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Novartis misses Q3 forecast with $390m settlement payment, strong dollar

pharmafile | October 27, 2015 | News story | Manufacturing and Production, Sales and Marketing Alcon, Novartis, Sandoz 

Novartis reported lower-than anticipated third quarter earnings on Tuesday, hit by the $390 million settlement it has agreed to pay to settle allegations that it made kickback payments to specialty pharmacies in the US to boost drug sales, as well as a strong US dollar.

The preliminary agreement would settle a $3.3 billion lawsuit brought by the US Department of Justice, and although the company neither admits or denies the accusations, chief executive Joe Jimenez said it wished to put the incident behind it.

Jimenez claimed the rebates were intended to encourage patient adherence, and that the practice was “quite common”. “We continue to maintain that specialty pharmacies must continue to play a role in ensuring patient adherence,” he explained. “How that’s going to play out as to whether we change our behaviour or not remains to be seen.”

Regardless of the settlement, the results were disappointing, with the company saying its core net income, which excludes such one-off payments, was down 2% to $3.06 billion and net sales down 6% to $12.27 billion.

The eye-care unit Alcon was a considerable drain on performance: its performance hit by falling surgical equipment sales and increased generics competition. The unit’s sales were down 12% to $2.3 billion- poor enough to offset the benefits of the company’s expanded oncology portfolio, gained from the purchase of assets from GSK in March.

News from Novartis’ generics unit Sandoz was more positive, also achieving net sales of $2.3 billion, with the company saying volume growth of 21 percentage points more than compensated for 12 percentage points of price erosion. Global sales of biopharmaceuticals rose 28% to $186 million, led by strong performance of its biosimilar version of Teva’s Copaxone, Glatopa, for relapsing multiple sclerosis.   

Novartis reiterated its full-year guidance of mid-single-digit growth and high-single-digit core operating income, stripping out the effects of currency fluctuations.

Commenting on the results, CEO Jimenez says: “Novartis continued to make strong progress on innovation and key launches in the third quarter. The Pharmaceuticals and Sandoz Divisions continue to perform exceptionally well, offsetting softness in the Alcon Division. Entresto was approved and launched in the US, and Tafinlar + Mekinist was approved in the EU for BRAF-mutant melanoma. We confirm our full-year guidance.”

Joel Levy

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