Novartis sees dip in 2007 growth

Novartis on Thursday posted another record year of sales and profits, but warned growth would slow in 2007 before picking up again from2008.

The Swiss group faces three crucial product approvals this year with plans for new blood pressure and diabetes products. Although two have been held up to provide more information, Novartis on Thursday announced European drug safety authorities had approved blood pressure treatment Exforge, the third.

Daniel Vasella, chairman and chief executive, predicted that sales growth would slow to “mid-to-high single digits” in local currencies this year and that Novartis would only keep pace with its competitors, rather than gaining market share, as in2006.

However, he said the deceleration – also likely to affect profits growth because of high launch costs for the new products – should be followed by a return to double-digit growth from 2008.

Dr Vasella’s prediction came as Switzerland’s biggest pharmaceuticals group announced a 15 per cent rise in sales to $37bn last year, while net profits climbed by 17 per cent to $7.2bn. Sales in the fourth quarter rose 16 per cent to $10.05bn, while net earnings jumped 23 per cent to$1.66bn.

Sales and earnings were boosted by organic growth and the impact of acquisitions. The full consolidation of Hexal/Eon Labs lifted performance in generics, while the group also saw initial results from the Chiron acquisition in vaccines and diagnostics.

Without the one-off costs linked to Chiron, bought for more than $5bn, Novartis said net profits last year would have surged by 25 per cent and operating income by 28 per cent.

The group proposed its 10th consecutive dividend increase, with a 17 per cent rise to SFr1.35 a share.

“All divisions, particularly pharmaceuticals, performed very well”, said Dr Vasella.

The core pharmaceuticals operation saw sales rise by 11 per cent, well ahead of the market, led by Diovan, the group’s bestselling blood pressure drug, and its Glivec leukaemia treatment, which achieved sales of $4.2bn and $2.6bn, respectively.

Meanwhile, sales at the new vaccines and diagnostics division created from Chiron jumped 42 per cent, while the Sandoz generics division saw sales rise 27 per cent to $6bn.

Dr Vasella sought to dampen speculation over Gerber, the group’s infant nutrition subsidiary, saying it was not for sale, but indicated that could change if Novartis needed to raise funds or was presented with an offer it could not refuse.

Net liquidity fell to $700m at the end of last year, compared with $2.5bn the previous year, reflecting the impact of recent acquisitions.

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