Novartis Earnings Squeezed by Research Costs

It posts nominal profit growth on a big, currency-goosed sales increase.
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Swiss pharmaceuticals giant

Novartis

(NVS) - Get Report

posted higher earnings and revenue in the second quarter, but saw bottom-line growth tempered by higher spending on drug research.

Second-quarter earnings were $1.32 billion, or 52 cents a share, compared with $1.29 billion, or 48 cents a share. Analysts polled by Thomson First Call had been forecasting earnings of 51 cents a share in the latest quarter. Sales jumped 19% to $6.2 billion, though about half that gain was attributable to currency swings.

The company reported double-digit sales growth in a number of its biggest drugs, including high-blood-pressure treatments Diovan and Lotrel, cholesterol treatment Lescol and antifungal drug Lamisil. Its cancer drugs and consumer health products also had solid results.

Novartis also stood by its full-year guidance, saying it expects sales growth "in the high single to low double-digit percentage range" in local currencies, but said research costs would also remain high.

"As pharmaceuticals pursues its vigorous investment strategy to sustain high-level growth, research and development investments are projected to continue to increase over-proportionately to sales in 2003, underscoring the group's commitment to bringing new therapies to patients," the company said.

"Net financial income is expected to be below the previous year's level, reflecting the lower level of liquidity and challenging economic conditions. However, thanks to the strong operational performance, both full-year operating and net income are expected to exceed the previous year's levels, barring any unforeseen events," it added.