Novartis AG ( NVS) said Wednesday that year-end results were badgered by a $444 million restructuring charge in the fourth quarter and a $1.4 billion drop in U.S. sales of five drugs throughout the year -- but the Swiss behemoth also announced a $9.2 billion buyback plan to dull the pain. Shares of the Switzerland-based pharmaceutical company were trading down $1.98, or 3.6%, to $53.46. For the year, net sales increased 11% to $38.1 billion. Profits totaled $11.95 billion, vs. $7.2 billion in 2006. Excluding divestments, the company said profit attributable to shareholders declined 6% to $6.75 billion. Basic annual earnings per share were down 3% to $2.81 from $2.90 the year before. Analysts surveyed by Thomson Financial were looking for $3.25 a share on revenue of $37.75 billion for 2007, and 73 cents a share on revenue of $9.7 billion for the quarter. Fourth-quarter net income attributable to shareholders fell 45% to $904 million, from $1.65 billion in the year-ago quarter, and earnings per share fell 41% to 40 cents a share. The company said quarterly net sales in pharmaceuticals rose just 2% year over year to $6.15 billion and vaccines and diagnostics fell 13% to $398 million. However, net sales from its Sandoz division and consumer health continuing operations rose 19% and 14%, respectively, countering the lesser performing groups. Looking ahead, the company said results of its pharmaceuticals division will be negatively affected in the first two quarters of 2008 by the full-year effect of having lost significant sales contributions from five products -- Zelnorm, Lotrel, Trileptal, Lamisil and Famvir -- in the U.S. during 2007. Those products accounted for $3.1 billion in sales in 2006, but only $1.7 billion in 2007. The impact of the loss of sales will linger until late 2008, but Novartis said it expects high single-digit sales growth for the division by the fourth quarter of 2008 with new product launches and expansions of its Diovan and Gleevec/Glivec. Novartis took a $444 million charge in the fourth quarter of 2007 from its "Forward" initiative. It launched the initiative in December to simplify organizational structures, accelerate and decentralize decision-making processes and provide productivity gains. The restructuring, which involves cutting 2,500 jobs, should be implemented in 2008 and 2009, according to the company. It predicts pretax annual cost savings from the initiative of $1.6 billion in 2010. Meanwhile, Novartis announced a $9.2 billion buyback, using money from the sale of its medical nutrition and Gerber baby food business, and plans to increase its dividend by 19%.
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).