Novartis Predicts Fruitful Year

The drug company says second-quarter results put it on track to meet its 2005 goals.
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advanced Thursday after the Swiss drug giant said second-quarter sales and earnings put it on track to meet its goals for 2005.

Novartis said its first-half performance suggests the company will achieve record net income for the full year, "barring any unforeseen events" and excluding the effect of two major acquisitions.

The stock gained $1.21, or 2.6%, to $48.41.

Earnings per share rose 11%, net income climbed 9% and revenue gained 12% for one of the world's largest drugmakers and the sixth-biggest seller of pharmaceuticals in the U.S. Novartis earned $1.65 billion, or 70 cents a share, on revenue of $7.8 billion for the three months ended June 30. That compares with a profit of $1.51 billion, or 63 cents a share, on revenue of $6.97 billion for the same period last year.

Each of the company's three major divisions -- prescription drugs, generic drugs and consumer health care products -- posted low double-digit sales gains.

The prescription drugs unit, which accounts for two-thirds of corporate sales, recorded a 17% increase in operating profit for the quarter. The consumer health division, whose products range from contact lenses to nonprescription cough and cold products, posted a 5% gain.

Novartis' Sandoz generics unit recorded a 40% drop in operating profit thanks primarily to one-time restructuring charges and other charges.

The Sandoz division is in the process of acquiring two generic drug companies,

Hexal AG

and

Eon Labs

(ELAB)

. Both are controlled by a German holding company. Sandoz completed the Hexal acquisition on June 6, and the Eon Labs deal is expected to close within three months.

Sales of the blood pressure drug Diovan rose 20% to $912 million. Another hypertension drug, Lotrel, advanced 22% to $278 million, and Zelnorm, for constipation and irritable bowel syndrome, had a sales increase of 34% to $102 million. One of the biggest drugs, Lamisil, for fungal nail infections, started to feel the impact of generic competition, posting a 6% gain to $315 million.

Novartis was also paced by its cancer drug franchise. Gleevec, for a type of leukemia and certain gastrointestinal tumors, gained 33% to $537 million. Sales of Femara, for breast cancer, were up 48% to $136 million, and Zometa, for strengthening bones damaged by the spread of cancer, saw sales rise 13% to $312 million.