Novartis has reported first-quarter profit that beat analysts’ expectations, but results took a hefty hit from currency exchange effects.
Core operating income of $3.55 billion slipped 4% from a year ago but still came in above the $3.17 billion average of eight estimates compiled by Bloomberg. And taking currency effects out of the equation, organic growth was actually a respectable 9%, as the firm starts to reap the benefits of its newly streamlined approach.
Net profit for the total group rocketed to $13 billion from last year’s figure, swelled by one-time gains from its mega deals with GlaxoSmithKline and Eli Lilly, but sales slipped 7% to $11.94 billion, masking growth of 3% at constant exchange rates.
Pharmaceuticals net sales fell 9% to $7.1 billion (+1% CER), as gains - including the new oncology assets acquired from GSK (sales of $200 million in March) - were offset by the negative impact of generic competition (-8 percentage points), largely for Diovan (valsartan) monotherapy and Exforge (amlodipine/valsartan).
Growth products - including: Gilenya (fingolimod), up 26% (CER) at $638 million; Afinitor (everolimus), up 18% to $388 million; Tasigna (nilotinib), up 20% at $372 million; Xolair (omalizumab), up 22% at $180 million; and Jakavi (ruxolitinib), up 86% at $90 million - generated $2.9 billion or 41% of division net sales, growing 25% altogether last year’s first quarter.
Elsewhere, the drug giant’s eye unit Alcon posted sales of $2.6 billion (-3%, +5% cc), led by continued growth in the Surgical and Ophthalmic Pharmaceuticals franchises, while generics arm Sandoz booked $2.2 billion (-3%, +9% cc), as volume growth of 13 percentage points more than compensated for 4 percentage points of price erosion.
Crushed by currency
According to Maxim Jacobs, analyst at Edison Investment Research, Novartis had “a solid quarter operationally but they got completely crushed by the strong US currency. A whopping 10% was shaved off of sales and 15% from net income because of the strong US dollar”.
“Usually international diversification is a good thing but with the wild currency moves we’ve seen lately, even a good quarter can be made to look weak”.
Looking forward, Novartis said it expects net sales growth in the mid-single digits for 2015, with core operating income rising at a faster high-single-digit pace. Chief Executive Joe Jimenez also reportedly told the media today that, following the completion of its GSK deal, it is now on the hunt for bolt-on acquisitions of $2 billion-$5 billion each.