Novartis ( NVS) said Thursday third-quarter profits jumped in light of divested assets, but the drugmaker is shaving off 1,260 U.S. jobs to adjust for weak pharmaceutical sales. Net profit rose to $6.9 billion, or $2.97, from just $1.9 billion in the third quarter of 2006 -- a surge that resulted from the sale of its Gerber baby foods and Medical Nutrition units to Nestle. The divestment resulted in after-tax gains of $5.2 billion. Without the one-time items, profit fell 12% to $1.57 billion from $1.79 billion last year. The company earned 68 cents a share from basic continuing operations for the quarter compared to 77 cents a share in 2006. Sales rose 9% to $9.61 billion from $8.82 billion. Pharmaceutical sales growth grew by only 2%, to $5.89 billion from $5.78 billion in the third quarter of 2006, while the pharmaceutical division's operating profit fell 13% to $1.54 billion from $1.78 billion. Novartis will cut 1,260 jobs in U.S. pharmaceuticals marketing and sales, an effort to save $230 million annually through the move. The company also announced that Joe Jimenez (who joined the company in April) will become the CEO of Pharmaceuticals and Thomas Ebeling (former CEO of pharmaceuticals) was named as CEO of Consumer Health. Novartis said the pharmaceuticals division's net sales are and will be negatively impacted during 2007 and the first half of 2008 by the suspension of Zelnorm as well as U.S. generic competition for Lotrel, Lamisil, Famvir and Trilepta. (Combined annual U.S. net sales in 2006 for these products were about $3.1 billion.) As a result, it expects mid-single-digit growth in 2007 net sales for group continuing operations and low-single-digit growth in the pharmaceuticals division, both in local currencies.
Stocks soar as the gross domestic product rises at an annualized rate of 3.5% in the third quarter and continuing jobless claims fall. Gregg Greenberg recaps the action in The Real Story video (above).