By Marta Falconi
ZURICH--Swiss pharmaceutical giant Novartis AG on Tuesday
reported a fall in fourth-quarter profit but said it expects its
business to gain momentum this year despite uncertainty spawned by
the strengthened Swiss franc.
Basel-based Novartis said net sales would grow by a mid-single
digit percentage this year compared with 2014, when stripping out
the effect of foreign-exchange rate fluctuations. Core operating
income, which excludes certain charges and expenses, will likely
grow at a slightly faster rate, the company said.
Last year marked the start of a sweeping overhaul of the
company, aimed at refocusing it on three core
businesses--pharmaceuticals, eye care and generics--where it says
it has the size and reach to compete as the global pharmaceutical
industry consolidates.
Novartis Chief Executive Joe Jimenez said during a media
briefing Tuesday that he doesn't expect the recent surge in value
of the Swiss franc to have a material impact on sales, but added
the company is "taking a look" at its cost base, both in
Switzerland and globally.
Earlier this month, the Swiss National Bank decided to abandon
the 1.20 Swiss francs-a-euro cap, sending the value of the franc
soaring and potentially inflicting higher costs on Switzerland's
banks and many export-reliant companies. The franc gained as much
as 29% in value versus the euro and 28% against the dollar shortly
after the SNB's move, and remains at elevated levels relative to
both currencies.
The currency fluctuation comes at a sensitive time for Novartis,
which is in the midst of a revamp.
For the fourth quarter, Novartis reported a 26.5% drop in
fourth-quarter net profit attributable to shareholders to $1.49
billion, from $2.03 billion in the same quarter a year earlier. The
decrease is mainly because of a charge related to the sale of
Novartis's flu vaccines business, the company said.
Core net income in the quarter, which excludes some items, rose
to $2.91 billion from a restated $2.89 billion, Novartis said.
The company reported that sales declined 2% to $14.63 billion in
the quarter, missing analysts forecast of $14.68 billion. Sales
were hurt by generic competition for Diovan, a blockbuster
blood-pressure medicine, the company said. Stripping out the impact
of currency fluctuations, sales rose 4%.
As part of its continuing overhaul, Novartis said in January it
had completed a roughly $5.4 billion sale of its animal-health
division to Indianapolis-based Eli Lilly & Co. Novartis is also
acquiring London-based GlaxoSmithKline PLC's oncology unit for
around $14.5 billion, adding to its lineup of cancer drugs.
At the same time, Glaxo is paying $5.25 billion for Novartis's
vaccines business. The two companies will also combine their
over-the-counter drug businesses under Glaxo's management.
Write to Marta Falconi at marta.falconi@wsj.com
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