Novartis healthcare portfolio generates strong growth in first quarter of 2010, progress on delivering innovation, growth and productivity
(Thomson Reuters ONE) -
Novartis International AG / Novartis healthcare portfolio generates strong growth in first quarter of 2010, progress on delivering innovation, growth and productivity processed and transmitted by Hugin AS. The issuer is solely responsible for the content of this announcement.
* Portfolio rejuvenation underpins positive momentum in first quarter of
2010:
* Net sales up 25% (+18% in constant currencies, or cc) to USD 12.1
billion as Group's recently launched products (USD 1.9 billion)
contribute 16% of net sales, while sales recognition of A (H1N1)
pandemic flu vaccine contracts adds USD 1.1 billion
* Operating income grows 50% (+42% cc) to USD 3.5 billion; core operating
income up 48% (+41% cc) to USD 3.9 billion, core margin improves to
31.9% of net sales
* Net income rises 49% (+41% cc) to USD 2.9 billion; core net income grows
44% (+36% cc) to USD 3.3 billion
* EPS up 48% (+40% cc) to USD 1.29; core EPS rises 44% (+36% cc) to USD
1.45
* Free cash flow before dividends (USD 2.9 billion, +93%) nearly doubles
on strong business performance and impact of initiatives to reduce cash
conversion cycles
* Making progress in 2010 as new leadership team implements strategic
priorities with continued focus on innovation, growth and productivity
* Extending innovation lead: Approvals for Menveo vaccine (US/EU) and
three new medicines in Japan; US priority review status for Tasigna
(cancer) and Gilenia (MS)
* Driving growth: Ongoing expansion in top emerging markets, EBEWE Pharma
accelerating Sandoz, adapting commercial models in China and the US
* Improving productivity: All businesses driving productivity initiatives
and targeted resource allocation to improve growth and profitability
* Alcon to be new growth platform: Completion of acquisition of 77%
majority Alcon stake on track for second half of 2010; merger proposal
in interest of all stakeholders
Key figures
First quarter
Q1 2010 Q1 2009 % change
USD m USD m USD cc
---------------------------------------------------
Net sales 12 131 9 709 25 18
Operating income 3 511 2 347 50 42
Net income 2 948 1 975 49 41
EPS (USD) 1.29 0.87 48 40
Free cash flow
(before dividends) 2 903 1 506 93
Core[1]
Operating income 3 865 2 611 48 41
Net income 3 309 2 302 44 36
EPS (USD) 1.45 1.01 44 36
---------------------------------------------------
[1] Core results for operating income, net income and earnings per share (EPS)
eliminate the amortization of intangible assets, the impact of
acquisition-related factors and other significant exceptional items. See page
31 for further information.
All product names appearing in italics are trademarks owned by or licensed to
Novartis Group Companies.
Basel, April 20, 2010 - Commenting on the results, Joseph Jimenez, CEO of
Novartis, said: "I am pleased with the strong growth generated in the first
quarter of 2010 across our entire healthcare portfolio. All of our businesses
are making good progress, particularly the sustained expansion in
Pharmaceuticals and the strong contributions from supply contracts for A (H1N1)
pandemic flu vaccines. We are focusing on extending our lead in innovation,
driving growth and improving productivity, which we believe will generate
greater sustainable value from our portfolio. The growing contributions from
products launched since 2007 are rejuvenating our portfolio and are the result
of our commitment to innovation and successful R&D investments. We are
intensifying productivity efforts to improve profitability as well as to enable
continued investments in drug discovery and expansion into new markets. As we
prepare for the integration of Alcon, which will create a new growth platform in
eye care, we are building momentum in 2010 and achieving continued success."
GROUP REVIEW
First quarter
Novartis delivered a strong performance in the first quarter of 2010 -
particularly the rapid expansion of recently launched products and important
regulatory approvals achieved for new medicines and vaccines - as the Group made
progress with a sharp focus on innovation, growth and productivity.
Net sales rose 25% (+18% cc) to USD 12.1 billion on improvements in all
businesses, particularly sales of A (H1N1) pandemic flu vaccines and rapid
growth of recently launched products across the Group (USD 1.9 billion).
Currency movements contributed seven percentage points to reported growth.
Pharmaceuticals (USD 7.3 billion, +7% cc) advanced in all regions and maintained
solid volume growth. Vaccines and Diagnostics (USD 1.4 billion, +436% cc)
provided USD 1.1 billion from recognition of A (H1N1) pandemic vaccine sales.
Sandoz (USD 2.0 billion, +9% cc) grew on successful new product launches and
integration of EBEWE Pharma following the September 2009 acquisition. All
Consumer Health businesses (USD 1.5 billion, +7% cc) had good performances and
grew faster than their markets.
Operating income rose 50% (+42% cc) to USD 3.5 billion on the volume-driven
sales expansion and significant contributions from Vaccines and Diagnostics,
while also benefitting from eight percentage points of favorable currency
movements. The operating income margin improved 4.7 percentage points to 28.9%
of net sales from 24.2% in the 2009 period. Core operating income, which
excludes exceptional items and amortization of intangible assets in both
periods, rose 48% (+41% cc) to USD 3.9 billion, and the core operating income
margin rose 5.0 percentage points to 31.9% of net sales from 26.9% in the
year-ago quarter.
Net income advanced 49% (+41% cc) to USD 2.9 billion as contributions from
associated companies and financial income more than offset increased interest
expenses and a higher tax rate. Earnings per share (EPS) rose largely in line
with net income to USD 1.29 from USD 0.87 in the 2009 period. Core net income
grew 44% (+36% cc) to USD 3.3 billion, while core EPS was up 44% (+36% cc) in
the first quarter to USD 1.45 from USD 1.01 in the year-ago period.
Delivering innovation, growth and productivity
Novartis continues to advance its strategy to meet the needs of patients
everywhere with a broad healthcare portfolio that includes innovative medicines,
preventive vaccines, cost-effective generics and self-care products. At the
heart of this portfolio lies a sustained commitment to innovation, which has
resulted in breakthrough products offering patients opportunities for improved
health outcomes.
At a time of converging trends, which include rising global demand for medicines
but also increasing cost-containment pressures, the new leadership team
appointed in January 2010 has established priorities to deliver innovation,
growth and productivity consistent with the Group's aspiration to be the world's
most successful and respected healthcare company.
These priorities, aimed at creating greater value for patients, payors and
physicians, include (1) extending the Group's lead in innovation; (2) delivering
sustainable growth through successful new product launches, investments to
strengthen the business portfolio, and expansion in emerging markets; and (3)
productivity initiatives that free up resources to improve profitability and
support investments in innovation and growth.
Innovation
Innovation is the key driver of Novartis. The Group's strong commercial position
is the result of consistent R&D investments and a commitment to advancing
treatment standards for patients.
An industry leader in new product approvals, Novartis achieved US and European
Union approvals in the first quarter for Menveo, a new vaccine offering
protection against four major serogroups of meningococcal meningitis, a
potentially fatal bacterial disease. In Japan, three medicines - Afinitor
(kidney cancer), Equa (type 2 diabetes) and Exforge (hypertension) - gained
regulatory approvals in January. This follows approval of six medicines in 2009
in Japan, the Group's second-largest market.
Two US regulatory submissions completed in late 2009 - Tasigna (cancer) and
Gilenia (FTY720, multiple sclerosis) - were recognized in the first quarter of
2010 for their potential patient benefits. The US Food and Drug Administration
granted these submissions priority review status, which accelerates the review
of medicines that offer major advances or provide treatments where no adequate
therapy exists. In the first quarter, a US filing was also made for Menveo to
expand the use of this vaccine to children from age 2-10.
Many development projects are progressing toward regulatory submissions in
2010, with up to five in oncology: two additional indications for Afinitor as
well as first submissions for the development projects SOM230 (Cushing's
disease), LBH589 (Hodgkin's lymphoma) and EPO906 (ovarian cancer). Others
include the first submission in Europe for MenB, which has the potential to
become the first global vaccine against the B serogroup of meningococcal
meningitis. However, one of the two Phase III trials involving ASA404 (cancer)
was halted in March following an interim analysis of benefits for patients with
non-small cell lung cancer (NSCLC). The Pharmaceuticals development project
PTZ601 (infections) was also halted in the first quarter, resulting in a pre-tax
impairment charge of USD 152 million (USD 57 million after release of deferred
tax provisions).
Growth
New products, the result of successful R&D investments, are rejuvenating the
Novartis portfolio together with initiatives to strengthen positions in emerging
markets, build global businesses of scale, develop new commercial skills and
improve talent. Contributions from recently launched products across the Group
rose 68% to USD 1.9 billion in the first quarter, representing 16% of net sales
compared to 12% in the 2009 period. In Pharmaceuticals, recently launched
products provided USD 1.5 billion of net sales in the 2010 period, representing
20% of the division's net sales compared to 14% in the 2009 quarter.
Targeted expansion in emerging markets is generating significant growth despite
the financial crisis, which continues to impact some countries. In the first
quarter, net sales from the top six emerging markets rose 38% (+22% cc) to USD
1.2 billion, driven by China and India. These six markets, which also include
Brazil, Russia and South Korea, represented 9.6% of Group net sales, up from
8.7% in the 2009 period, more than offsetting cost-containment measures in
Turkey.
Healthcare markets around the world are evolving rapidly, driven by factors such
as intensifying cost-containment initiatives, a more challenging regulatory
environment and the changing roles of physicians and payors. Novartis is
constantly seeking ways to address these changes. Three important new
initiatives were announced in the first quarter of 2010.
In China, a new regional operating structure is being implemented in
Pharmaceuticals to recognize the diversity of China's regions to better address
local market needs as the government, and Novartis, make major long-term
investments to improve healthcare access and quality.
In anticipation of changes to the product portfolio in the US, which includes
expected approvals for a number of new specialty medicines but also the loss of
market exclusivity for Diovan and other medicines in the next few years,
Novartis has further streamlined its US business in Pharmaceuticals to maximize
the potential of the changing portfolio in both primary care and specialty
markets. This initiative, announced in April 2010, will create three national
specialty businesses focused on multiple sclerosis, respiratory diseases and
neuroscience to complement the existing Oncology business unit. In addition, a
fourth business for primary care medicines, including the cardiovascular
portfolio, will be consolidated into four regional units (reduction from the
current five units). Approximately 383 full-time equivalent positions, primarily
in headquarter-based functions, are to be reduced in a socially responsible
manner, with 35% expected to be achieved by not filling vacant positions. A
one-time charge of USD 24 million is planned to be taken in the second quarter
of 2010, with annual cost savings of USD 56 million anticipated from 2011.
In addition, "Customers First" was launched in February 2010 after pilot
programs to accelerate collaboration across the businesses in 45 countries -
including the US, top European markets and Japan - that together represent 95%
of Group net sales. Local cross-divisional teams are identifying ways to
increase opportunities with key customers while increasing customer service and
productivity.
Productivity
Novartis is now implementing a continuous focus on agility, efficiency,
productivity and resource allocation throughout its operations, freeing up
resources to improve profitability as well as to invest in future growth,
particularly promising pipeline projects and emerging markets.
In the first quarter of 2010, the core operating income margin improved five
percentage points to 31.9% of net sales over the 2009 period, supported by
continuing improvements in productivity. Key areas of improvement in the 2010
quarter included Marketing & Sales in Pharmaceuticals, which declined to 27.9%
of net sales in the first quarter of 2010 from 29.5% in the 2009 period,
supported by the "geo-tailoring" strategy to adapt sales forces to local market
needs while supporting new product launches. Offsetting these improvements was
an increase in Cost of Goods Sold; this is partly the result of sustained
reductions in inventory and productivity efforts, which has created excess
capacity and lower fixed overhead absorption. Simplification of manufacturing
operations is under review. Sandoz continues to improve manufacturing
productivity, enabling it to absorb the impact of price erosion and improve its
core operating income margin by 2.4 percentage points to 22.5% of net sales.
Continuing improvements in gross margin have enabled Consumer Health to make
significant investments in the launch of Prevacid24HR in the US without an
adverse impact on the operating income margin.
Completion of the Alcon transactions will require a sharper focus on further
improving free cash flow, which rose 93% to USD 2.9 billion in the first quarter
of 2010 (before dividends). This improvement is a direct consequence of the
strong sales of A (H1N1) pandemic vaccines as well as programs in the divisions
to significantly reduce cash conversion cycles. The Group's goal is to return to
a net cash position within four years after completion of the Alcon
transactions. Internal and external investments will continue to target growth
opportunities offering potential to earn a premium on the Group's cost of
capital and strengthen the healthcare portfolio.
Alcon
The addition of Alcon, the global leader in eye care, will create a new growth
platform in the fast-growing eye care sector. Novartis announced on January 4
plans to gain full ownership of Alcon by first completing the agreement to
acquire a 77% majority stake - on track for completion in the second half of
2010 - and subsequently entering into an all-share direct merger with Alcon for
the remaining 23% minority stake. Following the merger under Swiss law, Alcon
will become a new division that incorporates CIBA Vision and certain Novartis
ophthalmic medicines.
2010 outlook
Novartis is building momentum in 2010 and reaffirms expectations for Group net
sales to grow at a mid-single-digit percentage rate in constant currencies
(excluding Alcon) and for improvement in the Group's operating income margin in
2010, driven by the business expansion and ongoing productivity gains. The
strong sales and profit contributions in the first quarter of 2010 from
fulfillment of agreed-upon government supply contracts for A (H1N1) pandemic
vaccines, with sales approximately USD 400 million above the Group's target at
the beginning of the year, will further strengthen these prospects. If exchange
rates remain at their current levels for the remainder of the year, reported and
constant currency growth rates would be broadly similar.
Pharmaceuticals is continuing the strong volume growth from 2009 amid uncertain
pricing conditions, with net sales reaffirmed to grow in 2010 at a mid- to
high-single digit rate in constant currencies. In addition to the exceptional
sales contributions from A (H1N1) pandemic vaccines, Vaccines and Diagnostics is
launching the new Menveo vaccine in the US and Europe while expanding in
targeted emerging markets. Sandoz is increasing its pace of sales growth in
2010 on contributions from all regions and the integration of EBEWE Pharma
coupled with a renewed focus on productivity, while Consumer Health aims to keep
growing ahead of its markets after a successful start to the year.
HEALTHCARE BUSINESS REVIEW
Pharmaceuticals
Q1 2010 Q1 2009 % change
USD m USD m USD cc
------------------------------------------------------
Net sales 7 291 6 433 13 7
Operating income 2 327 2 062 13 7
As % of net sales 31.9 32.1
Core operating income 2 431 2 171 12 6
As % of net sales 33.3 33.7
------------------------------------------------------
First quarter
Net sales
Net sales expanded 13% to USD 7.3 billion (+7% in cc), driven by volume
expansion. Recently launched products provided USD 1.5 billion of net sales in
the 2010 period, representing 20% of net sales compared to 14% in the 2009
quarter. These products launched since 2007 - which include Lucentis, Exforge,
Exelon Patch, Exjade, Reclast/Aclasta, Tekturna/Rasilez, Tasigna, Afinitor,
Onbrez Breezhaler, Ilaris and Fanapt - contributed substantially to the
division's 7% cc net sales growth in the quarter.
All regions continued to benefit from the product portfolio transformation,
particularly Europe (USD 2.8 billion, +10% cc) generating 25% of its net sales
from recently launched products. Latin America and Canada maintained solid
growth rates (USD 0.6 billion, +12% cc). Japan (USD 0.7 billion, -4% cc) was
impacted by a slowdown in demand ahead of the biennial price cuts in April,
masking underlying momentum from the regulatory approvals of nine new medicines
since 2009. The six top emerging markets (USD 690 million, +9% cc) were led by
double-digit gains in China, India, South Korea and Brazil, but more than
offseting cost-containment measures in Turkey.
All therapeutic areas contributed to the business expansion. Oncology (USD 2.4
billion, +14% cc), the largest franchise, was led by sustained growth of
Gleevec/Glivec (USD 1.0 billion, +8% cc) and Femara (USD 344 million, +15% cc),
and important contributions from the recently launched products Exjade (USD 179
million, +39% cc), Tasigna (USD 75 million, +102% cc) and Afinitor (USD 41
million). Cardiovascular and Metabolism (USD 1.9 billion, +7% cc) was affected
by Diovan (USD 1.4 billion, -1% cc), driven by the slowdown in demand ahead of
the biennial price cut in Japan. Neuroscience and Ophthalmics (USD 901 million,
+24% cc) saw rapid growth from Lucentis (USD 364 million, +43% cc) and
Exelon/Exelon Patch (USD 251 million, +17% cc).
Operating income
Operating income rose 13% (+7% in cc) to USD 2.3 billion. The operating income
margin of 31.9% of net sales was impacted by an impairment charge in R&D of USD
152 million after discontinuation of PTZ601, an anti-infective development
project, while an asset write-up in Cost of Goods Sold of USD 100 million and an
exceptional settlement gain in Other Income of USD 42 million were both related
to the recent settlement with Teva regarding Famvir.
Core operating income grew 12% (+6% cc) to USD 2.4 billion. The core operating
income margin of 33.3% of net sales was affected by lower Other Revenues and
sales to other divisions (-0.7 percentage points) as well as higher Cost of
Goods Sold (-1.0 percentage points) as a result of lower fixed overhead
absorption and a devaluation of inventories to reflect lower standard costs, in
addition to higher royalties. R&D improved 0.7 percentage points, mainly driven
by phasing of clinical trial activities. Marketing & Sales and General &
Administrative expenses benefited from continued productivity efforts, improving
1.7 percentage points compared to the same period in 2009. Higher net costs from
Other Income and Expense (-1.1 percentage points) were mainly due to the 2009
period benefiting from provision reversals for launch product inventories.
Cardiovascular and Metabolism
Q1 2010 Q1 2009 % change
USD m USD m USD cc
----------------------------------------------------------
Hypertension medicines 1 735 1 590 9 5
Diovan 1 442 1 402 3 -1
Exforge 204 136 50 42
Tekturna/Rasilez 89 52 71 66
Galvus 76 26 192 176
Lotrel 73 83 -12 -12
----------------------------------------------------------
Total strategic products 1 884 1 699 11 7
Mature products 295 331 -11 -16
----------------------------------------------------------
Total 2 179 2 030 7 3
----------------------------------------------------------
An expanding portfolio of high blood pressure medicines (USD 1.7 billion, +5%
cc) has enabled Novartis to increase its leadership of the global branded
hypertension market segment, achieving a 15.3% share in January 2010 compared to
14.4% in January 2009 (Source: IMS Health). Single-pill combinations based on
valsartan (Diovan) and aliskiren (Tekturna/Rasilez) now provide over half of
these sales, reflecting the continuing shift toward use of combination
therapies.
Diovan (USD 1.4 billion, -1% cc) sales declined in the first quarter, mainly
driven by a slowdown in the angiotensin receptor blocker (ARB) market in Japan
ahead of the biennial price cut. In the US, Diovan reached sales of USD 588
million (+1% cc) in the first quarter, maintaining its leading share of the ARB
segment with a 41.3% share in February 2010 (+1.1 percentage points vs. December
2009 and +0.9 percentage points vs. February 2009, Source: IMS Health). Diovan
is the only medicine in the ARB class approved to treat the three major
cardiovascular indications: high blood pressure, high-risk heart attack and
heart failure.
Exforge (USD 204 million, +42% cc) continued to deliver strong growth on
geographic expansion and the launch of Exforge HCT in the US and Europe.
Exforge, a single-pill combination of Diovan (valsartan) and the calcium channel
blocker amlodipine, has been consistently setting new standards for high blood
pressure combination therapies since its first launch in 2007. Exforge received
regulatory approval in Japan in January 2010, while Exforge HCT, which adds a
diuretic in a single pill, has been a key growth driver in both the US and
Europe.
Tekturna/Rasilez (USD 89 million, +66% cc) has a high growth rate supported by
geographic expansion and launches of the single-pill combinations
Tekturna/Rasilez HCT and Valturna. Tekturna/Rasilez is the only approved high
blood pressure therapy in a new class of medicines known as direct renin
inhibitors. The US is benefiting from the new growth driver Valturna, a
single-pill therapy of aliskiren and valsartan launched in late 2009. Other
single-pill combinations in development are a combination of aliskiren and
amlodipine, currently under regulatory review in the US and Europe, and a
triple-combination therapy with aliskiren, amlodipine and a diuretic expected to
be submitted for US regulatory approval in 2010.
Galvus/Eucreas (USD 76 million, +176% cc), oral treatments for type 2 diabetes,
has delivered sustained growth in many markets, particularly Germany, Spain,
Brazil, Korea and India. Galvus was approved in Japan in January 2010 under the
brand name Equa.
Oncology
Q1 2010 Q1 2009 % change
USD m USD m USD cc
------------------------------------------------
Gleevec/Glivec 1 032 894 15 8
Zometa 375 342 10 5
Femara 344 286 20 15
Sandostatin 310 258 20 14
Exjade 179 122 47 39
Tasigna 75 35 114 102
Afinitor 41 1 NM NM
Other 49 59 -17 -22
------------------------------------------------
Total 2 405 1 997 20 14
------------------------------------------------
NM - Not meaningful
Gleevec/Glivec (USD 1.0 billion, +8% cc) has sustained growth through continued
expansion in chronic myeloid leukemia (CML) as well as adjuvant treatment of
gastrointestinal stromal tumors (GIST). Gleevec/Glivec, a targeted therapy for
certain forms of CML and GIST, was most recently approved in 2009 for use in
adjuvant (post-surgery) GIST patients, with approvals now achieved in more than
55 countries in North America, Europe and Asia-Pacific.
Tasigna (USD 75 million, +102% cc) has been growing rapidly on geographic
expansion given the approvals in more than 80 countries and market penetration
as a second-line therapy for patients with certain forms of CML resistant or
intolerant to prior therapy including Gleevec/Glivec. In December 2009, Tasigna
was submitted for US, European and other approvals worldwide for use in certain
newly diagnosed chronic-phase CML patients based on data from the ENESTnd trial,
the largest ever head-to-head comparison of a targeted therapy against Glivec.
In February 2010, Tasigna received priority review status in the US for this
submission. Trials are also underway examining the use of Tasigna in CML
patients with suboptimal response to Glivec and in patients with metastatic
GIST.
Zometa (USD 375 million, +5% cc) expansion has come from improved compliance and
use of this intravenous bisphosphonate therapy in patients with certain types of
cancer that has spread to bones, particularly in key European markets. US and
European regulatory submissions were completed in late 2009 for use in adjuvant
breast cancer in premenopausal women.
Femara (USD 344 million, +15% cc) achieved ongoing double-digit growth on market
share gains in the US and key European markets, mainly Germany, France, Italy
and Denmark. The use of Femara, an oral therapy for postmenopausal women with
hormone sensitive breast cancer, has driven approximately 70% of overall
aromatase inhibitor market segment growth around the world, particularly in the
initial adjuvant (post-surgery) setting (Source: IMS Health Q4 2009).
Sandostatin (USD 310 million, +14% cc) benefited from increasing use of
Sandostatin LAR in neuroendocrine tumors (NET).
Exjade (USD 179 million, +39% cc) has continued to expand on increased average
dosing and improved adherence to therapy in the US, while also expanding in the
Middle East. Exjade, currently approved in more than 100 countries as the only
once-daily oral therapy for transfusional iron overload, received regulatory
approvals in 2009 in the US, Europe, Switzerland and other countries extending
the dose range to 40 mg/kg.
Afinitor (USD 41 million) has seen strong uptake following recent launches in
key European markets. Afinitor, an oral inhibitor of the mTOR pathway, was
launched in the US, Europe, Switzerland and Japan after first regulatory
approvals in 2009 as a new treatment for advanced renal cell carcinoma (RCC,
kidney cancer) following VEGF-targeted therapy. Afinitor, now approved in 49
countries, is being studied in many other cancer types. Phase III studies are
underway in patients with neuroendocrine tumors (NET), breast cancer, lymphoma,
tuberous sclerosis complex (TSC) and gastric cancer. Two potential regulatory
submissions are planned for 2010 based on trials involving patients with
neuroendocrine tumors (NET) as well as TSC. A late-stage trial in patients with
hepatocellular carcinoma (HCC) will be initiated in the second quarter.
Neuroscience and Ophthalmics
Q1 2010 Q1 2009 % change
USD m USD m USD cc
----------------------------------------------------------
Lucentis 364 229 59 43
Exelon/Exelon Patch 251 203 24 17
Comtan/Stalevo 141 123 15 9
Fanapt 21
Extavia 20 3 NM NM
Other 104 117 -11 -17
----------------------------------------------------------
Total strategic products 901 675 33 24
Mature products 133 131 2 -7
----------------------------------------------------------
Total 1 034 806 28 19
----------------------------------------------------------
NM - Not meaningful
Lucentis (USD 364 million, +43% cc) continued to deliver strong growth,
particularly in France, the UK, Australia and Japan, where it was launched in
early 2009. This biotechnology eye therapy, which is approved in more than 80
countries for "wet" age-related macular degeneration, has now been used in more
than 250,000 patients for this disease, a leading cause of blindness in people
over age 50. A regulatory submission for this indication was accepted in April
in China. In December 2009, a regulatory submission was filed in Europe for
treatment of visual impairment due to diabetic macular edema (DME). Genentech
holds the US rights to this medicine.
Exelon/Exelon Patch (USD 251 million, +17% cc) has been driven by Exelon Patch
since its first launch in 2007, generating more than 60% of total Exelon sales
in the first quarter of 2010 compared to 46% in the 2009 period. In February,
this therapy for mild to moderate forms of Alzheimer's disease dementia
(approved in Europe) as well as dementia linked with Parkinson's disease
(approved in the US) was also submitted for regulatory approval in Japan.
Extavia (USD 20 million) has grown from geographic expansion in key markets,
particularly Russia, Italy, Spain and the US, and expansion in Germany. Extavia,
the Novartis-branded version of Betaferon(®)/Betaseron(® )for relapsing forms of
multiple sclerosis, was launched in the US in 2009, and in over 20 other
countries, including Canada and Russia, in 2010.
Respiratory
Q1 2010 Q1 2009 % change
USD m USD m USD cc
----------------------------------------------------------
Xolair 80 61 31 24
TOBI 65 74 -12 -14
Other 2 -1 NM NM
----------------------------------------------------------
Total strategic products 147 134 10 5
Mature products 49 53 -8 -15
----------------------------------------------------------
Total 196 187 5 -1
----------------------------------------------------------
NM - Not meaningful
Xolair (USD 80 million, +24% cc) has been growing in major European and Latin
American markets as well as in Japan after its recent launch. The first quarter
of 2010 also included lower sales to Genentech compared to the 2009 period for
the US, where Novartis co-promotes Xolair with Genentech and shares a portion of
operating income. Xolair, a biotechnology drug for moderate to severe persistent
allergic asthma in the US and severe persistent allergic asthma in Europe, has a
global presence with approvals in more than 80 countries. Phase III trials in
China are planned to start in 2010 to support regulatory submissions in this
country.
Onbrez Breezhaler (QAB149) (USD 3 million) a once-daily long-acting
bronchodilator for adult patients with chronic obstructive pulmonary disease
(COPD), was launched in Germany in December 2009 as well as Ireland and Denmark
in March 2010 after European regulatory approval in November 2009. More than 20
launches are planned globally for the second half of 2010, including in the UK,
Spain, Brazil and Mexico. Regulatory submissions are also planned for 2010 in
Japan and China. In the US, all clinical studies to support resubmission have
been started following a Complete Response letter from the FDA in October 2009
requesting additional data.
Immunology and Infectious Diseases
Q1 2010 Q1 2009 % change
USD m USD m USD cc
----------------------------------------------------------
Neoral/Sandimmun 212 221 -4 -10
Reclast/Aclasta 123 85 45 41
Myfortic 100 73 37 27
Certican 34 23 48 36
Other 71 46 54 43
----------------------------------------------------------
Total strategic products 540 448 21 14
Mature products 207 220 -6 -11
----------------------------------------------------------
Total 747 668 12 6
----------------------------------------------------------
Reclast/Aclasta (USD 123 million, +41% cc) has maintained a strong growth pace
driven by the US and geographic expansion. Reclast/Aclasta, a once-yearly
infusion therapy for osteoporosis, has benefited from increasing patient access
to infusion centers and a broad range of use in patients with various types of
this debilitating bone disease.
Certican (USD 34 million, +36% cc), a transplantation medicine, is now available
in more than 70 countries for use in the prevention of organ rejection based on
its immunosuppressive efficacy and side-effect profile. Discussions are
continuing with the FDA on product labeling and a Risk Evaluation Mitigation
Strategy (REMS) to gain US regulatory approval (under the brand name Zortress)
for prevention of organ rejection in adult kidney transplant patients. The FDA
issued a Complete Response letter in December 2009, but did not request
additional clinical trials.
Ilaris (ACZ885) (USD 4 million), a fully human monoclonal antibody that blocks
action of the inflammatory protein interleukin-1 beta, has received additional
regulatory approvals in Canada (February) and Brazil (March) following US and
European regulatory approvals in 2009 for treatment of cryopyrin-associated
periodic syndrome (CAPS), a group of rare auto-inflammatory disorders.
Submissions of ACZ885 for use in the treatment of hard-to-treat gout are planned
for late 2010. Trials are ongoing in other diseases in which IL-1 beta is
believed to play an important role, including chronic obstructive pulmonary
disease (COPD), type 2 diabetes and systemic juvenile idiopathic arthritis
(SJIA).
Vaccines and Diagnostics
Q1 2010 Q1 2009 % change
USD m USD m USD cc
-------------------------------------------------------
Net sales 1 361 247 451 436
Operating income 839 -67 NM NM
As % of net sales 61.6
Core operating income 923 9 NM NM
As % of net sales 67.8 3.6
-------------------------------------------------------
NM - Not meaningful
First quarter
Net sales
The further deliveries for many supply contracts with governments around the
world for A (H1N1) pandemic flu vaccines and adjuvants generated net sales of
USD 1.1 billion, resulting in the strong overall four-fold increase compared to
the year-ago period. The vast majority came from recognition of sales for
deliveries made during the first quarter as part of supply contracts reached in
2009. The new vaccine Menveo was also launched in March after US and European
regulatory approvals for initial use from age 11 and older against four
meningococcal meningitis serogroups. Sales in other areas, including diagnostics
and tick-borne encephalitis vaccines, were broadly unchanged in the 2010 period
compared to 2009.
Novartis has now largely finished deliveries of A (H1N1) pandemic vaccines and
adjuvants to fulfill agreements with various governments, including the United
States, following the pandemic outbreak in mid-2009, and production of A (H1N1)
monovalent doses has been stopped.
Following the declaration of the pandemic in 2009, Novartis made significant
investments that enabled the delivery of more than 150 million A (H1N1) pandemic
vaccine doses through the end of the first quarter of 2010. More than 30,000
people were enrolled in A (H1N1) pandemic vaccine clinical trials, while three
different technology platforms (traditional egg-based, cell-culture-based and
MF-59 adjuvanted vaccines) received regulatory approvals to maximize the vaccine
supply. Novartis also deployed more than 1,000 associates from other divisions
within the Group to support these initiatives.
Operating income
Operating income in the first quarter of 2010 was USD 839 million compared to an
operating loss of USD 67 million in the 2009 period based on contributions of A
(H1N1) pandemic vaccines in the 2010 period, which were made possible by major
investments in 2009.
Core operating income rose to USD 923 million from USD 9 million in the year-ago
quarter. Significant investments were made in the first quarter of 2010 in R&D,
including post-marketing commitments for A (H1N1) pandemic vaccines as well as
the late-stage Menveo and MenB clinical development programs. Higher Marketing &
Sales investments in the first quarter of 2010 over the 2009 period supported
geographic expansion, particularly in emerging markets, and the build-up of
sales and marketing infrastructure for the Menveo launch in the US.
Sandoz
Q1 2010 Q1 2009 % change
USD m USD m USD cc
------------------------------------------------------
Net sales 2 001 1 726 16 9
Operating income 310 291 7 -1
As % of net sales 15.5 16.9
Core operating income 450 347 30 21
As % of net sales 22.5 20.1
------------------------------------------------------
First quarter
Net sales
All regions and businesses supported accelerating growth (USD 2.0 billion, +16%,
+9% cc) compared to 2009 as 17 percentage points of volume expansion from new
product launches, the inclusion of EBEWE Pharma's specialty generics business
since September 2009 and continued strong results from biosimilars more than
offset price erosion of eight percentage points.
US retail generics and biosimilars (+19% cc) delivered successful new product
launches (tacrolimus, lansoprazole and oxaliplatin) as well as improvements in
sales of antibiotics and injectable oncology medicines. German retail generics
and biosimilars (+5% cc) grew in a declining market, strengthening its
leadership position while adapting its business model to compete effectively in
the tender systems adopted by some major healthcare providers in 2009. In
Western Europe (+11% cc), many markets grew at a double-digit pace, notably
Italy, the UK, Austria, Switzerland, Belgium and the Nordic region, but France
contracted strongly and lost market share due to fierce price competition.
Emerging markets expanded at a rapid pace, particularly the Middle East, Turkey
and Africa (+18% cc) and Asia-Pacific (+16% cc) and Central and Eastern Europe
(+7% cc). Biosimilars (+81% cc) gained further momentum on contributions from
the three launch brands Omnitrope, Binocrit and Filgrastim.
Operating income
Operating income grew 7% to USD 310 million, but down 1% cc, as the operating
income margin fell 1.4 percentage points to 15.5% of net sales. Key factors for
the reduction included acquisition-related charges for the EBEWE Pharma
integration (-0.7 percentage points), exceptional costs for termination of a
co-development agreement (-0.8 percentage points) and provisions for settlement
of Average Wholesale Pricing litigation in the US (-1.9 percentage points).
Core operating income rose 30% (+21% cc) to USD 450 million, resulting in the
core operating income margin rising 2.4 percentage points to 22.5% of net sales.
Cost of Goods Sold (+0.1 percentage points) improved slightly as productivity
improvement programs fully offset price erosion. Marketing & Sales costs (-0.9
percentage points) rose faster than sales on investments in biosimilars, Central
& Eastern Europe and Asia-Pacific. R&D investments (+1.0 percentage points) were
lower as productivity initiatives more than offset investments in development
programs for biosimilars as well as other differentiated generics, including
oncology injectables and respiratory products. General & Administrative costs
(+0.8 percentage points) grew slower than net sales due to ongoing
cost-containment measures, while Other Income & Expense (+1.4 percentage points)
improved against the 2009 period due to lower legal fees.
Consumer Health
Q1 2010 Q1 2009 % change
USD m USD m USD cc
------------------------------------------------------
Net sales 1 478 1 303 13 7
Operating income 264 235 12 3
As % of net sales 17.9 18.0
Core operating income 288 254 13 5
As % of net sales 19.5 19.5
------------------------------------------------------
First quarter
Net sales
All three Consumer Health businesses - OTC, Animal Health and CIBA Vision -
contributed to higher net sales in the first quarter of 2010 (USD 1.5 billion,
+13%, +7% cc), as these businesses grew ahead of their respective markets
following challenges in 2009 posed by the financial crisis.
Pain medicines - particularly Voltaren in Europe and Excedrin in the US - were
key contributors in OTC, while a weak "Cough & Cold" season slightly offset this
performance. Prevacid24HR has achieved a 30% market share in the growing US
over-the counter market for proton pump inhibitors since its launch in November
2009, propelled by a strong advertising and promotional campaign. CIBA Vision
maintained its excellent growth pace from 2009, expanding in all regions on new
product launches. The AirOptix contact lens franchise was among top performers,
gaining share in all major markets. Animal Health grew ahead of its market in
the US, helped by a strong competitive position for parasiticide products.
The US (+11%) delivered strong performances across all three businesses, while
Europe (+5% cc) achieved robust growth with strong performances from Germany,
France and Spain. Net sales in the top six emerging markets grew 27% (+11% cc),
as all countries contributed to the positive results and led by double-digit
gains in India and Turkey. Russia also delivered double-digit growth despite
recent government price controls.
Operating income
Operating income rose 12% (+3% cc) to USD 264 million, at a slower pace than net
sales as the operating income margin declined 0.1 percentage points in the first
quarter of 2010 to 17.9% of net sales from the 2009 period.
Core operating income grew 13% (+5% cc) to USD 288 million, largely in line with
net sales in constant currencies, as the core operating income margin was
unchanged at 19.5% of net sales. Other Revenues and sales to other divisions
(+0.3 percentage points) were higher, while Cost of Goods Sold (+0.5 percentage
points) improved as a result of robust sales growth in key markets, optimized
pricing and productivity gains. However, this was largely offset by higher
Marketing & Sales expenses (-0.6 percentage points), primarily driven by
significant promotional support for the 2009 launch of Prevacid24HR in the US as
well as sales force expansion in emerging markets. R&D investments were flat as
a percentage of net sales as investments were made in new product development
across the businesses. General & Administrative costs (-0.3 percentage points)
increased in the 2010 period as a result of a provision release in 2009, while
Other Income & Expense (+0.1 percentage points) were largely unchanged compared
to the 2009 period.
FINANCIAL REVIEW
First quarter
Q1 2010 Q1 2009 % change
USD m USD m USD cc
------------------------------------------------------------------
Net sales 12 131 9 709 25 18
Divisional operating income 3 740 2 521 48 41
Corporate income & expense, net -229 -174
Group operating income 3 511 2 347 50 42
Income from associated companies 103 83 24 17
Financial income 49 -48 NM NM
Interest expense -133 -86 -55 -52
Taxes -582 -321 -81 -94
------------------------------------------------------------------
Net income 2 948 1 975 49 41
------------------------------------------------------------------
EPS (USD) 1.29 0.87 48 40
------------------------------------------------------------------
------------------------------------------------------------------
Core operating income 3 865 2 611 48 41
Core net income 3 309 2 302 44 36
Core EPS (USD) 1.45 1.01 44 36
------------------------------------------------------------------
NM - Not meaningful
Net sales
Net sales rose 25% (+18% cc) to USD 12.1 billion on improvements in all
businesses, particularly sales of A (H1N1) pandemic flu vaccines and rapid
growth of recently launched products across the Group (USD 1.9 billion).
Currency movements contributed seven percentage points to reported growth.
Pharmaceuticals (USD 7.3 billion, +7% cc) advanced in all regions and maintained
solid volume growth. Vaccines and Diagnostics (USD 1.4 billion, +436% cc)
provided USD 1.1 billion from recognition of A (H1N1) pandemic vaccine sales.
Sandoz (USD 2.0 billion, +9% cc) grew on successful new product launches and
integration of EBEWE Pharma following the September 2009 acquisition. All
Consumer Health businesses (USD 1.5 billion, +7% cc) had good performances and
grew faster than their markets. Higher volumes represented 19 percentage points
of growth, while currency movements had a positive impact of seven points and
acquisitions added one point. However, price changes reduced growth by two
points. All regions achieved double-digit growth, led by Europe (USD 4.9
billion, +13% cc) and the US (USD 3.9 billion, +23% cc). Asia-Pacific (USD 2.2
billion, +18% cc) benefited from rapid expansion in key markets. Among the top
six emerging markets (USD 1.2 billion, +22% cc), China, Brazil, India, Russia
and South Korea maintained solid growth, but Turkey was hampered by
cost-containment measures.
Corporate income & expense, net
Corporate expense rose in the first quarter to USD 229 million from USD 174
million in the 2009 period, mainly driven by an additional inter-divisional
profit elimination and various one-time costs.
Group operating income
Operating income rose 50% (+42% cc) to USD 3.5 billion on the volume-driven
sales expansion and significant contributions from Vaccines and Diagnostics,
while also benefitting from eight percentage points of favorable currency
movements. The operating income margin improved 4.7 percentage points to 28.9%
of net sales from 24.2% in the 2009 period. Core operating income, which
excludes exceptional items and amortization of intangible assets in both
periods, rose 48% (+41% cc) to USD 3.9 billion, and the core operating income
margin rose 5.0 percentage points to 31.9% of net sales from 26.9% in the
year-ago quarter.
Income from associated companies
For the first quarter of 2010, income from associated companies rose 24% to USD
103 million from USD 83 million in the 2009 period on anticipated higher net
income contributions from Alcon and Roche. Contributions from Roche for the
2010 quarter were reduced by USD 43 million after Roche took an additional
Genentech-related exceptional restructuring charge in the second half of 2009.
Core results, which exclude exceptional items and the amortization of intangible
assets in both periods, increased 30% to USD 288 million.
Financial income and interest expense
Financial income was a positive USD 49 million in the first quarter from a
negative USD 48 million in the 2009 period, mainly related to significantly
higher average liquidity in the 2010 period and a positive currency result.
Interest expenses rose 55% to USD 133 million following the issuance of US
dollar bonds in February 2009 and March 2010 and a euro bond in June 2009.
Taxes
The tax rate (taxes as percentage of pre-tax income) rose to 16.5% in the first
quarter from 14.0% in the 2009 period. A significant part of this increase was
due to sales of A (H1N1) pandemic flu vaccines in higher-tax jurisdictions.
Net income
Net income rose 49% (+41% cc) to USD 2.9 billion as contributions from
associated companies and financial income more than offset increased interest
expenses and a higher tax rate. Core net income rose 44% (+36% cc) to USD 3.3
billion.
Earnings per share
Earnings per share (EPS) rose largely in line with net income to USD 1.29 in the
first quarter from USD 0.87 in the 2009 period, while core EPS grew 44% (+36%
cc) to USD 1.45 from USD 1.01. The average numer of shares outstanding rose 1%
to 2,279.1 million from 2,265.9 million in the year-ago period, while a total of
2,287.9 million shares were oustanding at March 31, 2010.
Balance sheet
Total assets amounted to USD 95.8 billion at March 31, 2010, an increase of USD
0.3 billion compared to the end of 2009. Although cash and marketable securities
rose by USD 2.4 billion as a result of reinvesting proceeds from the US dollar
bond issued in March 2010, these were nearly offset by reductions due to
currency changes (USD 2.0 billion) and lower underlying trade receivables (USD
0.3 billion).
Total liabilities increased by USD 2.5 billion to USD 40.6 billion as higher
financial debts of USD 3.9 billion were partially offset by reductions in other
non-financial liabilities. The Group's equity fell by USD 2.2 billion to USD
55.2 billion at March 31, 2010, principally due to the dividend payment for
2009 of USD 4.5 billion (a 13% increase from the dividend payment for 2008 of
USD 3.9 billion) and translation losses of USD 1.0 billion. These were partially
offset by net income of USD 2.9 billion in the first quarter of 2010.
The Group's debt/equity ratio rose to 0.32:1 at March 31, 2010, compared to
0.24:1 at the end of 2009, reflecting the higher financial debt following the
issuance of the USD 5 billion bond in March 2010 and the lower equity. The
Group's financial debt of USD 17.9 billion consisted of USD 4.5 billion in
current and USD 13.4 billion in non-current liabilities. Overall liquidity rose
to USD 19.9 billion from USD 17.4 billion at the end of 2009. Net liquidity at
March 31, 2010, fell to USD 2.0 billion from USD 3.5 billion at the end of the
previous year following the USD 4.5 billion payment of the 2009 dividend.
Credit agencies maintained their ratings of Novartis debt during the first
quarter of 2010. Moody's rated the Group as Aa2 for long-term maturities and P-1
for short-term maturities, and Standard & Poor's had ratings of AA- for
long-term and A-1+ for short-term maturities. Fitch had a long-term rating of AA
and a short-term rating of F1+.
Cash flow
Cash flow from operating activities rose 69% to USD 3.3 billion in the first
quarter, driven by the strong business performance and in particular proceeds
from A (H1N1) pandemic vaccines. Cash used for investing activities fell by USD
1.7 billion to USD 1.1 billion from the 2009 period, which included USD 2.4
billion of investments in marketable securities with proceeds from the 2009 US
dollar bond. Among investments in the 2010 period were USD 0.4 billion for
acquisitions, including USD 0.3 billion for completion of the EBEWE Pharma
transaction. Cash flow from financing activities included a USD 4.2 billion
increase in net financial debt due to the 2010 US dollar bond issuance and USD
0.4 billion arising from treasury share transactions, principally related to
share-based compensation, but these were largely offset by the dividend payment
of USD 4.5 billion .
Free cash flow before dividends rose 93% to USD 2.9 billion, with the USD 1.4
billion increase principally coming from the improved cash flow from operating
activities.
INNOVATION REVIEW
Novartis has one of the industry's most competitive pipelines with 135 projects
in pharmaceutical clinical development, of which 58 involve new molecular
entities.
Among developments in the first quarter of 2010:
* Approvals in Japan in January for Afinitor (kidney cancer), Equa (Galvus)
(type 2 diabetes) and Exforge (hypertension) following approvals of six new
medicines in this market in 2009.
* First approvals of the Menveo meningitis vaccine in the US (February) and
Europe (March) from age 11 and older, and also the US filing for use from
age 2-10.
* Submission for US approval of a triple combination therapy for hypertension
in a single pill containing Tekturna/Rasilez, amlodipine and
hydrochlorothiazide as well as Exelon Patch (Alzheimer's disease) and
Tasigna (cancer) for approval in Japan.
* Two US regulatory submissions completed in late 2009 - Tasigna (newly
diagnosed CML) and Gilenia (FTY720, multiple sclerosis) - were given
priority review status.
* Discontinuation of PTZ601 (complicated staphylococcal skin and soft tissue
infections) after observation of a high rate of adverse events in a Phase I
study and LCI699 (heart failure) after identification of a safety issue in
form of an impaired stress response. One of the two Phase III trials
involving ASA404 (non-small cell lung cancer) was halted in March following
an interim analysis of benefits for patients with NSCLC.
2010 selected major approvals: US, Europe and Japan
--------------+-------------------------+------------------------+-------------
Product |Active ingredient |Indication |Approval date
--------------+-------------------------+------------------------+-------------
Afinitor |Everolimus |Kidney cancer |Japan - Q1
--------------+-------------------------+------------------------+-------------
Equa (Galvus)|Vildagliptin |Type 2 diabetes |Japan - Q1
--------------+-------------------------+------------------------+-------------
Exforge |Valsartan and amlodipine |Hypertension |Japan - Q1
--------------+-------------------------+------------------------+-------------
Menveo |Quadrivalent |Prevention of |US, EU - Q1
|meningococcal conjugate |meningococcal meningitis|
|vaccine |(A, C, Y, W-135) |
--------------+-------------------------+------------------------+-------------
Selected projects awaiting regulatory decisions
--------------------------------------------------------------------------------
Completed submissions
---------------------------
Product Indication US EU Japan News update
--------------------------------------------------------------------------------
ABF656 Hepatitis C Q4 2009 - EU
submission
withdrawn in
April 2010 for
technical
reasons
--------------------------------------------------------------------------------
Exelon Patch Alzheimer's Approved Approved Q1 2010
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Datum: 20.04.2010 - 01:02 Uhr
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"
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