Jan. 28 (Bloomberg) -- Novartis AG shares slid to the lowest level in more than three months after profit fell short of forecasts and a vaccine against meningitis was delayed.

Novartis dropped 2.83 francs, or 5.5 percent, to 48.62 francs in Zurich trading, the lowest value since Oct. 10. The decline is the stock’s biggest since Nov. 21.

Europe’s fourth-largest drugmaker earned $1.5 billion last quarter, below the $1.78 billion analysts had estimated, hurt by restructuring costs at the Sandoz generics unit and the dollar’s gain, which damped drug sales. Novartis, in need of new products before the patent expires on its best-selling hypertension pill Diovan, also said its Menveo vaccine will be delayed until 2011 because a clinical test needs more patients.

“Pharma is supposed to be a safe haven in the current environment,” said Joerg De Vries-Hippen, chief investment officer in European equities at Allianz Global Investors in Frankfurt. “The pharma unit didn’t deliver.”

Sales were little changed overall, while drug revenue increased 5 percent last quarter, the Basel, Switzerland-based company said. The currency impact shaved $91 million from operating profit while costs for restructuring Sandoz and recalling products added up to $50 million, according to a presentation on the Novartis Web site.

Menveo, the experimental meningitis vaccine, will be delayed until 2011 because U.S. regulators asked the company to expand a clinical trial to add 1,500 infants and children up to 10 years old. Development is still on target for patients aged 11 to 55. The product could have brought in as much as $1 billion in sales in its indication for children, Merrill Lynch said in a note to clients today.

Drug Mergers

A year ago, Novartis’s earnings were held back by generic- drug competition and product withdrawals. Sales of five products, including the Famvir herpes medicine and the irritable bowel treatment Zelnorm had fallen by almost half to $1.7 billion from 2006 after the medicines either faced generic competition or were pulled from the market.

Chief Executive Officer Daniel Vasella has cut jobs and reined in spending as Novartis prepares for the Diovan patent expiration. The company reduced its dependence on prescription medicines by developing its own generic treatments and vaccines and acquiring a stake in eye-care company Alcon Inc. last year.

Vasella said Novartis will continue to make small acquisitions but probably won’t take part in a bigger wave of industry mergers.

“The most important thing is to grow organically,” he said in a televised interview. “But you have to act with your eyes wide open” after Pfizer Inc.’s $68 billion bid for Wyeth earlier this week. He said he doesn’t view the enlarged Pfizer as a competitive threat.

Multiple Sclerosis

Net income at Novartis rose to $1.5 billion, or 68 cents a share, in the fourth quarter from $904 million, or 40 cents, a year earlier. Sales grew 1 percent to $10.1 billion.

This year, sales from continuing operations will probably rise at a mid-single-digit rate. Drug sales will likely grow at a mid-to-high-single-digit rate in local currencies, Novartis said.

The company’s experimental drug for multiple sclerosis fingolimod, a pill aimed at making treatment less painful for patients, is expected for submission to regulators at the end of 2009, according to the earnings report.

The drugmaker’s shares fell 10 percent last year, making it the eighth-worst-performing stock on the Bloomberg Europe Pharmaceutical Index.

To contact the reporter on this story: Eva von Schaper in Munich at evonschaper@bloomberg.net.

Last Updated: January 28, 2009 11:57 EST