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Novartis International AG

Novartis continues on dynamic growth path as Pharmaceuticals increases market share

Basel (ots)

  • First-quarter Group sales up 13% in local currencies (10% in Swiss francs)
  • Pharmaceuticals extends double-digit sales growth (+16% in local currencies; +14% in Swiss francs), driven by strong demand for cardiovascular, oncology and ophthalmic products in all regions
  • Net profits surge 20% in Swiss francs driven by sharp rises in operational performance and financial income
Consolidated key figures 
               First Quarter 2002    First Quarter 2001     Change
               USD m   CHF m   %     CHF m   %              CHF m   %
Sales          4'742   7'967         7'224                  743    10
Operat. Income 1'085   1'822                                277    18
in % of sales                  22,9  1'545   21,4
Net Income     1'064   1'788         1'485                  303    20
in % of sales                  22,4          20,6
Number of employee      72'631      69'491                3'140     5
Earnings per share/ADS 
               USD 0,42 CHF 0,70     CHF 0,57             CHF 0,13 23
Basel, 18 April 2002 - For the first time Novartis is reporting
full financial results on a quarterly basis, further increasing
transparency.
Dr. Daniel Vasella Chairman and CEO commented: "Our consistent
strategy of investing in innovation and growth resulted in the
continued dynamic performance. We gained segment share in the
critical US market and strengthened our leadership in the
cardiovascular and oncology fields. In 2002, we plan to further
invest in R&D to enhance our competitive edge over the long-term, and
will focus our resources on growing our strategic brands". In
February, the reorganization of Consumer Health into business units
was announced together with plans to divest the Health and Functional
Food business with annual sales of about CHF 850 million.
Group sales up 10% to CHF 8.0 billion (USD 4.7 billion) Group
sales rose 13% in local currencies (10% in Swiss francs) above the
previous first-quarter level. Sustained dynamic sales growth in
Pharmaceuticals, strong sales in Generics and the superior
performance in the US were the main contributors to the overall
growth.
Operating income climbs 18% to CHF 1.8 billion (USD 1.1 billion)
On a Group level, Marketing & Distribution investments increased at a
lower rate than sales. Investments in Research & Development
increased 12% and were maintained at 13% of sales. General &
Administration costs increased slightly as a percentage of sales
owing to joint venture termination costs in OTC and additional
intangible charges. As a result, operating income increased
substantially by 18% to CHF 1.8 billion (USD 1.1 billion), with the
Group's operating margin improving to 22.9% versus 21.4% for the same
period last year.
Net income rises 20% to CHF 1.8 billion (USD 1.1 billion) This
record level of net income resulted from a strong growth in operating
income paired with a higher net financial income, up 74% to CHF 378
million (USD 225 million). Taxes amounted to CHF 398 million (USD 238
million), corresponding to a tax rate of 18.2% up 1.2 percentage
points from the prior period.
Outlook
Growth momentum is expected to continue in Pharmaceuticals based
on the performance of key brands, new product roll-outs and new
indications. The strong start in the first quarter of 2002
underscores Novartis' forecasts of full-year Pharmaceuticals sales
growth in the 10% range, with top-line growth driving an equivalent
rise in operating income, resulting in a stable operating margin -
assuming no unexpected product approvals.
The remaining sectors are expected to develop in line with their
respective markets, with the non-pharmaceutical operating margins on
average maintained.
Barring any unforeseen events, Group sales are expected to
increase in the mid to high single-digit range in 2002, with
operating income growing in line with sales. Net financial income,
which is still difficult to predict, is expected to be lower than
last year but net income is expected to reach a new record level. 
   Sector reviews
Sales by sector
First quarter 2002  First quarter 2001  Change
 USD m      CHF m    CHF m               in CHF m   in CHF    in loc.
                                                           currencies
                                                                    %
Pharmaceuticals
 3'067      5'153    4'538                615       14             16
Generics
   384        646      528                118       22             26
OTC
   340        571      601(1)             -30       -5             -3
Animal Health
   150        252      240                 12        5              8
Medical Nutrition2  
   223        375      373(1)               2        1              3
Infant & Baby
   323        542      521(1)              21        4              3
CIBA Vision
   255        428      423                  5        1              4
Total
 4'742      7'967    7'224                743       10             13
(1) Restated to reflect a change in the classification of certain
sales incentives and discounts to retailers. In the first   quarter
of 2001, sales have been reduced by CHF 30 million, CHF 11 million
and CHF 55 million for OTC,   Medical Nutrition, and Infant & Baby,
respectively, with a corresponding reduction in marketing and
distribution   expenses.
(2) Including Health & Functional Food 
Operating income by sector
First Quarter 2002          First Quarter 2001    Change 
                          % of                 % of
      USD m     CHF m     Sales     CHF m      Sales      CHF m    %
Pharma
        862     1'448      28,1      1'244      27,4        204   16
Generics
         55        92      14,2         65      12,3         27   42
OTC
         32        54       9,5         58       9,7         -4   -7
Animal Health
         25        42      16,7         44      18,3         -2   -5
Medical Nutrition(1)  
         14        23       6,1         18       4,8          5   28
Infant & Baby
         59        99      18,3         90      17,3          9   10
CIBA Vision(2)
         23        38       8,9          6       1,4         32   -- 
Corporate income, net
         15        26      --           20        --          6   30
Total
      1'085     1'822      22,9      1'545      21,4        277   18
(1)  Including Health & Functional Food
(2) Excluding exceptionals in the first quarter of 2001 associated
with the Wesley Jessen acquisition (CHF 28 million),   operating
income would have been CHF 34 million, producing a 2002 increase of
12% in Swiss francs and a 2001   operating margin of 8%.
Pharmaceuticals
Sales
Pharmaceuticals first-quarter sales climbed 16% in local
currencies (+14% in Swiss francs) to CHF 5.2 billion (USD 3.1
billion), with all countries performing well. In the US, sales surged
23%, driven by strong demand for cardiovascular, oncology and
ophthalmics products.
Operating income
Strong top line growth driven by increased volumes lifted
Pharmaceuticals' operating income by 16%. Research & Development
investments increased 10% as a result of the new research strategy
initiated in the second part of 2001 and to advance projects in the
final stages of development.
Highlights
Primary Care
Diovan/CoDiovan (+80%, US: +102%; hypertension) sales continued to
grow dynamically. The brand extended its leadership of the
angiotensin II receptor blocker category in the US, where more than
half of its sales are generated and where its share of total
prescriptions at the quarter-end reached 36.8% (IMS weekly TRx data).
In the US, the tablet formulation and the 320mg strength were rolled
out, offering greater choice and flexibility in terms of dosage
strength than any other product in the class. Further data published
in March from the Val-HeFT study showed that Diovan reduced mortality
by 33% and morbidity by 44% in heart failure patients who did not
take ACE inhibitors.
The Cibacen (hypertension) range posted sales growth of 39% (US:
+49%), driven by the continuing strong performance of Lotrel (Cibacen
combined with amlodipine; US: +55%), which extended its share of new
prescriptions in the US amlodipine segment to 22.7% at the
quarter-end.
Lescol (+31%, US: +39%; cholesterol reduction) sales were up
markedly on the prior period due to the XL (extended-release)
formulation and the product's particularly favorable proven
safety/efficacy profile compared with other statins. This was
underscored by positive new data from an analysis of 9000 patients
published in January and the landmark LIPS clinical trial, published
in March, which demonstrated the protective effect of Lescol against
future fatal and non-fatal cardiac events.
Lamisil (-16%, US: -42%; fungal infections) sales dropped
reflecting increased inventories in the US at the end of 2001. The
product's success in gaining market segment share from its major
competitor was further supported by clinical results, published in
March, from the L.I.ON. I.E.S. study, showing higher long-term cure
with Lamisil compared with itraconazole in treating fungal toenail
infections.
Famvir (+26%, US: +31%; viral infections) performed very well
thanks to its unique benefit in reducing the duration of painful,
post-herpetic neuralgia.
Exelon (+23%, US: +37%; Alzheimer's disease) continued to grow
dynamically in spite of increased competition in its fast-growing
segment. Results were published in January showing for the first time
that Exelon is beneficial for patients with subcortical vascular
dementia.
Trileptal (+82%, US: +105%; epilepsy) sales were driven by the
roll-out in the US, where the product is also now being launched in
the additional indication of monotherapy in childhood epilepsy. The
new oral suspension formulation offering more convenient
administration for young patients is being introduced in Europe.
Recently launched products and pipeline update Elidel, the new
non-steroid cream for treating eczema was launched in its first
market, the US. It gained its first EU approval, in Denmark, in March
and was approved more recently in Mexico and Columbia. The clinical
data released in the first quarter showed that eczema improved in 82%
of adults treated with Elidel cream.
Starlix (CHF 32 million; USD 19 million, type 2 diabetes) is
progressing slowly in the very competitive oral anti-diabetics
market; its uptake is expected to increase as post-prandial glucose
monitoring becomes standard clinical practice.
Zelmac/Zelnorm, for irritable bowel syndrome (IBS), gained further
market approvals, including Australia, Canada and Brazil, bringing
the total number of countries in which this novel treatment is
approved to 27. The response from patients and physicians has been
very positive. Survey results published in March emphasize that IBS
is under-diagnosed and has a negative economic impact worldwide.
Novartis has provided further data to the FDA and is continuing to
work with regulatory authorities in the US and the EU to bring the
product to female patients who are in need of a safe and effective
treatment for IBS.
Phase III trials of zoledronic acid for treatment of
postmenopausal osteoporosis and Paget's disease were initiated. New
data were published in the February edition of the New England
Journal of Medicine demonstrating the drug's efficacy in increasing
bone mineral density in post-menopausal women with osteoporosis after
a once-yearly dose.
Oncology
Novartis Oncology sales grew strongly (+28% in local currencies),
thanks in particular to the introduction of Glivec/Gleevec and the
strong performances of Femara, Zometa and Sandostatin.
Glivec/Gleevec (chronic myeloid leukemia) first-quarter sales
topped CHF 183 million (USD 109 million). Now approved in more than
60 countries, this innovative cancer therapy was awarded the
prestigious Prix Galien in France last month. The February 2002 issue
of New England Journal of Medicine reported that 95% of
Glivec/Gleevec-treated patients with late chronic phase CML were
alive at 18 months. Novartis plans to apply, by mid 2002, for a label
change to include newly-diagnosed CML patients. In February, the
product gained US approval for use in gastrointestinal stromal
tumors; it has also received approval in Switzerland and a positive
opinion from the CPMP bringing it closer to European approval for
this rare life-threatening disease.
Zometa (bone cancer complications) achieved sales of CHF 112
million (USD 66 million) and, in February, gained broad FDA approval
for treating patients with multiple myeloma and patients with
documented bone metastases from lung cancer, breast cancer, other
solid tumor types and prostate cancer - a large market with high need
for effective treatment. Promotion to urologists was initiated in the
US in March. Approval for bone metastases is expected in the EU in
the third quarter.
Aredia (bone metastases; _40%, US: _52%), sales reflected the
impact of first generics and the introduction of Zometa, the new
generation, more convenient and more potent successor compound.
Aredia and Zometa posted combined sales of CHF 306 million (USD 182
million), down 6% from the first quarter of 2001.
Femara, the first-line treatment for advanced breast cancer in
hormone sensitive post-menopausal women posted a sales increase of
63% over the prior period, benefiting from the rapid expansion of the
global market for aromatase inhibitors. Data were published
demonstrating Femara's (in vivo) superiority to anastrazole in
suppressing estrogen levels, and a head-to-head comparison of the two
drugs in the second line setting will be presented at the American
Society of Clinical Oncology meeting in May.
Sandostatin (+30%; US: +47%; acromegaly/carcinoid syndrome)
continued strong growth in its market segments, thanks to the success
of the more convenient, long-acting, once-a-month LAR formulation.
Ophthalmics
Ophthalmics posted a 25% rise in sales in local currencies (22% in
Swiss francs) above the first quarter of last year, due mainly to the
performance of Visudyne.
Visudyne (+47%; US: +40%; treatment for forms of choroidal
neovascularization secondary to age related macular degeneration)
sales continued to grow strongly due to increased usage in newly
approved indications, reimbursement in major European markets and
geographical expansion. Visudyne therapy is now available in some 60
countries for its main indication and is also approved in more than
35 countries including the EU, US and Canada for additional
indications. A direct-to-consumer marketing campaign was launched in
the US in February to increase awareness of Visudyne therapy.
The remaining Ophthalmics business including anti-allergy, dry-eye
and glaucoma treatments posted solid sales growth.
Transplantation
Sales of Neoral/Sandimmun, the cornerstone of immunosuppression,
eased down just 1% from the prior period level, owing mainly to
strong US (+7%) and European performances.
Simulect, the induction immunosuppressant designed to complement
Neoral and optimize clinical outcomes, posted a 28% rise in sales
(US: +72%) as it gained market segment share from established
competitor brands in most geographic regions.
Mature Products
The slow-down in sales erosion of mature brands continued in the
first quarter of 2002 as a result of steps taken to further drive
marketing and sales force productivity across key markets. The sales
decline rate of Voltaren (_3%; US: -33%; anti-inflammatory) developed
as anticipated.
Generics
Sales
Novartis Generics sales jumped 26% in local currencies million
(22% in Swiss francs) to CHF 646 million (USD 384 million),
reflecting a slower start in the previous year, new product launches,
increased volumes and, to some extent, recent acquisitions. The
Retail Business posted exceptionally strong gains, particularly in
the US and Mexico, fuelled by recent launches including the
anti-depressant fluoxetine (a generic form of Prozac(r)), the
diabetes drug metformin (a generic form of Glucophage(r)), and the
anti-inflammatory nabumetone (a generic form of
Relifex(r)/Relafen(r)). The latter two were launched in January and
February respectively.
The Industrial Business benefited from sustained strong sales of
bulk antibiotics. Production is currently focussed on various
high-value compounds, the sales of which are expected to occur in the
second half of the year. The contract manufacturing business showed
further favorable growth.
Operating income
Operating income soared 42%, mainly as a result of the high margin
fluoxetine business, the benefits of restructuring in the US, and
acquisition synergies. Costs related to the latter items did not in
recur in the first quarter of 2002. The operating margin increased
1.9 percentage points to 14.2%.
OTC
Sales    First-quarter sales of OTC (over-the-counter) medicines
reached CHF 571 million (USD 340 million).
Excluding terminated businesses, sales grew 3%, driven by the key
brands Lamisil Cream (antifungal), Nicotinell/Habitrol (smoking
cessation), Maalox (heart burn, indigestion), and Denavir (herpes),
which was recently transferred from Pharmaceuticals. Additional
impetus came from Benefiber, a natural fiber laxative developed by
Novartis and recently launched in the US.
The expiry of two licensing/distribution agreements at the end of
last year combined with a weak season for cough and cold products in
the US, led to an overall decline in sales of 3% in local currencies
(-5% in Swiss Francs).
Operating income
Operating income dropped 7% to CHF 54 million owing to lower
volumes and provisions for the expected impact of the Kao joint
venture in Japan, which was terminated in March. The operating margin
eased down 0.2 of a percentage point to 9.5%.
Animal Health
Sales
In an overall stagnating market, Animal Health sales were up from
the same period of last year by 8% in local currencies (5% in Swiss
francs) to CHF 252 million (USD 150 million). The US vaccine business
acquired in January contributed 6 percentage points to sales growth,
the remainder coming principally from a pick-up in European sales
combined with good performances in the Latam and Asia/Pacific
regions. First-quarter revenues in the US were lower, owing to a
shift of the Spring sales offer to the second quarter this year.
The farm animals business, delivered strong sales growth, led by
the therapeutic antimicrobials Tiamutin and Econor for pigs and
poultry. The Vaccines and Aquahealth businesses continued to perform
well and were strengthened by the US launch of a novel vaccine for
dairy cattle. The companion animal business faced increased
competition particularly in the flea treatment area, but benefited
from the solid performance of Interceptor (worm treatment) and the
strong growth of Fortekor, the cardio/renal drug for dogs and cats.
Operating income
Animal Health's operating income reached CHF 42 million, 5% lower
than in the first quarter of last year, owing mainly to
acquisition-related costs. The operating margin was 16.7%, 1.6
percentage points off the previous period's high level.
Medical Nutrition (including Health & Functional Food) Sales
Combined Medical Nutrition and Health & Functional Food sales grew 3%
in local currencies (1% in Swiss francs) to CHF 375 million (USD 223
million).
Medical Nutrition posted solid sales growth in all regions as a
result of continued focus on the umbrella brands Isosource and
Novasource (tube feeding products), Resource (medical food
supplements) and Impact (immunonutrition), a concentration on
specific disease segments, and the expansion of the home-care
channel.
Health & Functional Food (HF&F) sales were slightly lower than in
the prior period owing mainly to the continued weak performance of
the juice business in Poland and lower-than-expected Food and
Beverage sales in China due to a change of distributors. Plans to
divest the HF&F business by year-end are proceeding on track.
Operating Income
Operating income was up 28% to CHF 23 million, owing to lower R&D
costs in HF&F. Marketing & Distribution investments increased in
Medical Nutrition to enhance sales force activities. The operating
margin climbed 1.3 percentage points to 6.1%.
Infant & Baby
Sales
The Infant & Baby sector continued to outpace its segments,
posting first-quarter sales growth of 3% in local currencies (4% in
Swiss francs) to CHF 542 million (USD 323 million) despite only
moderate birth rate increases.
In the largest segment, US baby/toddler food, Gerber continued to
build its share through innovative marketing programs and
initiatives. The Gerber Wellness line posted record quarterly growth
as US sales jumped 40% above the first quarter of last year.
Performance outside the US was good with Latam sales growing 11%.
Asia also turned in a good overall performance, whilst Europe and the
Middle East had to contend with increased competition.
Operating Income
Operating income rose 10% to CHF 99 million (USD 59 million) as a
result of continued productivity gains and lower investments for
development and product introductions than in the previous period. As
a result, the operating margin improved by one percentage point to
18.3%.
CIBA Vision
Sales
First-quarter sales at CIBA Vision increased 4% in local
currencies (1% in Swiss francs) to CHF 428 million (USD 255 million),
driven by the Focus range of contact lenses and the FreshLook brand
of cosmetic lenses, which were introduced in Japan.
In the ophthalmic surgical business, Vivarte, the anterior chamber
phakic refractive lens, was launched in Europe and the company signed
an agreement with Presby Corp. for a worldwide license to innovative
ophthalmic surgical products.
The lens-care business continued to contend with a declining
market by rolling out new improved-convenience products including
SOLO-care PLUS, which gained FDA approval in January.
Operating income
First-quarter operating income increased by CHF 32 million to CHF
38 million (USD 23 million) and the operating margin increased from
1.4% to 8.9%. The improvement was mainly due to non-recurring costs
of CHF 28 million in the first quarter of 2001 related to the
integration of Wesley Jessen. Adjusting for this, the operating
margin increased from 8.0% in 2001 to 8.9% in 2002.
Novartis AG (NYSE: NVS) is a world leader in healthcare with core
businesses in pharmaceuticals, consumer health, generics, eye-care,
and animal health. In 2001, the Group's businesses achieved sales of
CHF 32.0 billion (USD 19.1 billion) and a net income of CHF 7.0
billion (USD 4.2 billion). The Group invested approximately CHF 4.2
billion (USD 2.5 billion) in R&D. Headquartered in Basel,
Switzerland, Novartis Group companies employ about 72 600 people and
operate in over 140 countries around the world. For further
information please consult http://www.novartis.com.
Further reporting dates in 2002
First half and second quarter sales and results22 July 2002   
Nine months and third quarter sales and results17 October 2002
Notes to the interim financial report for the three months ended
31 March 2002
1. Basis of preparation
The unaudited interim financial report for the three months ended
31 March 2002 has been prepared in accordance with the accounting
policies set out in the Financial Report for the year ended 31
December 2001 and International Accounting Standard 34 on Interim
Financial Reporting.
There were no significant changes in accounting policies or
estimates or in any contingent liabilities from those disclosed in
the 2001 Financial Report.
2. Changes in the scope of consolidation and other significant
acquisitions The following significant changes were made during the
three months to 31 March 2002 and in 2001:
2002
Animal Health
In January, the sector completed the acquisition of two US farm
animal vaccine companies, Grand Laboratories Inc., Iowa and ImmTech
Biologies Inc., Kansas. The combined 2001 revenues were approximately
CHF 55 million (USD 33 million) and the combined purchase price is a
minimum of CHF 160 million of which CHF 140 million was settled in
Novartis American Depositary Shares. The final purchase price may
increase depending on whether certain future sales and other targets
are met.
Medical Nutrition (including Health & Functional Food) In
February, Novartis announced its intention to divest the Health &
Functional Food businesses by the end of 2002.
2001
Generics
In January, the sector acquired the generic business line in the
USA of Apothecon Inc., from Bristol Myers Squibb. In April, the
sector acquired Labinca SA, Buenos Aires, Argentina and Lagap
Pharmaceuticals Ltd., UK.
Corporate
During 2001, the Group acquired 21.3% of the voting shares of
Roche Holding AG, which represents approximately 4% of its total
shares and equity securities.
This release contains certain "forward-looking statements",
relating to the Group's business, which can be identified by the use
of forward-looking terminology such as "plan", "expect", "estimates",
"forecasts", "will", or similar expressions, or by discussions of
strategy, plans or intentions. Such statements include descriptions
of new products and new indications to be approved for existing
products, expected to be introduced or have been introduced by the
Group and anticipated customer demand for such products. Such
statements reflect the current views of the Group with respect to
future events and are subject to certain risks, uncertainties and
assumptions. Many factors could cause the actual results, performance
or achievements of the Group to be materially different from any
future results, performances or achievements that may be expressed or
implied by such forward-looking statements. Some of these are
uncertainties relating to clinical trials and product development,
unexpected regulatory delays or government regulation generally, and
obtaining and protecting intellectual property, as well as factors
discussed in the Group's Form 20-F filed with the Securities and
Exchange Commission. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those described
herein as anticipated, believed, estimated or expected.
All USD figures are convenience translations of CHF into USD at a
rate of 1.68. These translations should not be construed as
representations that the CHF amounts actually represent, or could
have been converted into, such USD amounts at the rate indicated or
any other rate.

Contact:

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Internet Address: http://www.novartis.com