Novartis 1st-qtr 2011 hit by strong franc but still beats forecasts

Swiss drug major Novartis (NOVN: VX) reported a 16% rise (+14% at constant currencies) in first-quarter 2011 sales to $14.0 billion, ahead of consensus estimates of $13.8 billion. Excluding A(H1N1) pandemic flu vaccine sales and Alcon, net sales grew 10% (+8% cc). Currency benefited sales by 2% as the dollar weakened against most currencies.

Operating income for the quarter was down 3% (0% cc) and core operating income margin declined 3.3 percentage points to 28.6% of sales. Core operating income was up 4% (+6% cc) to $4.0 billion (versus estimates of $3.8 billion); core earnings per share decreased 3% (0% cc) to $1.41 (vs expectations of around $1.36). Net income came in at $2.82 billion, down 4%. The company reaffirmed its 2011 group net sales to grow around the double-digit and aim to improve core operating income margin in constant currencies.  Novartis shares were up 2.3% at 49.70 francs at 0710 GMT this morning.

Commenting on the results, Joseph Jimenez, chief executive of Novartis, said: "Contributions from all businesses led to a good start in 2011, as we achieved 14% growth in the first quarter. We maintained our innovation momentum with new approvals for our multiple sclerosis treatment Gilenya [fingolimod] and our eye care treatment Lucentis [ranibizumab injection] in the EU. Additionally, promising results of numerous clinical trials, including a Phase III study involving JAK inhibitor INC424, again showed the success of our novel approach to R&D. In April, we completed our merger with Alcon, the leading eye care business in the world, creating the second-largest business in the Novartis portfolio."