Novartis makes strong start for the year
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Novartis International AG /
Novartis makes strong start for the year
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The issuer is solely responsible for the content of this announcement.
* Novartis generates strong sales growth of 14% in constant currencies in
first quarter, operating income impacted by 2010 sales from A(H1N1)
pandemic flu vaccines
- Net sales up 16% (+14% in constant currencies, or cc) to USD 14.0 billion
- Core operating income up 4% (+6% cc) to USD 4.0 billion despite impact of
A(H1N1) in year-ago base; core EPS decreased by 3% (0% cc) to USD 1.41
- Free cash flow of USD 1.6 billion
* Excluding A(H1N1) pandemic flu vaccine sales and Alcon, net sales up 10%
(+8% cc), core operating income up 13% (+16% cc) and core margin improves
2.0 percentage points (cc)
* Novartis strengthens its healthcare portfolio
- Alcon merger completed on April 8, 2011 to provide new, world-class
growth platform addressing unmet needs in the rapidly growing eye care
sector; new divisional structure to be implemented from second quarter
2011
- Dilution from Alcon-related share issue to be mitigated further by share
repurchases; USD 2.4 billion of Alcon shares and USD 0.6 billion of
Novartis shares repurchased in first quarter of 2011
* Novartis maintains its industry-leading position in innovation with new
approvals and recommendations, expanding potential for sustained growth
- The breakthrough multiple sclerosis treatment Gilenya gains approval in
the EU, as does Lucentis for the treatment of vision loss related to
diabetic macular edema, a leading cause of blindness
- Novartis pipeline highlights include a Phase III study of JAK inhibitor
INC424 that shows promise for patients with myelofibrosis and CHMP's
recommendation for Lucentis in the treatment of retinal vein occlusion
Key figures
Q1 2011 Q1 2010 % change
USD m USD m USD cc
---------------------------------------------------
Net sales 14 027 12 131 16 14
Operating income 3 408 3 511 -3 0
Net income 2 821 2 948 -4 -1
EPS (USD) 1.21 1.29 -6 -3
Free cash flow
(before dividends) 1 622 2 903 -44
Core[1]
Operating income 4 012 3 865 4 6
Net income 3 376 3 309 2 4
EPS (USD) 1.41 1.45 -3 0
---------------------------------------------------
[1] See page 38 for further information and definition of core results
Basel, April 19, 2011 - Commenting on the results, Joseph Jimenez, CEO of
Novartis, said:
"Contributions from all businesses led to a good start in 2011, as we achieved
14% growth in the first quarter. We maintained our innovation momentum with new
approvals for our multiple sclerosis treatment Gilenya and our eye care
treatment Lucentis in the EU. Additionally, promising results of numerous
clinical trials, including a Phase III study involving JAK inhibitor INC424,
again showed the success of our novel approach to R&D. In April, we completed
our merger with Alcon, the leading eye care business in the world, creating the
second-largest business in the Novartis portfolio."
GROUP REVIEW
First quarter
Net sales rose 16% (+14% cc) to USD 14.0 billion. Currency benefited sales by
2% as the dollar weakened against most currencies. Excluding A(H1N1) pandemic
flu vaccine sales and Alcon, net sales grew 10% (+8% cc). Recently launched
products provided USD 3.1 billion of net sales in the first quarter,
representing 26% of total net sales (excluding Alcon).
Pharmaceuticals net sales grew 7% (+5% cc) to USD 7.8 billion, driven by 9
percentage points of volume growth, partly offset by a negative pricing impact
of 2 percentage points and the negative impact of generics entries and product
divestments of 2 percentage points. Recently launched products contributed 25%
of Pharmaceuticals sales, an increase of 33% cc over the first quarter of 2010.
Sandoz showed strong growth (+15% cc) in the US, Canada, Western Europe, and
Central and Eastern Europe, which more than offset the shortfall in Germany due
to rapid tender implementation and increased government-mandated rebates.
Vaccines & Diagnostics was down by 73% in constant currencies due to 2010
A(H1N1) pandemic flu vaccine sales (USD 1.1 billion); excluding this, sales grew
43% in constant currencies. Consumer Health grew 9% in constant currencies led
by OTC with Prevacid24HR and the cough and cold and respiratory portfolio. Alcon
contributed USD 1.9 billion of net sales in the first quarter with a strong
performance from pharmaceuticals.
Operating income was down by 3% (0% cc). Currency had a negative impact of 3%,
as the dollar weakened against the Swiss franc (-12%) and increased slightly
against the euro (+1%). Excluding A(H1N1) pandemic flu vaccine and Alcon,
underlying operating income was up 25% (+30% cc). Exceptional items in operating
income in the first quarter of 2011 include: divestment gains of USD 102 million
on the sale of ophthalmic pharmaceuticals and lens care products required for
the approval of the Alcon merger and an exceptional CIBA Vision gain of USD 183
million from a legal settlement, offset by exceptional charges relating to legal
settlements (Sandoz USD 28 million) and restructuring charges relating to the
streamlining of our manufacturing network (USD 55 million). Alcon contributed
USD 207 million to operating income in the first quarter.
Core operating income, which excludes exceptional items and amortization of
intangible assets, increased 4% (+6% cc). Core operating income excluding
A(H1N1) pandemic flu vaccine and Alcon was up 16% cc versus previous year.
Pharmaceuticals grew core operating income by 11% cc on good cost management.
Sandoz was up by 11% cc, and Consumer Health was up by 30% cc. Vaccines &
Diagnostics turned in a small loss following a substantial 2010 income from
A(H1N1) pandemic flu vaccine. Alcon contributed USD 722 million to core
operating income.
Core operating income margin declined 3.3 percentage points to 28.6% of sales.
Currency movements (-1.1 percentage points) and 2010 A(H1N1) pandemic flu
vaccine sales (-5.4 percentage points), partially offset by a contribution from
the inclusion of Alcon (+1.2 percentage points), obscured an improvement in the
underlying core margin in constant currencies of 2.0 percentage points.
Net income was down 4% (-1% cc) due to additional financing costs related to
Alcon, partially offset by an improved tax rate of 16.0% (from 16.5%). Core net
income increased 2% (+4% cc). EPS was down 6% (-3% cc) more than net income and
core EPS declined 3% (0% cc) due to the impact of the allocation of Alcon core
net income to its non-controlling shareholders.
Free cash flow of USD 1.6 billion was 44% lower than the previous year,
primarily due to cash collection for A(H1N1) pandemic flu vaccine in the first
quarter of 2010 (USD 1.3 billion).
Changes to the Executive Committee of Novartis
Effective October 1, 2011 Felix R. Ehrat will become the new General Counsel for
Novartis International AG reporting directly to Joseph Jimenez. Mr Ehrat joins
Novartis from the Swiss law firm of Baer & Karrer Ltd, where he last served as
Senior Partner and Executive Chairman. He brings to Novartis considerable Swiss
and International legal experience and will become a permanent attendee to the
Executive Committee of Novartis. Mr Ehrat succeeds Thomas Werlen who has chosen
to depart Novartis to pursue opportunities including entrepreneurial and
commercial interests. The company thanks Mr Werlen for his dedication and
contributions to the business over the last years.
Delivering innovation, growth and productivity
The long-term Novartis growth strategy is based on our focused, diversified
portfolio. We deliver world-class treatments to patients and develop innovative
collaborations with customers and governments across the global marketplace. Our
merger with Alcon adds the largest eye care business in the world to this
portfolio, strengthening our position in a sector whose future growth is
underpinned by the aging population around the world. Starting in the second
quarter of 2011, the OTC and Animal Health businesses will be reported as
Novartis Consumer Health, and CIBA Vision will be reported as a part of our new
Alcon Division. Restated financials on the new divisional structure will be
published on May 18, 2011.
All of the Novartis divisions share a continued commitment to three core
priorities: (1) innovation leading to the creation of new treatments to address
unmet patient need; (2) growth, expanding our reach through best-in-class
launches and partnerships in new markets; and (3) productivity allowing us to
operate efficiently and effectively, freeing up resources for future R&D and
investment in talent. Focusing on these three priorities will help us to realize
our goal of becoming the world's most respected and trusted healthcare company.
Innovation: new treatments and expanded applications
Novartis continues to lead the industry in our commitment to R&D. This
dedication has resulted in a deep pipeline of new products that drive sustained
growth. Further, our cutting-edge approach to R&D, based on researching the
pathways of a disease, allows us to continually find new applications for our
products, expanding their impact on patient outcomes and quality of life. In the
first quarter of 2011, we made further progress in the development of our
pipeline.
Our breakthrough oral multiple sclerosis treatment Gilenya was approved for use
in the EU, Switzerland and Australia, among other countries. Lucentis was
approved in the EU for the treatment of diabetic macular edema, a leading cause
of blindness for which there had previously been no approved therapies.
In Vaccines & Diagnostics, our meningococcal vaccine Menveo was approved for use
in the US for children from 2 to 10 years of age in the prevention of this
deadly disease. Novartis received a Refusal to File letter from the FDA for the
use of Menveo in infants aged 2 to 12 months. In April, we have submitted a new
file in infants and toddlers for the age from 2 to 24 months and are awaiting
acceptance from the FDA of our resubmitted application for the expanded use of
the vaccine. Aflunov, an influenza vaccine to help prevent avian flu (H5N1), was
approved for use in the EU.
Many of our treatments also received positive recommendations from key
regulators in the first quarter. The EMA's Committee for Medicinal Products for
Human Use (CHMP) gave a positive recommendation for Lucentis in the treatment of
vision loss stemming from retinal vein occlusion and for Rasilamlo, a single-
pill therapy for the treatment of high blood pressure.
The FDA's Pulmonary-Allergy Drug Advisory Committee recommended approval for
Arcapta(TM) Neohaler(TM) (QAB149, indacaterol) in the 75 mcg dose for treatment
of chronic obstructive pulmonary disease (COPD), a progressive and life-
threatening lung disease that affects more than 12 million Americans.
The FDA granted priority review for Afinitor in the treatment of patients with
advanced neuroendocrine tumors (NET). Based on feedback from the FDA, Novartis
amended its application on April 8 to only seek approval for the treatment of
advanced NET of pancreatic origin. At a meeting on April 12, the FDA's Oncologic
Drugs Advisory Committee unanimously recommended approval of Afinitor for this
indication. The current median survival duration for patients with advanced
pancreatic NET is only 24 months, and Afinitor holds promise for addressing this
critical area of patient need.
The outcome of the second Phase III study of JAK inhibitor INC424 yielded data
showing significant improvement in patients with myelofibrosis, a debilitating
disease with limited available therapies. Taken together, the two Phase III
studies of INC424 provide the basis for worldwide regulatory filings, which
Novartis expects to make in the second quarter of 2011. In addition, two Phase
III studies showed that Onbrez Breezhaler, when combined with tiotropium, was
more effective than tiotropium alone in the treatment of COPD.
In Phase II results, data suggested the effectiveness of DEB025 as a first-in-
class therapy for hepatitis C. Hepatitis C is one of the world's most common
liver diseases.
Sandoz made progress with its biosimilar pipeline, announcing the initiation of
a Phase II clinical study of rituximab (Rituxan®/Mabthera®). Sandoz is currently
the global leader in biosimilars, with three products on the market.
Growth: meeting the needs of the global marketplace
The Novartis growth strategy is based on an expansive view of the healthcare
marketplace. We are committed to meeting the needs of patients, partners, and
customers regardless of category or geography. Novartis, with our focused,
diversified portfolio and established R&D excellence, has a true commitment to
anticipating and addressing customer and patient needs.
In the first quarter, excluding A(H1N1) pandemic flu vaccine sales and Alcon, we
achieved strong volume growth of 10%, with a negative price impact of 2%. The
strong growth was fueled by our continued portfolio rejuvenation. Our recently
launched products, excluding A(H1N1) pandemic flu vaccine and Alcon, grew 45%,
and now represent 26% of total sales.
Novartis maintains a strong presence in key emerging markets, particularly in
China, Russia, Brazil and India. In the first quarter, we grew 2% (-1% in cc) in
our top six emerging markets - which include South Korea and Turkey in addition
to the countries listed above - impacted by the effect of strong A(H1N1)
pandemic flu vaccine sales in the prior-year period. Excluding A(H1N1) pandemic
flu vaccine, growth in top six emerging markets was 10% in constant currencies.
Our Vaccines & Diagnostics division completed the acquisition of a majority
stake in Zhejiang Tianyuan, expanding our vaccines presence in China.
Pharmaceuticals achieved strong underlying volume growth of 9%. Recently
launched Pharmaceuticals products continued to contribute significantly to
overall growth in the first quarter as a result of our sustained commitment to
R&D. In particular, Gilenya, launched in the US in October 2010, achieved strong
growth, with sales of USD 59 million. In addition, Tasigna (USD 153 million,
+100% cc) contributed to Pharmaceuticals growth, gaining additional ground in
its market segment, supported by data that continue to demonstrate its
superiority even to Glivec in treating patients with chronic myeloid leukemia.
Sandoz grew strongly by 15% in constant currencies versus previous year with
25% volume expansion driven by recent launches including enoxaparin and
gemcitabine, as well as strong performance in the US, Canada, Western Europe,
Russia and Japan, and strong biosimilars growth.
Vaccines & Diagnostics showed strong growth in its underlying business,
excluding the 2010 A(H1N1) pandemic flu vaccine sales. The meningococcal disease
franchise performed well in the first quarter.
Consumer Health also performed well, growing 9% in constant currencies in the
first quarter. All three businesses grew faster than their respective markets,
with OTC growth driven by a strong cough and cold and flu season, and Animal
Health growth benefitting from the performance of parasiticides and the farm
animal business. CIBA Vision continued to show strong growth in key brands
AirOptix and Dailies, though overall growth was affected by a difficult market
environment in Europe.
Productivity: creating opportunities for reinvestment in talent and R&D
Novartis maintains a high commitment to efficiency in all of our operations,
enabling us to continue to lead the industry in R&D investment and to attract
and retain top talent. Productivity improvements in the quarter generated
benefits equivalent to 3.9 percentage points of margin improvement although this
benefit was partially offset by a gross margin decrease of 2.4 percentage
points. Overall, when excluding the distorting effects of A(H1N1) pandemic
vaccine and the Alcon acquisition, core margin improved by 2.0 percentage points
in constant currencies.
In the first quarter, we made further progress in our efforts to optimize our
manufacturing footprint. We announced the discontinuation of Pharmaceuticals
manufacturing in Tlalpan, Mexico, and Horsham, UK, in addition to the four sites
we announced in the fourth quarter of 2010. We have recorded charges related to
exits and inventory write-offs of USD 55 million in the first quarter of 2011,
and USD 118 million cumulatively since the program began in the fourth quarter
of 2010. With these exits we are reducing excess capacity and enabling the shift
of strategic production to technology competence centers. Further progress will
be announced each quarter following the announcements to our associates.
Alcon
On April 8, 2011 we completed the merger with Alcon, Inc. (Alcon), creating a
global leader in eye care. With approximately 16% of total Group sales, the new
Alcon Division is the company's second largest growth platform behind
Pharmaceuticals. The eye care sector offers attractive growth opportunities,
underpinned by the increasing unmet needs of emerging markets and a global aging
population. Together, the Alcon and Novartis eye care portfolios address a broad
range of these unmet needs.
Under the terms of the merger agreement, Alcon shareholders received 2.9228
Novartis shares (which includes the dividend adjustment) and USD 8.20 in cash
for each share of Alcon, for a total consideration of USD 168 per share. Total
consideration for the merger was USD 9.6 billion, comprising equity of USD 9.1
billion (165 million shares) and cash of USD 0.5 billion (contingent value
amount). Total consideration was lower than anticipated in December 2010 as a
result of Alcon share repurchases of USD 2.6 billion.
Novartis is committed to mitigating the dilution to shareholders from the issue
of Novartis shares. This has already been partially mitigated through completed
share repurchases of USD 3.2 billion (including the purchase of 16.1 million
Alcon shares and 9.7 million Novartis shares since the December 15, 2010
announcement). Based on the share repurchases made to date, the merger is
expected to be approximately 4% dilutive to basic earnings per share (EPS), and
approximately 1% dilutive to core EPS in 2011. If the share buyback were to be
increased to USD 5.0 billion (which includes the USD 3.2 billion already
completed), the transaction would be approximately 3% dilutive to basic EPS and
neutral to core EPS.
The new Alcon Division combines the Alcon portfolio with Novartis ophthalmic
medicines (excluding Lucentis) and the CIBA Vision contact lens and lens care
business. The division will operate with three businesses - Surgical,
Pharmaceutical and Vision Care - with a full portfolio of products addressing
eye diseases, vision conditions and common refractive errors. The Alcon generics
business, Falcon, will be integrated into Sandoz. Annual sales of the new
division will be in excess of USD 9 billion.
Integration of the eye care businesses commenced immediately after merger
closing and is expected to take approximately six months. We have already
established a new operating model for the Alcon Division, announced the global
leadership team and selected country management. Functional integration is well
underway.
Combining Novartis and Alcon offerings, all three businesses have leading global
brands: the Surgical business is the number one in intraocular lenses, cataract
and vitreoretinal equipment; the Pharmaceutical business is leading in allergy
products, anti-infectives and glaucoma products; and the Vision Care business is
well positioned in weekly/monthly and disposable contact lenses, as well as
multi-purpose and peroxide solutions.
To maximize value creation through integration, we are following our strategic
priorities of innovation, growth and productivity. We will leverage our
expertise in R&D to expand potential targets for Alcon, and have already
identified opportunities for the integrated development of technology in the
contact lens and intraocular lens segment. With our expanded portfolio, we will
have more to offer eye care professionals, and expect to have an increased share
of voice in the eye care market. Expanded market access is expected to increase
reimbursement for value-added products outside the US and accelerate penetration
in emerging markets. We plan to leverage the portfolio breadth, global presence
and capabilities of Sandoz to deliver growth from the Alcon generics business.
From a financial perspective, Novartis has four key objectives for the
integration: streamlining the cost base and delivering cost savings;
capitalizing on the growth opportunities; improving cash flow return on
investment (CFROI) for the Alcon Division; and mitigating dilution of earnings
per share (EPS) from the merger.
With full ownership, annual cost synergies are expected to exceed USD 300
million. Programs have been launched to reduce the cost base in manufacturing
and procurement, as well as back-office and commercial functions. We expect
significant reduction of head office and General & Administration costs by up to
40%, whereas there is limited overlap in Marketing & Sales and R&D operations.
Total exceptional costs associated with the merger over the next three years are
estimated to amount approximately to USD 600 million, including charges for
severance, retention and relocation, and a preliminary estimate for the
integration of Alcon into the Novartis IT platform of USD 350 million.
Reflecting the value creation opportunities we identified, we expect the new
Alcon Division to improve CFROI across sales growth, core operating margin and
cash flow-to-sales ratio. In 2010, Alcon delivered high-single-digit sales
growth, while CIBA Vision achieved sales growth in the mid-single-digits.
Combining the two businesses and executing on the identified revenue synergies
is expected to provide sales growth above market. Core operating margin of the
two businesses can be improved through identified cost synergies. In addition,
we have identified improved operating structures, which could have a beneficial
impact on the Group tax charge of up to 0.5 percentage points. Realizing growth
and cost saving opportunities, together with a reduction of invested capital, is
expected to improve CFROI.
Full pro forma comparatives of the new Alcon Division will be provided in an
investor call on May 18, 2011.
Cash flow
The sustainability of our strategy lies with the generation of cash flow that
provides the resources for reinvestment and creates shareholder return. Cash
flow is driven by a continued focus on the cash conversion cycle and operational
cash flow improvements. Free cash flow was USD 1.6 billion for the quarter, a
decline of 44% over the previous year, primarily due to the cash collection for
A(H1N1) pandemic flu vaccine in the first quarter of 2010 (USD 1.3 billion), the
payment of legal and restructuring provisions made in 2010 (USD 0.6 billion) and
an increase in working capital from the low year-end level.
Capitalization and net debt
On April 8, 2011, 165 million shares were issued in connection with the merger
with Alcon, composed of 108 million newly issued shares and 57 million treasury
shares. This represents an increase in the shares outstanding of 6.8% since
December 15, 2010. On announcement of the merger agreement, the company
committed to reduce the dilution created by the share issue through reactivation
of the share buyback program. In the period from the announcement to the date of
the merger, purchases of Novartis shares (USD 0.6 billion) and Alcon shares (USD
2.6 billion) totaled USD 3.2 billion, significantly reducing dilution.
Repurchases of Novartis shares will continue to further reduce the impact of
dilution.
As of March 31, 2011, net debt stood at USD 22.3 billion, with USD 8.7 billion
outstanding on the commercial paper programs. This represents a net increase of
USD 7.4 billion since December 31, 2010, mainly as a result of the cash used for
the dividend payment (USD 5.4 billion), cash outflow for share repurchases (USD
2.8 billion) and acquisitions (USD 0.6 billion). The long-term credit rating for
the company continues to be double-A (Moody's Aa2; Standard & Poor's AA-; Fitch
AA).
2011 Group outlook
(Barring unforeseen events)
Novartis reaffirms expectations for Group net sales to grow around the double-
digit mark in 2011 and aim to improve core operating income margin in constant
currencies while absorbing price cuts, generic competition and the loss of sales
from the A(H1N1) pandemic flu vaccine, and while investing for the future.
During the first quarter, the dollar weakened against most currencies. As a
result, if March year-to-date exchange rates prevail for the remainder of the
year, the impact would be positive (+3%) on sales and negative (-2%) on
operating income for the full year.
HEALTHCARE BUSINESS REVIEW
Pharmaceuticals
Q1 2011 Q1 2010 % change
USD m USD m USD cc
------------------------------------------------------
Net sales 7 765 7 291 7 5
Operating income 2 499 2 280 10 13
As % of net sales 32.2 31.3
Core operating income 2 580 2 385 8 11
As % of net sales 33.2 32.7
------------------------------------------------------
First quarter
Net sales
Net sales grew 7% (+5% cc) to USD 7.8 billion, driven by 9 percentage points of
volume growth, partly offset by a negative pricing impact of 2 percentage points
(mainly due to healthcare cost-containment measures), and the effect of generics
launches and product divestments of an additional 2 percentage points. Products
launched since 2007 generated USD 2 billion of net sales, growing 33% in
constant currencies over the same period last year. These recently launched
products - which include Lucentis, Exforge, Exelon Patch, Exjade,
Reclast/Aclasta, Tekturna/Rasilez, Tasigna, Afinitor, Onbrez Breezhaler, Ilaris,
Fanapt and Gilenya - now comprise 25% of division sales, compared to 20% in the
same period last year.
Europe (USD 2.8 billion, +3% cc) particularly benefited from recently launched
products, which accounted for 32% of net sales in the region. Europe sustained
strong volume growth of 9 percentage points, more than offsetting the negative
pricing impact of 5 percentage points (mainly due to healthcare cost-containment
measures) and the effect of the entry of generics of 1 percentage point. Latin
America and Canada (USD 0.7 billion, +13% cc) maintained solid growth rates,
while Japan (USD 0.9 billion, +12% cc) saw strong sales growth due to increased
launch momentum and wholesaler safety stocking in light of recent natural
disasters. The US (USD 2.4 billion, +2% cc) contributed 31% of total sales for
the division. India, China and South Korea led the six top emerging markets (USD
0.8 billion, +6% cc) with double-digit sales growth, partly offset by the impact
of cost-containment measures in Turkey.
All strategic franchises contributed to the business expansion. Oncology (USD
2.6 billion, +6% cc), the largest franchise in Pharmaceuticals, benefitted from
the sustained growth of Bcr-Abl products Glivec/Gleevec and Tasigna (USD 1.2
billion, +9% cc), Sandostatin (USD 337 million, +7% cc) and Femara (USD 354
million, +2% cc), with the recently launched Afinitor adding USD 90 million
(+117% cc). The Cardiovascular and Metabolism franchise (USD 1.9 billion, +5%
cc) showed solid growth momentum supported by hypertension medicines (USD 1.8
billion, +2% cc) and continued strong uptake of Galvus (USD 132 million, +72%
cc). Neuroscience and Ophthalmics (USD 1.0 billion, +14% cc) benefited from the
continued robust growth of Lucentis (USD 444 million, +18% cc), Extavia (USD 34
million, +66% cc), and the recently launched Gilenya, which increased its growth
momentum in the US.
Operating income
Operating income increased 10% (+13% cc) to USD 2.5 billion, stronger than core
operating income due to divestment income from ophthalmic products related to
the Alcon acquisition (USD 81 million), partly offset by restructuring-related
charges.
Core operating income grew 8% (+11% cc). The core operating income margin of
33.2% increased by 0.5 percentage points despite a negative currency impact of
1.5 percentage points. Gross margin improved slightly by 0.1 percentage points,
while R&D expenses increased by 0.3 percentage points, mainly due to negative
currency impact and phasing of clinical trial activities. Marketing & Sales and
General & Administration expenses improved by 1.1 percentage points, benefiting
from continuing productivity efforts that more than offset significant
investments in new product launches. Other Income and Expense, net increased by
0.5 percentage points, primarily due to the fee associated with healthcare
reform in the US.
Pharmaceuticals product review
Cardiovascular and Metabolism
Q1 2011 Q1 2010 % change
USD m USD m USD cc
----------------------------------------------------------
Hypertension medicines
Diovan 1 405 1 442 -3 -5
Exforge 261 204 28 27
Tekturna/Rasilez 131 89 47 46
----------------------------------------------------------
Subtotal 1 797 1 735 4 2
Galvus 132 76 74 72
----------------------------------------------------------
Total strategic products 1 929 1 811 7 5
Established medicines 262 368 -29 -31
----------------------------------------------------------
Total 2 191 2 179 1 -1
----------------------------------------------------------
Our Hypertension franchise, consisting of Diovan, Exforge and Tekturna/Rasilez,
continued to grow as our portfolio shifts from Diovan to Exforge and
Tekturna/Rasilez.
Diovan Group (USD 1.4 billion, -5% cc) worldwide sales started to decline mainly
driven by the anticipated entry of generic valsartan in selected markets such as
Spain, Canada and Brazil and price pressure. The Diovan Group maintains its
position as the top-selling branded anti-hypertensive medication worldwide, and
continues to gain global market share with 16.18% of the hypertension market (as
of February 2011, IMS).
Exforge Group (USD 261 million, +27% cc) showed strong worldwide growth fueled
by continued prescription demand in the EU, US and other key regions, as well as
ongoing Exforge HCT launches in European, Asian and Latin American markets.
Exforge, a single-pill combination of Diovan (valsartan) and the calcium channel
blocker amlodipine, has delivered sustained growth across world markets since
its launch in 2007. Exforge HCT, the first modern triple hypertension medication
that includes a diuretic in a single pill, is now available for patients in over
30 countries.
Tekturna/Rasilez (USD 131 million, +46% cc) maintained its strong growth driven
by performance in the EU and Japan, where a two-week prescription restriction on
Rasilez (aliskiren) has been lifted, benefiting monthly sales. The Rasilez Group
market share of the total anti-hypertensive market has grown to 1.05% (year-to-
date January 2011).
Galvus Group (USD 132 million, +72% cc), which comprises oral treatments
containing vildagliptin for type 2 diabetes, continued to deliver strong growth.
This performance was driven mainly by the single-pill combination
Eucreas/Galvusmet (vildagliptin and metformin), which contributed 65% of total
sales and grew at 70% in constant currencies during the first quarter.
Oncology
Q1 2011 Q1 2010 % change
USD m USD m USD cc
---------------------------------------------------
Bcr-Abl Franchise
Gleevec/Glivec 1 076 1 032 4 2
Tasigna 153 75 104 100
---------------------------------------------------
Subtotal 1 229 1 107 11 9
Zometa 373 375 -1 -2
Femara 354 344 3 2
Sandostatin 337 310 9 7
Exjade 179 179 0 -2
Afinitor 90 41 120 117
Other 36 49 -27 -27
---------------------------------------------------
Total 2 598 2 405 8 6
---------------------------------------------------
Our Bcr-Abl franchise, consisting of Gleevec/Glivec and Tasigna, continued to
grow strongly, reaching USD 1.2 billion (9% cc) in the first quarter.
Gleevec/Glivec (USD 1.1 billion, +2% cc), a targeted therapy, grew as a
treatment for Philadelphia chromosome-positive chronic myeloid leukemia (Ph+
CML), as well as an adjuvant (post-surgery) treatment of gastrointestinal
stromal tumors (GIST), though its pace of growth slowed as patients are
increasingly being started on Tasigna for Ph+ CML.
Tasigna (USD 153 million, +100% cc) has been growing rapidly as a next
generation targeted therapy for adult patients newly diagnosed with Ph+ CML in
chronic phase. Regulatory approvals for Tasigna in the first-line indication
have been achieved globally in 40 markets including the US, EU, Japan and
Switzerland, with additional submissions pending around the world. Tasigna
continues to grow market segment share in the imatinib resistant/intolerant Ph+
CML chronic phase and accelerated phase segments with approvals in over 90
countries and plans for further geographic and market expansion.
Zometa (USD 373 million, -2% cc) is a leading treatment to reduce or delay
skeletal-related events in patients with bone metastases from solid tumors and
multiple myeloma. In the US, Zometa is facing new competition in the
marketplace. In 2010, regulatory filings in the US and EU for the potential use
of Zometa for adjuvant breast cancer treatment were withdrawn because two
confirmatory registration trials for this indication were required by health
authorities.
Femara (USD 354 million, +2% cc) is a treatment for early stage and advanced
breast cancer in postmenopausal women. Growth was achieved in the US, Japan and
several EU and emerging countries. However, in some countries outside of the US,
sales declined due to generic competition. We expect an increase in generic
competition as early as the second quarter of 2011.
Sandostatin (USD 337 million, +7% cc) benefited from the increasing use of
Sandostatin LAR in treating symptoms of patients with neuroendocrine tumors in
key markets.
Exjade (USD 179 million, -2% cc) continues to grow at a mid- to high-single-
digit rate outside of the US. The US saw a slow start to sales this quarter, due
in part to wholesaler reduction of inventory days on hand. Exjade is currently
approved in more than 100 countries as the only once-daily oral therapy for
transfusional iron overload.
Afinitor (USD 90 million, +117% cc), an oral inhibitor of the mTOR pathway,
continues to achieve strong growth in key markets as an approved treatment for
patients with advanced renal cell carcinoma following VEGF-targeted therapy. In
the US, Afinitor is also approved for the treatment of patients with
subependymal giant cell astrocytoma (SEGA), a benign brain tumor associated with
tuberous sclerosis, who require therapeutic intervention but are not candidates
for curative surgical resection. Everolimus, the active ingredient in Afinitor,
is also available under the trade names Zortress/Certican for use in non-
oncology indications. Everolimus is exclusively licensed to Abbott and
sublicensed to Boston Scientific for use in drug-eluting stents.
Neuroscience and Ophthalmics
Q1 2011 Q1 2010 % change
USD m USD m USD cc
----------------------------------------------------------
Lucentis 444 364 22 18
Exelon/Exelon Patch 251 251 0 -1
Comtan/Stalevo 146 141 4 2
Gilenya 59 0 nm nm
Extavia 34 20 70 66
Fanapt 9 21 -57 -57
Other 104 104 0 -3
----------------------------------------------------------
Total strategic products 1 047 901 16 14
Established medicines 136 133 2 -2
----------------------------------------------------------
Total 1 183 1 034 14 12
----------------------------------------------------------
nm - not meaningful
Lucentis (USD 444 million, +18% cc) showed continued strong growth as the only
approved medicine to significantly improve vision in patients with wet age-
related macular degeneration (AMD), for which it is established as the standard
of care, and in patients with visual impairment due to diabetic macular edema
(DME). Lucentis is approved in more than 85 countries for the treatment of wet
AMD and in more than 30 countries for the treatment of visual impairment due to
DME. Genentech holds the rights to Lucentis in the US.
Exelon/Exelon Patch (USD 251 million, -1% cc) combined sales were impacted by
oral generic competition in the US, but benefited from patients' continued
conversion from oral to transdermal therapy. Exelon Patch, the transdermal form
of the medicine, grew 22% and generated more than 75% of total Exelon sales in
the first quarter, compared to less than 65% in the same period in 2010. Exelon
Patch is approved for the treatment of mild-to-moderate Alzheimer's disease
dementia in more than 80 countries, including more than 20 countries where it is
also approved for dementia associated with Parkinson's disease.
Gilenya (USD 59 million) was approved this quarter by the European Commission as
a disease-modifying therapy for patients with highly active relapsing-remitting
multiple sclerosis (RRMS) despite treatment with beta interferon, or in patients
with rapidly evolving severe RRMS. Gilenya was also approved in Canada for RRMS
patients with an inadequate response or intolerance to other MS therapy, and is
currently under regulatory review in countries around the world, including
Japan, Turkey and Brazil. Gilenya was approved in the US in 2010. It is licensed
from Mitsubishi Tanabe Pharma.
Extavia (USD 34 million, +66% cc), the Novartis-branded version of
Betaferon(®)/Betaseron(® )(interferon beta-1b) for relapsing forms of multiple
sclerosis, continued to grow within key markets. Extavia was launched in the EU
and US in 2009, and has been approved in over 30 countries.
Betaferon®/Betaseron® are registered trademarks of Bayer.
Respiratory
Q1 2011 Q1 2010 % change
USD m USD m USD cc
---------------------------------------------------------
Xolair 107 80 34 38
TOBI 71 65 9 9
Onbrez Breezhaler 20 2 nm nm
---------------------------------------------------------
Total strategic products 198 147 35 37
Established medicines 50 49 2 0
---------------------------------------------------------
Total 248 196 27 28
---------------------------------------------------------
nm - not meaningful
Onbrez Breezhaler (USD 20 million) has demonstrated strong sales growth since
its approval in the EU in November 2009 as a once-daily long-acting beta-2
agonist for the maintenance bronchodilator treatment of airflow obstruction in
patients with chronic obstructive pulmonary disease (COPD). Onbrez Breezhaler
150 and 300 mcg are now approved in more than 50 countries and available in more
than 20, with launches continuing throughout 2011. In the US, we are awaiting
feedback from the FDA on our filing. The proposed trade name will be Arcapta(TM)
Neohaler(TM).
Xolair (USD 107 million, +38% cc), a biotechnology drug for severe persistent
allergic asthma in Europe and moderate-to-severe persistent allergic asthma in
the US, continued to show strong growth in major Latin American markets with
sales remaining on track in Europe. Xolair is approved in more than 85
countries, and a Phase III trial to support registration in China is ongoing.
Xolair Liquid, a new formulation in pre-filled syringes that enables easier
administration than with the original lyophilized formulation, has been launched
in more than 10 European countries since January 2011 including France, Germany,
Spain and the UK. Novartis co-promotes Xolair with Genentech in the US, and
shares a portion of operating income.
Integrated Hospital Care
Q1 2011 Q1 2010 % change
USD m USD m USD cc
---------------------------------------------------------
Neoral/Sandimmun 214 212 1 -3
Myfortic 120 100 20 18
Zortress/Certican 42 34 24 21
Ilaris 11 4 nm nm
Other 86 67 28 26
---------------------------------------------------------
Total strategic products 473 417 13 11
Established medicines 346 330 5 3
---------------------------------------------------------
Total 819 747 10 7
---------------------------------------------------------
nm - not meaningful
Zortress/Certican (USD 42 million, +21% cc) is an immunosuppressive medicine to
prevent organ rejection in adult heart and kidney transplant recipients.
Available in more than 80 countries, it continues to generate solid growth,
particularly in the US market, where it has been available since April 2010 for
adult kidney transplantation under the trade name Zortress. Everolimus, the
active substance, is also available under the trade name Afinitor for use in
certain oncology indications, and is exclusively licensed to Abbott and
sublicensed to Boston Scientific for use in drug-eluting stents.
Ilaris (USD 11 million) is available in over 40 countries for the treatment of
adults and children four years of age and older who suffer from cryopyrin-
associated periodic syndrome (CAPS), a group of rare auto-inflammatory
disorders. Ilaris was recently filed for the treatment of CAPS in Japan.
Regulatory filings for the use of ACZ885 (Ilaris, canakinumab) in gouty
arthritis have been completed in the EU in 2010 and in the US in the first
quarter of 2011, based on two Phase III registration studies that met their co-
primary endpoints.
Vaccines & Diagnostics
Q1 2011 Q1 2010 % change
USD m USD m USD cc
-------------------------------------------------------
Net sales 371 1 361 -73 -73
Operating income -101 839 nm nm
As % of net sales -27.2 61.6
Core operating income -24 923 nm nm
As % of net sales -6.5 67.8
-------------------------------------------------------
nm - Not meaningful
First quarter
Net sales
Net sales were USD 371 million for the first quarter of 2011 (-73% cc), compared
with USD 1.4 billion in the 2010 period. The primary driver of net sales
variance against the prior-year period was USD 1.1 billion of A(H1N1) pandemic
flu vaccine sales in first quarter of 2010 that were not repeated in the same
period in 2011.
Excluding the impact of the A(H1N1) pandemic flu in 2010, there was strong
growth in the quarter (+43% cc), including the release of shipments that had
been delayed from the fourth quarter of 2010 at one of our production
facilities, as well as growth in our meningococcal disease franchise.
Operating income/loss
Reported operating loss was USD 101 million for the quarter, compared to a
profit of USD 839 million for the same period in 2010. This was largely due to
the operating income associated with A(H1N1) pandemic flu vaccine sales from the
prior year not repeated in the first quarter of 2011 and only partially offset
by the growth in the base business noted above. In addition to amortization of
intangible assets, the operating loss for the quarter included an impairment of
USD 19 million related to a financial asset. Excluding the impact of A(H1N1),
profitability was additionally impacted by increased investment in our pipeline
and the expansion of our meningococcal disease franchise.
Core operating loss for the period was USD 24 million, compared to a profit of
USD 923 million for the same period in 2010.
Sandoz
Q1 2011 Q1 2010 % change
USD m USD m USD cc
------------------------------------------------------
Net sales 2 318 2 001 16 15
Operating income 390 310 26 28
As % of net sales 16.8 15.5
Core operating income 492 450 9 11
As % of net sales 21.2 22.5
------------------------------------------------------
First quarter
Net sales
Sandoz sales grew strongly to USD 2.3 billion (+15% cc) versus prior year with
25 percentage points of volume expansion, more than offsetting price erosion of
10 percentage points. Growth was driven by strong sales of recently launched
products, such as enoxaparin (generic Lovenox®) and gemcitabine (generic
Gemzar®); strong performance in the US, Canada, Russia, France, Spain, Italy, UK
and Japan; and accelerating biosimilars growth outside Germany.
US retail generics and biosimilars (USD 754 million, +55% cc) continued its
strong sales trajectory, due in part to the recent, successful first-to-market
launches of enoxaparin (USD 247 million), gemcitabine and lansoprazole. Sandoz's
enoxaparin exclusivity in the US could change at any time, whereas lansoprazole
oral dispersible tablets (ODT) and gemcitabine will face increased competition
in the US in April and July of 2011, respectively.
German sales of retail generics and biosimilars (USD 310 million, -27% cc)
declined compared to the strong prior-year quarter, absorbing the price impact
of statutory health insurance tenders and new lower reference prices implemented
in 2010. Western Europe retail generics and biosimilars (+19% cc) grew
positively, bolstered by strong performances in Spain, France, Italy and UK.
Emerging markets growth was strong in Asia-Pacific (+11% cc) and Central and
Eastern Europe (+22% cc). Sandoz sustained its leading global position in
biosimilars (+32% cc) with good momentum based on recent launches of 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 26% (+28% cc) to USD 390 million. The operating income
margin improved 1.3 percentage points to 16.8% of net sales, after provisions
relating to legal settlements in the US of -1.2 percentage points of net sales.
Operating income margin (+1.3 percentage points) performed more strongly than
core operating income margin (-1.3 percentage points) due to charges for the
EBEWE Pharma integration and exceptional costs for termination of a co-
development agreement in 2010, together with higher provisions for litigation in
the prior-year quarter.
Core operating income rose 9% (+11% cc) to USD 492 million, with a decline in
core operating income margin by 1.3 percentage points to 21.2% of net sales.
Gross profit margin decreased 2.0 percentage points, mainly due to lower sales
to other divisions and other revenues (-0.5 percentage points), a negative
currency impact (-0.4 percentage points), and a significantly different sales
mix than in the prior-year quarter, which particularly reflects higher lower-
margin sales in the US and lower higher-margin sales in Germany. Marketing &
Sales (16.5% of net sales, +1.5 percentage points) improved core operating
income margin due to higher productivity, while fully funding investments in
growing businesses. R&D costs (6.9% of net sales, +0.1 percentage points) were
slightly lower as productivity savings offset continued investment in the
development of differentiated generics such as biosimilars and respiratory
products. General & Administration costs (3.8% of net sales, +0.7 percentage
points) improved through ongoing cost-containment measures. Other Income &
Expense, net (1.5% of net sales, -1.5 percentage points) increased mainly due to
exceptional income in 2010 and higher net cost of litigation and legal
settlements in 2011 (below the threshold for exclusion from core).
Consumer Health
Q1 2011 Q1 2010 % change
USD m USD m USD cc
-------------------------------------------------------
Net sales 1 642 1 478 11 9
Operating income 562 264 113 119
As % of net sales 34.2 17.9
Core operating income 358 288 24 30
As % of net sales 21.8 19.5
-------------------------------------------------------
First quarter
Net sales
The three Consumer Health businesses - OTC, Animal Health and CIBA Vision -
together delivered double-digit growth in the first quarter of 2011 (+9% cc).
OTC and Animal Health, in particular, delivered strong performances, continuing
to grow significantly faster than their respective markets.
OTC delivered double-digit net sales growth in the first quarter, with key
contributions from the US and emerging markets. Prior-year investments in
advertising and promotional support, as well as the continued focus on key
brands and markets, further supported the growth momentum. Prevacid24HR
benefited from normalized quarterly stock movement compared with the first
quarter of 2010, and is maintaining a solid market share in the large and
growing US proton pump inhibitor heartburn market. Theraflu, Otrivin and
Triaminic, key brands in the cough and cold portfolio, delivered double-digit
growth as a result of a focused investment strategy and a strong cough and cold
and flu season in key markets.
Continued strong performance in Animal Health led to above-market growth for the
first quarter. Sales in the US continued to expand, underpinned by strategic
sales programs to support the key parasiticide brands Sentinel and Interceptor
against new competitive entries. Milbemax continued to be a growth driver
throughout European companion animal markets, and the farm animal business grew
dynamically with the continued success of Zolvix and double-digit growth from
the pig therapeutic Denagard.
CIBA Vision maintained its strategic focus on key brands AirOptix and Dailies.
AirOptix extended its strong growth momentum in all regions. In Japan and key
emerging markets, CIBA Vision sales grew at double-digit rates, significantly
faster than the respective markets, while Europe delivered modest growth in a
difficult market environment.
Operating income
Operating income rose 113% (+119% cc) to USD 562 million, with the operating
income margin in the first quarter of 2011 rising to 34.2% of net sales.
Operating income in the quarter includes exceptional income from a litigation
settlement in CIBA Vision (USD 183 million), divestment of non-core brands in
OTC (USD 43 million), and an Alcon antitrust-related divestment in CIBA Vision
(USD 21 million).
Core operating income increased 24% (+30% cc) to USD 358 million, delivering
strong operating leverage in the Consumer Health businesses with the core
operating income margin up 2.3 percentage points to 21.8% of net sales. The core
gross margin (67.5% of net sales, -1.2 percentage points) declined mainly as a
result of product mix and the appreciation of the Swiss franc versus the prior
year, which more than offset the positive impact of price increases and
productivity gains. Marketing & Sales expenses (34.5% of net sales, +2.0
percentage points) improved as a result of the sales performance and high
investments in the prior-year quarter due to the launch of Prevacid24HR in the
US. R&D (5.6% of net sales, +0.2 percentage points) and General & Administration
expenses (6.2% of net sales, +0.3 percentage points) both benefited from
productivity initiatives and strong sales leverage, while Other Income &
Expense, net (0.5% of net sales, +0.9 percentage points) improved due to a
divestment gain of small non-core brands.
Alcon
+-----------------------+
| |
Q1 2011 | Q1 2010[1] % change |
| |
USD m | USD m USD cc |
---------------------------------+-----------------------+
Net sales 1 931 | 1 721 12 10 |
| |
Operating income 207 | 165 25 24 |
| |
As % of net sales 10.7 | 9.6 |
| |
Core operating income 722 | 649 11 11 |
| |
As % of net sales 37.4 | 37.7 |
---------------------------------+-----------------------+
[1] Q1 2010 is comprised of the figures reported by Alcon, Inc., on April
26, 2010, adjusted on a pro forma basis as from January 1, 2010 for the impact
of the change in control and related purchase price allocation arising from the
Novartis acquisition of 77% majority ownership on August 25, 2010. These Q1
2010 pro forma figures of Alcon, Inc., do not form part of the consolidated
financial statements summarized elsewhere in this release, and are given solely
for the purpose of providing a basis of comparison for the Q1 2011 results
disclosed in this section.
First quarter
Net sales
Net sales rose 12% (+10% cc) to USD 1.9 billion for the first quarter of 2011.
Alcon's double-digit sales growth was broad-based, with balanced contributions
across its geographies and products, and fueled by the successful execution of
new product launches.
US sales increased 8% to USD 783 million, driven mainly by strong sales of
pharmaceutical products, which grew 17% over the same period last year. US sales
growth was adversely affected by winter weather conditions, which had a negative
impact on cataract surgery procedure volume, partially offset by strong sales of
allergy products due to an earlier onset of the season. Sales in non-US markets
rose 16% (+12% cc) to USD 1.2 billion with key contributions from the
pharmaceutical and surgical product categories. Sales in emerging markets
increased 21% (+19% cc), led by Brazil, Russia, India and China, which together
reported sales growth of 30% (+24% cc).
Operating income
Operating income rose 25% (+24% cc) to USD 207 million, or 10.7% of net sales.
This amount includes USD 501 million in amortization of intangible assets and
other items (USD 14 million) arising from the purchase price allocation related
to Novartis obtaining majority ownership of Alcon and the full merger between
Novartis and Alcon (pro forma amounts for the first quarter of 2010 are USD 491
million for the purchase price allocation and USD -7 million for other items).
Core operating income increased by 11% (+11% cc) to USD 722 million, or 37.4% of
net sales. The increase reflects the success of Alcon's business model focusing
on eye care with a diversified portfolio of high-margin products across the
major eye care categories. Continued diligence in spending management allowed
Alcon to achieve operating leverage on a constant currency basis, even while
reallocating significant spending to R&D and other growth initiatives. On a core
basis, gross margin declined from 75.9% to 75.1% of net sales due primarily to
the impact of currency fluctuations on COGS. R&D expenses increased 11% to 10%
of net sales, reflecting Alcon's continued commitment to investing in
innovation. Marketing & Sales expenses increased 13% to 23% of net sales, with a
significant portion of the increase stemming from sales force investments in
fast-growing emerging markets. General & Administration expenses were 5% of net
sales, flat compared to last year due to a continued focus on organizational
productivity.
Alcon product review
Surgical
Q1 2011 Q1 2010 % change
USD m USD m USD cc
-------------------------------------------------------
Intraocular lenses 309 291 6 4
Cataract/vitreoretinal 498 453 10 8
Refractive 38 28
Unternehmensinformation / Kurzprofil:
Datum: 19.04.2011 - 07:01 Uhr
Sprache: Deutsch
News-ID 53682
Anzahl Zeichen: 65552
contact information:
Town:
Basel
Kategorie:
Business News
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"Novartis makes strong start for the year"
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