Novartis sees no 2012 revenue slippage despite Diovan and Tekturna
This article was originally published in Scrip
Novartis believes its sales this year can match those of 2011, despite the expiry of the patent on its best-selling antihypertensive drug Diovan (valsartan) and the unwelcome trial results late last year for the newer antihypertensive Tekturna/Rasilez (aliskiren), which has led to the company advising doctors to avoid using it in certain patients. The upbeat forecast came as the Swiss group reported a 4% increase in fourth-quarter sales to $14.8 billion and a 16% increase in full-year sales to $48.6 billion for 2011.
The company now says Tekturna/Rasilez sales will be less than half of those reported in 2011 ($557 million, +27% on 2010 but down 19% in the fourth quarter to $108 million). Despite this setback, along with the impact of ongoing price reductions, generic erosion to key products and competition for Sandoz's generic enoxaparin, the company believes sales of products launched in the past five years will replace lost revenues to keep 2012 sales in line with 2011, assuming that it can recommence shipping products out of its Lincoln, Nebraska consumer health manufacturing site by mid-year. However, these negative factors, along with the necessary investments in developing new products, will cause the operating margin to decline.
charges bite
The company's bottom line was hit by several one-off charges in the fourth quarter, including a $903 million exceptional charge for Tekturna/Rasilez (scripintelligence.com, 13 January 2012), another charge of $163 million for the discontinuation of elinogrel and the oral calcitonin SMC021 (scripintelligence.com, 13 January 2012), $115 million booked because of the suspension of production at a consumer health site in the US (scripintelligence.com, 9 January 2012) plus restructuring costs of $288 million. In total the net exceptional charge in the quarter was $1.5 billion, which when combined with the strengthening of the US dollar and already strong Swiss Franc pushed operating income and net income down by 47% to $1.3 billion and $1.2 billion, respectively.
For the full year, sales growth was helped by the weakness of the US dollar through much of the year, but exceptional charges totalled $1.9 billion (up from $1.3 billion in 2010), and operating income was down by 5% to $11 billion. Net income fell by 7% to $9.2 billion.
Fourth-quarter pharmaceutical sales (+4% to $8.3 billion) were boosted by volume growth, which was only partially offset by generic competition and product divestments, and a strengthening of the dollar against other currencies. During the quarter, in Europe price cuts took seven percentage points off growth, and generic competition to branded products including the breast cancer drug Femara (letrozole) and Diovan accounted for another six percentage point hit.
Among products that Novartis has earmarked as future growth drivers in the face of patent expiries, Novartis reported fourth-quarter sales of $203 million and full year sales of $494 million for recently launched Gilenya (fingolimod), the MS treatment that is now the subject of safety investigations (scripintelligence.com, 20 January 2012 and 22 December 2011) , while Tasigna (nilotinib) for chronic myeloid leukaemia grew by 64% to $207 million in the quarter and by 79% to $716 million for the full year, and Lucentis (ranibizumab) for wet age-related macular degeneration generated fourth-quarter sales of $550 million (+40%) and full-year growth of 34% to $2.1 billion.
Diovan sales fell by 16% in the quarter to $1.3 billion and by 6% for the full year to $5.7 billion after losing exclusivity in Europe. Gleevec/Glivec (imatinib) sales grew by 8% in the quarter to $1.2 billion, and by 9% to $4.7 billion for the full year. The anticancer faces patent expiry in 2015.
Total full-year pharma sales grew by 7% to $32.5 billion.
The company noted that it saw accelerating growth in emerging markets – and Russia and China in particular – with full-year sales in the top six emerging markets (Brazil, China, India, Russia, South Korea and Turkey) rising to $5.8 billion, or 10% of group sales.
By division, the eye care business Alcon reported $2.4 billion of sales in the fourth quarter, up 6% pro forma; vaccines and diagnostics were boosted by the meningococcal disease franchise and the resolution of previous shipment delays to rise by 86% to $671 million; and the consumer health businesses (OTC and animal health) fell by 7% to $1.1 billion, hit by the US production issues in December.
Novartis's generics business, Sandoz, suffered from additional competition to its blood thinner enoxaparin. In the fourth quarter divisional sales were down by 5% to $2.3 billion. Enoxaparin sales were $1 billion for the full year and $225 million in the fourth quarter.
overtime settlement
Separately, Novartis in the US has settled litigation brought by pharmaceutical sales reps claiming that they had been wrongly classified as exempt from overtime pay. The settlement, which dates back to 2006 but also includes newer claims, will see Novartis pay up to $99 million to up to 7,000 current and former employees, according to the plaintiffs' lead counsel David Sanford.
"It is a fair and equitable result and can serve as an exemplar for companies around the US that face wage and hour litigation," he added. Novartis still maintains that sales reps should be classified as exempt from overtime "because their autonomy and incentive compensation are typical of exempt employees as defined by US law". The US Supreme Court is expected to rule later this year on the interpretation of wage and hour law by the Department of Labor, which supported the plaintiffs in the Novartis case.