
EPS (USD) 1.26 1.31 -4 1 3.88 3.91 -1 4
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[1] Constant currencies (cc), core results, and free cash flow are non-IFRS
measures. An explanation of these non-IFRS measures and reconciliation tables
can be found beginning on page 45 of the Condensed Interim Financial Report.
[2] Impact of generics was approximately USD 0.5 billion & USD 1.8 billion, in
quarter 3 and in nine months respectively
[3] Growth products are defined on page 2.
[4] Based on modeling assumption that the launch of a generic Diovan monotherapy
in the US will not happen in 2013.
[5] Restated as explained in the Condensed Interim Financial Report on pages 36
and 71.
All product names appearing in italics are trademarks owned by or licensed to
Novartis Group Companies.
Basel, October 22, 2013 - Commenting on the results, Joseph Jimenez, CEO of
Novartis, said:
"Novartis delivered strong sales performance in the third quarter, with all
divisions contributing to growth. We achieved impressive momentum in innovation,
and set an industry record with our third FDA Breakthrough Therapy designated
product of the year for BYM338 in a degenerative muscle disease. Our strategy of
leading through science-based innovation is the right one for the business, for
patients, and for our shareholders."
* Juergen Brokatzky-Geiger moves to a new position as Global Head of Corporate
Responsibility, effective February 26, 2014, having built a strong human
resources function over the last ten years.
* Steven Baert is named Head of Group Human Resources, reporting to Joe
Jimenez and serving as a Novartis Executive Committee member, effective
February 26, 2014. Baert is currently Head of Human Resources in Novartis
Oncology.
GROUP REVIEW
Third quarter
Group net sales grew on strong execution of growth products[1]
Group net sales increased 4% (+6% cc) to USD 14.3 billion in the third quarter,
with all divisions contributing to growth in constant currencies. Currency had a
negative impact of 2 percentage points, mainly from the weakened yen and
weakening emerging market currencies.
Excluding the impact of patent expiries, underlying net sales grew 10% in
constant currencies. This performance was fueled by growth products, which
contributed USD 4.6 billion or 32% of Group net sales, up 17% over the prior-
year period. Generics impacted sales by approximately USD 0.5 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 9% (-2% cc) to USD 2.7 billion. The negative
currency impact of 7 percentage points was greater than the currency impact on
sales, as the yen and emerging market currencies represent a larger proportion
of operating income than sales. Operating income margin declined 2.8 percentage
points to 18.6% of net sales mainly due to the currency impact and favorable
exceptional items in the prior year.
Core operating income was down 5% (+1% cc) to USD 3.6 billion, which is
consistent with the full year guidance we issued in the second quarter. This
decline was primarily due to the impact of generic erosion, increased investment
in multiple promising pipeline projects and higher cost of goods sold over a low
prior-year base. Core operating income margin in constant currencies decreased
by 1.4 percentage points; currency had a negative impact of 0.9 percentage
points, resulting in a net decline of 2.3 percentage points to 25.3% of net
sales. The decline in core operating income was less than the decline in
reported operating income due to higher exceptional income in the prior year.
The adjustments made to Group operating income to arrive at core operating
income amounted to USD 950 million (2012: USD 862 million).
Excluding the impact of generic competition, core operating income grew 12% in
constant currencies.
Group net income of USD 2.3 billion was down 6% (+1% cc), a lower decline than
operating income, principally due to higher income from associated companies and
lower taxes. EPS was down 8% (0% cc) to USD 0.91, mainly due to a negative
currency impact, and in line with net income.
Group core net income of USD 3.1 billion was down 3% in USD, but up 3% in
constant currencies. Core EPS declined 4% (+1% cc) to USD 1.26, largely in line
with core net income.
Pharmaceuticals net sales reached USD 7.9 billion (+1%, +4% cc) in the third
quarter, driven by strong volume growth (+10 percentage points) and pricing (+1
percentage point), partly offset by the impact of generic competition (USD 0.5
billion, -7 percentage points). Growth products, including Gilenya, Afinitor,
Tasigna, Galvus, Xolair, the Q Family[2] and Jakavi, together generated USD 3.1
billion or 39% of division net sales, up 28% in constant currencies over the
prior-year period.
Pharmaceuticals operating income declined 10% (-5% cc) to USD 2.3 billion,
driven by the impact of generic erosion, increased investment in multiple
promising pipeline projects (mainly in oncology, heart failure and respiratory),
as well as higher cost of goods sold (mainly driven by low prior-year production
write-offs and increased Gilenya royalties). Core operating income declined 10%
(-4% cc) to USD 2.3 billion. Core operating income margin in constant currencies
declined 2.8 percentage points; currency had a negative impact of 0.9 percentage
points, resulting in a net decrease of 3.7 percentage points to 29.7% of net
sales.
Alcon net sales amounted to USD 2.5 billion (+3%, +6% cc) in the third quarter,
benefitting from strong growth in the Surgical franchise (+5%, +9% cc). Surgical
performance was driven by the Cataract segment, with the continued procedural
market rebound and overall market share gains, as well as by continued demand
for LenSx femtosecond laser technology. Ophthalmic Pharmaceuticals (+3%, +5% cc)
was driven by market share gains across fixed dose combination glaucoma and
Infection/Inflammation products, offset by US generic prostaglandin competition.
Vision Care also grew (+1%, +3% cc), with solid sales in contact lenses
partially offset by flatness in contact lens care products.
Alcon operating income was USD 251 million (-30%, -15% cc). Adjustments made to
arrive at core operating income were USD 60 million higher than in the prior
year mainly due to higher integration costs, restructuring and incremental
amortization charges. Core operating income was USD 874 million (-5%, +1% cc).
Core operating income margin in constant currencies decreased by 1.8 percentage
points mainly due to one-time other revenues and favorable accounting
adjustments in the prior year; currency had a negative impact of 1.3 percentage
points, resulting in a net decrease of 3.1 percentage points to 34.4% of net
sales.
Sandoz net sales increased by 11% (+11% cc) to USD 2.3 billion in the third
quarter. Volume grew 17 percentage points, including 4 percentage points
contributed by Fougera, which more than offset price erosion of 6 percentage
points. Retail generics and biosimilars sales in the US, Western Europe
(excluding Germany) and emerging markets showed double-digit growth. Sandoz
continued to strengthen its global leadership position in biosimilars (USD 106
million, +25% cc) in the third quarter, achieving its second straight quarter of
biosimilars sales over USD 100 million.
Sandoz operating income was USD 242 million (-3%, +2% cc). Core operating income
increased by 5% (+8% cc) to USD 377 million. The difference between reported and
core operating income growth was mainly driven by an exceptional income in the
previous year. Core operating income margin in constant currencies decreased by
0.4 percentage points, mainly driven by the high-margin authorized generic
launch of valsartan HCT in the prior-year quarter; currency had a negative
impact of 0.5 percentage points, resulting in a net decrease of 0.9 percentage
points to 16.6% of net sales.
Vaccines and Diagnostics net sales increased 2% (+1% cc) to USD 594 million,
driven by Menveo sales, partially offset by a later start to the supply for the
US flu season. Operating income was USD 33 million compared to a loss of USD 22
million in the 2012 period. Core operating income increased to USD 90 million
from USD 34 million in the prior year.
Consumer Health, which comprises OTC and Animal Health, saw net sales grow 11%
(+12% cc) to USD 1.0 billion in the third quarter, mainly driven by strong
performance of key brands globally and product re-launches in the US. Operating
income increased to USD 90 million from USD 48 million in the prior-year period.
Core operating income grew 43% (+49% cc) to USD 110 million. Core operating
income margin in constant currencies increased 2.7 percentage points; currency
had a negative impact of 0.3 percentage points, resulting in a net increase of
2.4 percentage points to 10.6% of net sales.
[1] "Growth products" comprise 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, Seebri Breezhaler
and the soon to be launchedUltibro Breezhaler.
Nine months
Strong net sales performance offset impact of patent expiries
Group net sales increased to USD 42.8 billion in the first nine months, up 2%
(+4% cc) over the prior-year period. Currency had a negative impact of 2
percentage points, mainly from the weakening yen and emerging market currencies
against the US dollar.
Excluding the impact of patent expiries, underlying sales grew 8% in constant
currencies. Growth products contributed USD 13.3 billion or 31% of Group net
sales, up 15% over the prior-year period. Generics impacted sales by
approximately USD 1.8 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 8.5 billion (-3%, +3% cc). The negative currency
impact of 6 percentage points was greater than the currency impact on sales, as
the yen and emerging market currencies represent a larger proportion of
operating income than sales. Operating income margin declined 1.1 percentage
points to 19.9% of net sales, mainly due to a negative currency impact.
Core operating income was USD 11.1 billion (-1%, +3% cc). Core operating income
margin in constant currencies decreased by 0.4 percentage points; currency had a
negative impact of 0.6 percentage points, resulting in a net decrease of 1.0
percentage points to 25.9% of net sales. The adjustments made to Group operating
income to arrive at core operating income amounted to USD 2.6 billion (2012: USD
2.5 billion).
Excluding the impact of generic competition, core operating income grew 16% in
constant currencies.
Group net income of USD 7.2 billion was down 2% (+5% cc), a lower decline than
operating income, principally due to higher income from associated companies and
lower taxes.
EPS was down 3% (+4% cc) to USD 2.92, mainly due to a negative currency impact.
Group core net income was USD 9.6 billion (0%, +5% cc). Core EPS was USD 3.88 (-
1%, +4% cc), largely following core net income.
Pharmaceuticals delivered net sales of USD 23.9 billion (0%, +3% cc) in the
first nine months, with strong volume growth (+9 percentage points) and pricing
(+1 percentage point) offset by the impact of generic competition (USD 1.7
billion, -7 percentage points). Growth products contributed USD 9.0 billion or
38% of division net sales in the first nine months, up 27% in constant
currencies over the same period last year.
Pharmaceuticals operating income was USD 7.4 billion (-4%, 0% cc). Core
operating income declined 7% (-2% cc) to USD 7.4 billion. Core operating income
margin in constant currencies declined by 1.6 percentage points, mainly due to
pipeline investments; currency had a negative impact of 0.7 percentage points,
resulting in a net decrease of 2.3 percentage points to 30.9% of net sales.
Alcon net sales were USD 7.8 billion (+3%, +5% cc) in the first nine months. The
Surgical franchise grew 3% (+6% cc), driven by procedure growth, market share
gains, and demand for LenSx femtosecond technology. Ophthalmic Pharmaceuticals
growth (+2%, +5% cc) was due to broad market share gains across key segments,
but was impacted by generic competition in the Glaucoma segment. Vision Care
grew (+2%, +3% cc), with strong sales in contact lenses balanced by softness in
sales of contact lens care products.
Alcon operating income of USD 1.1 billion (-7%, +6% cc) was driven by sales
growth and productivity gains, partially offset by integration and restructuring
charges. Core operating income increased to USD 2.8 billion (+2%, +7% cc),
generating operating leverage for the first nine months. Core operating income
margin in constant currencies increased by 0.7 percentage points; currency had a
negative impact of 1.0 percentage points, resulting in a net decrease of 0.3
percentage points to 36.3% of net sales.
Sandoz net sales increased by 7% (+7% cc) to USD 6.7 billion as a result of
double-digit retail generics and biosimilars sales increases in Western Europe
(excluding Germany), Japan and emerging markets. Biosimilars accounted for USD
301 million (+22% cc) of net sales globally. Volume increased 17 percentage
points, including 6 percentage points contributed by Fougera, more than
offsetting price erosion of 10 percentage points, driven primarily by higher
prior-year pricing for enoxaparin (generic Lovenox(®)).
Sandoz operating income decreased by 7% (-5% cc) to USD 752 million. Core
operating income grew by 7% (+8% cc) to USD 1.2 billion. The difference between
reported and core operating income growth was driven by higher exceptional items
compared to the previous year. Core operating income margin in constant
currencies increased by 0.2 percentage points, benefitting from the addition of
the Fougera business, which offset the sharp decline in US enoxaparin sales, as
well as from strong sales in several high-margin markets. Currency had a
negative impact of 0.1 percentage points, resulting in a net increase of 0.1
percentage points to a core operating income margin of 17.3% of net sales.
Vaccines and Diagnostics net sales were USD 1.3 billion (+8%, +8% cc) for the
first nine months, up from USD 1.2 billion in 2012, driven primarily by bulk
pediatric shipments, US and UK pre-pandemic contracts, and Menveo. Operating
loss was reduced to USD 207 million from USD 291 million in the 2012 period.
Core operating loss was USD 28 million compared to USD 174 million in 2012.
Consumer Health net sales increased 9% (+10% cc) to USD 3.0 billion, with both
OTC and Animal Health contributing to growth. Operating income increased 117%
(+119% cc) to USD 130 million from USD 60 million in the prior-year period. Core
operating income increased 75% (+77% cc) to USD 238 million. Core operating
income margin in constant currencies increased 3.0 percentage points; currency
had no impact, resulting in a net increase of 3.0 percentage points to 7.9% of
net sales.
Executing on innovation, growth and productivity
A consistent focus on three priorities - innovation, growth and productivity -
guides every aspect of our long-term strategy. By executing on this strategy, we
have been able to bring new, high-quality medicines, medical devices and
vaccines to patients in need, while rejuvenating the portfolio and optimizing
shareholder returns. In the third quarter, we made progress in each of our
priority areas, strengthening our leadership positions across high-growth
segments of the healthcare industry.
Innovation: Reached significant milestone with third FDA Breakthrough Therapy in
2013
The third quarter saw continued pipeline progress with positive regulatory
decisions and significant clinical trial data released. Key developments are
included below.
New approvals and positive opinions
* Ultibro approved in EU and Japan for COPD
The European Commission (EC) approved Ultibro Breezhaler (QVA149) as a once-
daily treatment to relieve symptoms in adult patients with chronic
obstructive pulmonary disease (COPD). In Japan, the Ministry of Health,
Labour and Welfare (MHLW) approved Ultibro Inhalation Capsules, delivered
through the Breezhaler device, to relieve symptoms in COPD.
* Ilaris approved in EU to treat active systemic juvenile idiopathic arthritis
Ilaris (canakinumab) was approved by the EC for the treatment of active
systemic juvenile idiopathic arthritis (SJIA), a serious form of childhood
arthritis.
* FDA approved Menveo for infants as young as 2 months
The FDA expanded the age indication for Menveo (meningococcal serogroup A,
C, W-135 and Y conjugate vaccine) to include infants and toddlers from two
months of age.
* Alcon received US and EU approval to launch Centurion and Verion
Alcon secured regulatory clearances in the US and EU to permit the launch of
two components of its next-generation cataract refractive suite: Centurion,
a new phacoemulsification platform which provides enhanced ocular safety
through better fluidics control, and Verion, which facilitates planning and
automating key steps of the surgical procedure. Together, Centurion and
Verion offer cataract surgeons the possibility to significantly improve
patient outcomes and optimize patient management.
* Allegretto WAVE Eye-Q 400Hz Excimer Laser approved in US
Alcon's Allegretto WAVE Eye-Q 400Hz Excimer Laser received US approval for
refractive surgery. The laser system includes a unique illumination system
as an integral part of the device - along with a revised stability concept -
that enables barrier-free treatment as well as reliable post-surgery
examination of the patient's cornea.
Regulatory submissions and filings
* Breakthrough Therapy designation granted for BYM338 in degenerative muscle
disease
The FDA designated BYM338 (bimagrumab) a Breakthrough Therapy for the
treatment of sporadic inclusion body myositis, a rare, yet potentially life-
threatening, muscle-wasting condition. BYM338 is the third Novartis
investigational treatment this year to receive Breakthrough Therapy
designation.
* Phase III data on omalizumab in CSU supported filings in US, EU, Switzerland
New results from the Phase III ASTERIA I study showed that omalizumab (sold
as Xolair for treatment of moderate to severe persistent allergic asthma)
was nearly twice as effective as placebo in reducing itch and hives in
patients with chronic spontaneous urticaria (CSU), a chronic and
debilitating disease.
Results from important clinical trials and other highlights
* AIN457 beat standard of care in head-to-head Phase III psoriasis study
Data from the Phase III FIXTURE study in moderate-to-severe plaque psoriasis
demonstrated that AIN457 (secukinumab) is significantly superior to standard
of care etanercept (Enbrel(®)) in clearing skin. The FIXTURE study, part of
the largest clinical trial program completed in moderate-to-severe plaque
psoriasis, met all primary and pre-specified key secondary endpoints.
* Phase III RLX030 results showed improved mortality across multiple subgroups
A new analysis of the Phase III RELAX-AHF study demonstrated that RLX030
(serelaxin), designated by the FDA as a Breakthrough Therapy in acute heart
failure (AHF), consistently improved symptoms and mortality across multiple
subgroups of patients. If approved, RLX030 would be the first significant
treatment advance for AHF patients in 20 years.
* New data on Ultibro Breezhaler showcased at European Respiratory Society
New analyses from the Phase III IGNITE clinical trial program showed that
Ultibro Breezhaler provides superior, rapid and sustained improvements in
lung function and significantly reduces shortness of breath versus
comparator therapies.
* New data presented at EURETINA reinforced efficacy and safety profile of
Lucentis
VERO analysis of real-world treatment patterns for Lucentis (ranibizumab)
and aflibercept (Eylea(®)) in wet age-related macular degeneration showed
that physicians use the treatments in a similar way, giving patients an
average of 4.9 injections of Lucentis and 5.2 injections of aflibercept to
achieve the same level of efficacy.
* Data showed that Gilenya can reduce brain volume loss and relapse risk in MS
New four-year data from the pivotal FREEDOMS studies showed that continued
treatment with Gilenya (fingolimod) reduced brain volume loss in multiple
sclerosis (MS) patients compared to delaying treatment with Gilenya by two
years. Separately, a new analysis of patient data from an international MS
registry and US health claims database showed that treatment with Gilenya
reduced the annualized relapse rate by approximately 50% compared to
standard therapy with an interferon or glatiramer acetate treatment.
* Afinitor study in liver cancer did not meet primary endpoint of overall
survival
Results from the Phase II EVOLVE-1 study did not show that Afinitor
(everolimus) provides a survival benefit for patients with locally advanced
or metastatic hepatocellular carcinoma after progression on or intolerance
to sorafinib. These results do not impact the use of Afinitor in other
approved indications, and Novartis continues to study everolimus in other
disease areas.
* Global licensing and research collaboration announced in cell therapy space
A new exclusive global licensing and research collaboration was announced
with Regenerex LLC, a biopharmaceutical company, for use of the company's
novel Facilitating Cell Therapy platform, which has been investigated in
kidney transplantation and may have curative potential for multiple
underserved diseases.
Growth: Strong commercial execution and global presence continued to drive
growth
In the third quarter, key growth drivers - including growth products 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 518 million in the third quarter, +63% cc; USD 1.4 billion in
the first nine months, +66% cc), our breakthrough oral MS therapy, grew
worldwide, including in the US, despite competitive pressures.
* Afinitor (USD 337 million in the third quarter, +65% cc; USD 948 million in
the first nine months, +83% cc) continued to deliver solid growth over the
prior-year period.
* Tasigna (USD 315 million in the third quarter, +25% cc; USD 914 million in
the first nine months, +33% cc) continued to gain market segment share in
the third quarter, driving growth in our CML franchise (which includes
Gleevec/Glivec in addition to Tasigna).
* Galvus (USD 316 million in the third quarter, +46% cc; USD 872 million in
the first nine months, +41% cc), our oral type 2 diabetes treatment,
delivered strong double-digit growth across markets.
* Lucentis (USD 581 million in the third quarter, -1% cc; USD 1.8 billion in
the first nine months, +1% cc) delivered double-digit volume growth in the
third quarter, offset by a negative pricing impact, mainly due to one-time
reductions required to secure reimbursement for new indications. Together
with competitive pressure in certain markets, this resulted in slightly
lower sales than in the previous-year quarter.
* Xolair (USD 151 million in the third quarter, +13% cc; USD 440 million in
the first nine months, +20% cc), our severe allergic asthma treatment, grew
consistently in the third quarter.
* The Q Family (USD 64 million in the third quarter, +103% cc; USD 172 million
in the first nine months, +84% cc), which includes Arcapta Neohaler/Onbrez
Breezhaler, Seebri Breezhaler and the newly approved Ultibro Breezhaler,
grew triple-digits, reinforcing the strength of our once-daily COPD
portfolio.
* Biosimilars (USD 106 million in the third quarter, +25% cc; USD 301 million
in first nine months, +22% cc) continued to grow at a strong double-digit
rate in the quarter, reinforcing Sandoz global leadership position.
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 9%
(cc) in the third quarter, contributing USD 3.6 billion or 25% to Group net
sales. In the first nine months, Emerging Growth Markets were up 10% (cc) to
USD 10.8 billion.
* In China, net sales performance was strong across the portfolio, up 18% (cc)
in the quarter and up 21% (cc) in the first nine months.
* Russia net sales were up 15% (cc) in the third quarter and 22% (cc) in the
first nine months.
Productivity: Continued focus on efficiency to support 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 375 million in the third quarter and USD 980 million in
the first nine months.
* We continued to optimize our Marketing & Sales function by reallocating
resources and streamlining processes while investing in new launches for
growth products. In the third quarter, Marketing & Sales spend in constant
currencies decreased as a percentage of net sales to 24.3% from 24.6% in the
prior-year period.
* We continued to optimize our manufacturing footprint in the third quarter,
increasing capacity utilization and shifting strategic production to
Technology Competence Centers. Related to this initiative, we recorded
exceptional charges of USD 26 million in the third quarter and USD 112
million in the first nine months. This brings total charges to USD 512
million cumulatively since the program began in the fourth quarter of 2010.
In the third quarter, our productivity initiatives generated gross savings that
contributed approximately USD 730 million. 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 optimizing technical capabilities and instilling
a sustainable culture for quality and compliance across the network. There were
a total of 66 global health authority inspections during the third quarter (212
in the first nine months), 11 of which were conducted by the FDA (32 in the
first nine months). All FDA inspections in the third quarter were assessed as
good or satisfactory. These inspections, coupled with our metrics and quality
indicators, confirm that our intense focus on quality systems upgrades continues
to result in progress.
Free cash flow
Free cash flow of USD 3.5 billion for the third quarter was 1% above the
previous year, mainly due to improved cash collection and inventory reduction,
partially offset by increased spend on property, plant and equipment and by
lower proceeds from disposals. For the first nine months, free cash flow of USD
6.6 billion was 16% below the prior year. Aside from the significant currency
impact, major reasons for the decline were receivables partially driven by
collection timing and increased capital investments in manufacturing and
research facilities.
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 nine months 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 26 million shares (USD 1.9 billion)
on the SIX Swiss Exchange first trading line year to date.
As of September 30, 2013, net debt stood at USD 11.4 billion, compared to USD
11.6 billion at December 31, 2012. Free cash flow of USD 6.6 billion generated
in the first nine months equaled the dividend payment of USD 6.1 billion in the
first quarter and year-to-date net share repurchases of USD 0.5 billion. 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 strong growth
products momentum at Pharmaceuticals and a lower impact from generic
competition, now expected to amount to USD 2.3 billion, compared to our
assumption of USD 2.7 billion in July and USD 3.5 billion in January. This
reduction is mostly due to the continued absence of generic competition for
Diovan monotherapy in the US. While this delay is expected to provide upside in
reported sales and operating income in 2013, we expect the benefit to reverse
and result in higher generic erosion in 2014. We now assume in our outlook for
modeling purposes that the launch of a generic Diovan monotherapy in the US will
not happen in the fourth quarter of 2013.
Group net sales in 2013 are expected to grow at a low- to mid-single digit rate
in constant currencies.
Group core operating income in 2013 is now expected to be in line or better than
previous year in constant currencies, resulting from the benefit of lower
generic competition partially offset by increased investment into our pipeline
and launches.
During the third quarter, the US dollar strengthened against many currencies,
especially emerging market currencies. If September 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 5%).
Summary Financial Performance
Group
% %
Q3 2013 Q3 2012 change 9M 2013 9M 2012 change
USD m USD m USD cc USD m USD m USD cc
----------------------------------------------------------------------
Net sales 14 338 13 807 4 6 42 842 41 845 2 4
Operating income 2 671 2 948 -9 -2 8 537 8 792 -3 3
As % of net sales 18.6 21.4 19.9 21.0
Core operating income 3 621 3 810 -5 1 11 090 11 248 -1 3
As % of net sales 25.3 27.6 25.9 26.9
----------------------------------------------------------------------
Pharmaceuticals
% %
Q3 2013 Q3 2012 change 9M 2013 9M 2012 change
USD m USD m USD cc USD m USD m USD cc
----------------------------------------------------------------------
Net sales 7 893 7 783 1 4 23 891 23 877 0 3
Operating income 2 267 2 531 -10 -5 7 363 7 674 -4 0
As % of net sales 28.7 32.5 30.8 32.1
Core operating income 2 345 2 597 -10 -4 7 390 7 932 -7 -2
As % of net sales 29.7 33.4 30.9 33.2
----------------------------------------------------------------------
Alcon
% %
Q3 2013 Q3 2012 change 9M 2013 9M 2012 change
USD m USD m USD cc USD m USD m USD cc
-----------------------------------------------------------------------
Net sales 2 539 2 460 3 6 7 841 7 649 3 5
Operating income 251 360 -30 -15 1 060 1 142 -7 6
As % of net sales 9.9 14.6 13.5 14.9
Core operating income 874 923 -5 1 2 843 2 799 2 7
As % of net sales 34.4 37.5 36.3 36.6
-----------------------------------------------------------------------
Sandoz
% %
Q3 2013 Q3 2012 change 9M 2013 9M 2012 change
USD m USD m USD cc USD m USD m USD cc
----------------------------------------------------------------------
Net sales 2 273 2 044 11 11 6 748 6 315 7 7
Operating income 242 250 -3 2 752 807 -7 -5
As % of net sales 10.6 12.2 11.1 12.8
Core operating income 377 358 5 8 1 168 1 089 7 8
As % of net sales 16.6 17.5 17.3 17.2
----------------------------------------------------------------------
Vaccines and Diagnostics
Q3 % %
2013 Q3 2012 change 9M 2013 9M 2012 change
USD m USD m USD cc USD m USD m USD cc
----------------------------------------------------------------------
Net sales 594 582 2 1 1 332 1 230 8 8
Operating income/loss 33 -22 nm nm -207 -291 29 28
As % of net sales 5.6 -3.8 -15.5 -23.7
Core operating 90 34 165 145 -28 -174 84 83
income/loss
As % of net sales 15.2 5.8 -2.1 -14.1
----------------------------------------------------------------------
nm = not meaningful
Consumer Health
% %
Q3 2013 Q3 2012 change 9M 2013 9M 2012 change
USD m USD m USD cc USD m USD m USD cc
-----------------------------------------------------------------------
Net sales 1 039 938 11 12 3 030 2 774 9 10
Operating income 90 48 88 99 130 60 117 119
As % of net sales 8.7 5.1 4.3 2.2
Core operating income 110 77 43 49 238 136 75 77
As % of net sales 10.6 8.2 7.9 4.9
-----------------------------------------------------------------------
A condensed interim financial report with the information listed in the index
below can be found at
http://hugin.info/134323/R/1737142/582351.pdf.
Novartis Q3 and 9M 2013 Condensed Interim Financial Report - Supplementary Data
INDEX Page
-------------------------------------------------------------------------------
GROUP AND DIVISIONAL OPERATING PERFORMANCE Q3 AND 9M 2013
Group 2
Pharmaceuticals 5
Alcon 11
Sandoz 14
Vaccines and Diagnostics 16
Consumer Health 17
-------------------------------------------------------------------------------
CASH FLOW AND GROUP BALANCE SHEET 19
-------------------------------------------------------------------------------
INNOVATION REVIEW 21
-------------------------------------------------------------------------------
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Condensed consolidated income statements 29
Condensed consolidated statements of comprehensive income 31
Condensed consolidated balance sheets 32
Condensed consolidated changes in equity 33
Condensed consolidated cash flow statements 34
Notes to condensed consolidated financial statements, including update on 36
legal proceedings
-------------------------------------------------------------------------------
SUPPLEMENTARY INFORMATION (unaudited) 45
CORE RESULTS
Reconciliation from IFRS to core results 47
Group 49
Pharmaceuticals 51
Alcon 53
Sandoz 55
Vaccines and Diagnostics 57
Consumer Health 59
Corporate 61
ADDITIONAL INFORMATION
Condensed consolidated changes in net debt / Share information 62
Free cash flow 63
Net sales of top 20 Pharmaceuticals products 64
Pharmaceuticals sales by business franchise 66
Net sales by region 68
Currency translation rates/Income from associated companies 70
Restatement information 71
-------------------------------------------------------------------------------
DISCLAIMER 73
-------------------------------------------------------------------------------
Disclaimer
This press release contains forward-looking statements that can be identified by
terminology such as "momentum," "prospects," "pipeline," "potential,"
"Breakthrough Therapy," "outlook," "to be," "strategy," "potentially,"
"investigational," "would," "may," "expected," "promising," "launch," "planned,"
"launched," "target," "modeling," "will," "launches," "underway," "may,"
"positive opinion," "on track," "expect," 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 and exclusivity on key products which
commenced last year and will continue this year; unexpected product
manufacturing and quality issues, including the resolution of the Warning Letter
issued to us with respect to three Sandoz manufacturing facilities, and the
completion of 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 133,000
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
November 22, 2013 Novartis Investor Day in London
January 29, 2014 Fourth quarter and full year results 2013
February 25, 2014 Annual General Meeting
April 24, 2014 First quarter results 2014
Please find full media release in English attached and on the following link:
http://hugin.info/134323/R/1737142/582353.pdf
Further language versions are available through the following links:
German version is available through the following link:
http://hugin.info/134323/R/1737144/582352.pdf
French version is available through the following link:
http://hugin.info/134323/R/1737143/582355.pdf
Media release (PDF):
http://hugin.info/134323/R/1737142/582353.pdf
IFR (PDF):
http://hugin.info/134323/R/1737142/582351.pdf
This announcement is distributed by Thomson Reuters on behalf of
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#1737142]
Unternehmensinformation / Kurzprofil:
Datum: 22.10.2013 - 07:00 Uhr
Sprache: Deutsch
News-ID 307831
Anzahl Zeichen: 55056
contact information:
Town:
Basel
Kategorie:
Business News
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