Novartis Quarterly Profit Misses Estimates Amid Alcon Woesby
Drugmaker appoints new CEO for Alcon unit as its sales drop
Novartis forecasts 2016 sales, profit to be unchanged
Novartis AG, Europe’s second-largest drugmaker, posted fourth-quarter earnings that missed analysts’ estimates as revenue at its Alcon eye-care unit continued to plummet and the strength of the U.S. dollar eroded the value of global sales.
A measure of profit that the company calls core net income, which excludes results from operations that have been sold or discontinued as well as some costs, declined 5 percent to $2.71 billion, the Basel, Switzerland-based company said in a statement Wednesday. That missed the $2.9 billion average of 12 analyst estimates compiled by Bloomberg. Shares of Novartis fell by the most in four months.
Sales at Alcon, which Novartis acquired for about $41.2 billion in 2010-11, fell 13 percent in the quarter to $2.3 billion. The company said:
- Mike Ball, formerly head of Hospira before its acquisition by Pfizer Inc., will replace Jeff George as chief executive for Alcon from Feb. 1
- Alcon’s ophthalmic medicines business will be combined with the drugmaker’s broader pharmaceuticals unit
- Some mature pharmaceutical products with sales of $900 million will be shifted into Sandoz generics unit
- CEO Joe Jimenez forecasts Alcon to begin turnaround toward end of 2016 with mid-single digit growth
- Jimenez plans to invest $200 million in Alcon
- Novartis to keep its contact lens care business; forecasts its growth will revive
Shares of Novartis dropped by as much as 3.9 percent, the most since September, before trading down 3.2 percent to 80.95 Swiss francs as of 9:06 a.m. in Zurich trading. The stock has dropped 8.9 percent over the past year.
In other changes, Vas Narasimhan was appointed global head of drug development and Andre Wyss was appointed president of Novartis Operations.
For 2016, Novartis forecast that sales and core operating income would be largely unchanged from last year on a constant exchange rate basis. Alcon will show low single digit growth, the company said.
The drugmaker aims to trim more than $1 billion from annual costs by 2020 as it centralizes manufacturing and combines some drug development operations under Narasimhan. Novartis will also accrue one-time restructuring costs of $1.4 billion that will be spread over a five-year period.
Global sales in the fourth quarter fell 4 percent, with revenue from the pharmaceuticals division unchanged at $7.9 billion and the Sandoz unit shrinking by 8 percent to $2.3 billion.
(An earlier version of the story was corrected to show that currency volatility had trimmed 8 percentage points from fourth-quarter sales in the second chart.)