PRESS RELEASE: Novartis Delivers Strong New -2-

portfolio of 15 global brands with annual sales of more than USD  100 
million. Novartis aims to make Prevacid 24HR a top-five OTC brand  in 
the US, where this  proton pump inhibitor has  three years of  market 
exclusivity. 
 
Group outlook 
(Barring any unforeseen events) 
 
Novartis expects to deliver a strong operational performance in 2009. 
Group net sales are  now set to grow  at a high-single-digit rate  in 
local  currencies,  even  excluding  anticipated  H1N1  pandemic  flu 
vaccines sales in  the fourth  quarter of  2009. Pharmaceuticals  net 
sales  in  local  currencies  are   now  expected  to  expand  at   a 
double-digit rate in 2009. Operating  and net income are expected  to 
reach record levels in  constant currencies for  the full year,  even 
excluding the  contribution from  H1N1  pandemic flu  vaccine  sales. 
However, currency-related losses could significantly reduce growth in 
reported results. 
BUSINESS REVIEW 
 
Nine months to September 30 
 
Net sales 
 
                                      YTD 2009 YTD 2008 % change 
                                         USD m    USD m  USD  lc 
Pharmaceuticals                         20 765   19 901    4  11 
Vaccines and Diagnostics                 1 037    1 268  -18 -13 
Sandoz                                   5 350    5 753   -7   4 
Consumer Health continuing operations    4 189    4 460   -6   3 
Net sales from continuing operations    31 341   31 382    0   8 
 
 
Pharmaceuticals: USD 20.8 billion (+4%, +11% lc) 
Sustained dynamic performance achieved in local currencies thanks  to 
rapid expansion of recently launched products and double-digit growth 
in all  regions.  The  global rollouts  of  new  products,  including 
Lucentis,  Exforge,   Exjade,  Exelon   Patch,  Reclast/Aclasta   and 
Tekturna/Rasilez, are transforming the portfolio and provided USD 3.3 
billion of net sales in the 2009 period. These products accounted for 
16% of net sales, up from 9% in 2008, and eight percentage points  of 
the division's 11% local currency net sales growth. 
 
All therapeutic franchises  advanced at double-digit  rates in  local 
currencies.  Oncology  (USD  6.5  billion,  +13%  lc),  the   largest 
franchise, grew thanks to Gleevec/Glivec (USD 2.9 billion, +12%  lc), 
Femara (USD 925 million, +16% lc)  and Exjade (USD 469 million,  +30% 
lc). The strategic Cardiovascular  and Metabolism franchise (USD  5.4 
billion, +12%  lc) was  led by  the new  medicines Exforge  (USD  475 
million) and  Tekturna/Rasilez  (USD  202 million)  as  well  as  the 
flagship product  Diovan  (USD 4.4  billion,  +5% lc).  The  diabetes 
medicine Galvus (USD  115 million) outpaced  competition in some  key 
markets  in  Europe,  Latin   America  and  Asia.  Neuroscience   and 
Ophthalmics (USD 3.3  billion, +13%  lc) gains were  led by  Lucentis 
(USD 858 million, +48% lc) and Exelon (USD 687 million, +24% lc). 
 
Europe (USD 7.6 billion, +11% lc) as well as Latin America and Canada 
(USD 1.8 billion,  +14% lc)  showed strong  performances. Gains  were 
also seen in the US (USD 7.1 billion, +10% lc), while Japan (USD  2.2 
billion, +9% lc)  benefited from  new product launches.  The six  top 
emerging markets of  Brazil, China,  India, Russia,  South Korea  and 
Turkey (USD 1.8 billion, +19% lc) kept up a good growth pace. 
 
Vaccines and Diagnostics: USD 1.0 billion (-18%, -13% lc) 
A sharp reduction in deliveries  of H5N1 avian pandemic flu  vaccines 
compared to the 2008 period as well as lower sales of TBE (tick-borne 
encephalitis) vaccines in Europe were among reasons for the  decline. 
Seasonal influenza  vaccines  sales were  down  in the  2009  period, 
mainly due to price pressure in the US. 
 
Sandoz: USD 5.4 billion (-7%, +4% lc) 
Sandoz achieved three  quarters of  consistent 4% lc  growth in  2009 
compared to only 1% lc in  2008. Retail generics in Germany (+5%  lc) 
grew in a declining market, reaching  a 29% share as launches  offset 
the switch to tenders by some government health insurance  providers. 
US retail generics and biosimilars (+1%) delivered 18 new launches so 
far in 2009 (vs. 17 in all of 2008), but price erosion offset some of 
the volume  gains. Other  regions were  higher, led  by  Asia-Pacific 
(+20% lc) on growth in China and Japan. 
 
Consumer Health: USD 4.2 billion (-6%, +3% lc) 
CIBA Vision is the industry's  fastest-growing contact lens and  lens 
care company,  driven by  the  expansion of  new products  that  have 
fueled solid local currency growth.  Animal Health grew ahead of  its 
global market and gained share  in the US parasiticide market,  while 
OTC delivered an increasingly positive underlying performance  during 
the year. 
Operating income 
 
                                       YTD 2009    YTD 2008   Change 
                                             % of        % of 
                                              net         net 
                                      USD m sales USD m sales      % 
Pharmaceuticals                       6 486  31.2 6 017  30.2      8 
Vaccines and Diagnostics               -211          52   4.1 
Sandoz                                  850  15.9   884  15.4     -4 
Consumer Health continuing operations   809  19.3   858  19.2     -6 
Corporate Income & Expense, net        -589        -527 
Operating income 
from continuing operations            7 345  23.4 7 284  23.2      1 
 
 
Pharmaceuticals: USD 6.5 billion (+8%) 
Operating income grew  8%, well  ahead of  sales, and  advanced at  a 
faster 16% pace when  adjusted in both  periods for adverse  currency 
movements  (-10  percentage   points)  and   exceptional  items   (+2 
percentage points). The double-digit sales expansion and productivity 
gains of  more  than  USD  700 million  in  the  2009  period  fueled 
operating income growth  and enabled significant  investments in  new 
product launches  as  well  as accelerated  investments  in  Oncology 
projects, particularly Afinitor, and  targeted emerging markets  such 
as China. Marketing &  Sales expenses fell to  29.0% of net sales  in 
2009 from  30.0%  in the  2008  period while  supporting  the  global 
rollouts of a range of new products, including Galvus, Exelon  Patch, 
Tekturna/Rasilez and  Afinitor. R&D  investments  were 20.3%  of  net 
sales in 2009 while  supporting ten new Phase  III trials started  in 
2009, but declined  from 21.3% in  the 2008 period  that included  an 
exceptional charge of USD 223 million for impairment of the  Aurograb 
development project. 
 
Vaccines and Diagnostics: USD -211 million 
Core  operating  income,   which  excludes   exceptional  items   and 
amortization of intangible assets,  fell to USD  66 million from  USD 
254 million in the year-ago period. Investments were made in clinical 
trials for H1N1 pandemic  vaccines and late-stage meningitis  vaccine 
development projects.  Results  in 2009  included  exceptional  legal 
charges of USD 45 million, while the 2008 period benefited from a USD 
49 million exceptional gain for a diagnostics license. 
 
Sandoz: USD 850 million (-4%) 
Strong performance realized with 8% growth in constant currencies  on 
volume expansion in  key markets  and major  productivity gains,  but 
these were more than offset in reported results by negative  currency 
movements (-12 percentage points). The Project Compete initiative led 
to reduced total function costs compared to the 2008 period, with the 
operating income margin rising 0.5 percentage points to 15.9% of  net 
sales. 
 
Consumer Health: USD 809 million (-6%) 
Increased productivity  provided operating  income  growth of  9%  in 
constant currencies, well ahead of  3% lc sales growth. These  gains, 
however, were more  than offset  by adverse  currency movements  (-15 
percentage points). 
 
Corporate Income & Expense, net 
The increase  in net  corporate  expenses was  due mainly  to  higher 
pension expenses. 
 
 
Third quarter 
 
Net sales 
 
                                      Q3 2009 Q3 2008 % change 
                                        USD m   USD m  USD  lc 
Pharmaceuticals                         7 217   6 709    8  11 
Vaccines and Diagnostics                  543     666  -18 -16 
Sandoz                                  1 850   1 899   -3   4 
Consumer Health continuing operations   1 476   1 473    0   5 
Net sales from continuing operations   11 086  10 747    3   7 
 
 
Pharmaceuticals: USD 7.2 billion (+8%, +11% lc) 
Ongoing dynamic growth in the 2009 third quarter thanks to the  rapid 
expansion of  new  products  and  sustained  contributions  from  key 
markets. Recently launched  products reached USD  1.3 billion of  net 
sales in the 2009 quarter,  representing 18% of divisional net  sales 
compared to 11% in the 2008 quarter. These new products also provided 
nine percentage points  of the 11%  lc net sales  growth in the  2009 
period. 
 
All  therapeutic  franchises  delivered  strong  underlying   growth. 
Initial contributions  from  the  US  launch  of  Afinitor  supported 
Oncology  (USD   2.3   billion,   +11%   lc),   while   Exforge   and 
Tekturna/Rasilez  underpinned   the  strategic   Cardiovascular   and 
Metabolism franchise (USD 1.8 billion, +9% lc). The diabetes  therapy 
Galvus (USD 50  million) also  continued its  dynamic performance  in 
Europe, Latin America and Asia. Neuroscience and Ophthalmics (USD 1.2 
billion, +18% lc) saw rapid gains for Lucentis (USD 335 million, +60% 
lc ) and Exelon (USD 251 million, +23% lc). 
 
Important growth contributions came from Europe (USD 2.6 billion, +9% 
lc) as well as  Latin America and Canada  (USD 645 million, +17%  lc) 
and the US (USD  2.4 billion, +10% lc).  Japan (USD 773 million,  +8% 
lc) advanced thanks  to contributions  from new  product launches  in 
2009. The six top emerging markets (USD 639 million, +12% lc) further 

(MORE TO FOLLOW) Dow Jones Newswires

October 22, 2009 01:16 ET (05:16 GMT)

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