Drugmaker Novartis to eke out more cost savings to lift margins

Thu Jul 17, 2014 4:31am EDT
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By Caroline Copley

ZURICH (Reuters) - Swiss drugmaker Novartis NOVN.VX posted a quarterly rise in sales that missed expectations and said it would focus on eking out gradual cost savings to boost margins as it prepares a radical business overhaul.

Despite the sales miss, the Basel-based company confirmed its full-year guidance for a rise in sales and profit, expecting revenue from new products to offset generic competition to its blood pressure pill Diovan.

Novartis unveiled a series of deals worth more than $25 billion in April to get out of underperforming businesses such as vaccines and animal health operations while adding higher-margin cancer drugs from GlaxoSmithKline (GSK.L: Quote).

Weak performance from the outgoing vaccines and animal health businesses weighed on second-quarter group sales that were up 2 percent at $14.64 billion, slightly short of the average forecast of $14.72 billion in a Reuters poll.

Sales at the vaccines unit were down 13 percent, hit by the timing of some bulk pediatric shipments, while animal health faced a tough year-on-year comparison after last year's relaunch of flea control product Sentinel.

Analysts at Sanford C. Bernstein described the results as "weak" but noted that the company's full-year guidance remained intact and has retained its "outperform" rating on the stock.

Shares in Novartis, which have advanced 14 percent this year as investors cheered its overhaul, were trading down 0.9 percent at 80.40 francs by 0803 GMT (4.03 a.m. EDT).


The logo of Swiss drugmaker Novartis is seen at its headquarters in Basel October 22, 2013.   REUTERS/Arnd Wiegmann