Novartis gains momentum with strong performance in first half of 2008

Novartis AG
  • First-half results for continuing operations led by improving Pharmaceuticals performance ahead of expectations and expansion in Vaccines and Diagnostics
  • Net sales rise 11% (+2% in local currencies) to USD 20.6 billion
  • Operating income advances 12% to USD 4.9 billion on business expansion, productivity gains and currency benefits
  • Net income up 13% to USD 4.6 billion; basic EPS rises 17% to USD 2.01
  • Dynamic growth from new products - including Tekturna/Rasilez, Exforge, Lucentis, Exelon Patch and Aclasta/Reclast - provides USD 1.3 billion in first-half net sales
  • Key R&D projects on track for 2008 submissions, particularly Afinitor (RAD001) for advanced kidney cancer and Menveo meningococcal meningitis vaccine
  • 25% stake in Alcon, the world leader in eye care, purchased in July; strategic acquisitions strengthen portfolio and complement internal growth drivers
  • Novartis on track for record sales and earnings in 2008 from continuing operations

Commenting on the results, Dr. Daniel Vasella, Chairman and CEO of Novartis said: "The growth acceleration in the second quarter of 2008 and our R&D successes, especially in Pharmaceuticals and Vaccines, demonstrate that our strategy is delivering results and that we are heading towards a promising future despite a weak economy. Speed and productivity of operations are improving and growth in most countries is dynamic."

First half
All businesses contributed to the strong performance, especially accelerating sales and profitability in Pharmaceuticals and sustained dynamic growth in Vaccines and Diagnostics that underpinned expectations for record results in 2008.

Net sales rose 11% (+2% in local currencies) to USD 20.6 billion as higher sales volumes contributed two percentage points of growth, while currency translation added nine points. Price changes and acquisitions had no significant impact.

Advancing faster than net sales, operating income was up 12% to USD 4.9 billion and driven by the solid business expansion as well as the Forward initiative, which also provided funds for major investments in new product development and expansion in fast-growing markets. The operating margin was slightly higher at 24.0% of net sales from 23.9% in the 2007 period.

Net income rose 13% to USD 4.6 billion on the increase in operating income as well as higher levels of financial income and income from associated companies. Basic earnings per share (EPS) rose faster, up 17% to USD 2.01 due to fewer outstanding shares.

Second quarter
Net sales for the quarter rose 14% (+5% lc) to USD 10.7 billion as Pharmaceuticals grew ahead of expectations and succeeded in overcoming the impact of 2007 challenges in the US. Vaccines and Diagnostics expanded at a fast rate, while difficult conditions in the US led to moderate growth in Sandoz and Consumer Health. Higher sales volumes provided five percentage points of growth, while positive currency translation added nine points.

Operating income advanced 17% to USD 2.5 billion on double-digit contributions from Pharmaceuticals and Consumer Health. As a result, the operating income margin rose to 22.9% of net sales from 22.3% in the 2007 period.

Net income also rose 17%, rising to USD 2.3 billion, benefiting from the ongoing business expansion and supported by higher levels of financial income and associated company income. Basic earnings per share (EPS) rose 19% to USD 0.99, above the 17% of net income growth reflecting the lower number of outstanding shares.

About Novartis
Novartis AG provides healthcare solutions that address the evolving needs of patients and societies. Focused solely on healthcare, Novartis offers a diversified portfolio to best meet these needs: innovative medicines, cost-saving generic pharmaceuticals, preventive vaccines, diagnostic tools and consumer health products. Novartis is the only company with leading positions in these areas. In 2007, the Group's continuing operations (excluding divestments in 2007) achieved net sales of USD 38.1 billion and net income of USD 6.5 billion. Approximately USD 6.4 billion was invested in R&D activities throughout the Group. Headquartered in Basel, Switzerland, Novartis Group companies employ approximately 98,000 full-time associates and operate in over 140 countries around the world. For more information, please visit http://www.novartis.com.

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