Novartis Fourth-Quarter Net Drops on Job Cut Costs

Novartis Fourth-Quarter Net Drops on Job Cut Costs

Jan. 17 (Bloomberg) -- Novartis AG, Europe's third-largest drugmaker, said fourth-quarter profit fell because of costs from cutting jobs. The company will spend 10 billion Swiss francs ($9.1 billion) to buy back shares.

Net income dropped 45 percent to $904 million, or 41 cents a share, from $1.65 billion, or 67 cents, a year earlier, the Basel, Switzerland-based company said in a statement handed to reporters today. This fell short of the $1.5 billion median estimate of five analysts surveyed by Bloomberg News. Sales rose 5.7 percent to $9.9 billion, the company said.

Slowing sales pushed the drugmaker to cut 2,500 posts over the next two years to save $1.6 billion annually by 2010. The maker of the Diovan heart medicine has struggled in the last year with the delay of the potentially best-selling diabetes medicine Galvus, the withdrawal of its irritable bowel treatment Zelnorm and failure to win approval for the Prexige painkiller. It's also facing generic competition to a number of drugs including the Lotrel heart pill.

``Growth is sluggish and Novartis has compensated that with job cuts and share buy-backs, but it would be nice to see some top-line growth,'' Andrew Fellows, an analyst with Helvea in London said in an interview before the release.

Novartis, which also makes the Gleevec leukemia medicine, said in December it would take a restructuring charge of $450 million. It also said the fourth quarter and the first half of 2008 would be affected by a ``strong negative impact'' from its U.S. drug unit.

The Swiss drugmaker's shares fell 12 percent in 2007, making it the third-worst-performing stock on the Bloomberg Europe Pharmaceutical Index. Novartis fell 50 centimes, or 0.8 percent, to 61.25 Swiss francs yesterday in Zurich.

Job Cuts

Novartis announced a first round of cuts in October, and changed the head of its pharmaceuticals unit after regulatory delays to new diabetes and hypertension treatments. Joe Jimenez now runs the drug operation, replacing Thomas Ebeling, who moved to the smaller consumer-health business.

Novartis is pushing new products on to the market to replace revenue that will be lost to generic versions of the company's older medicines when their patents end. Diovan, Novartis's best- selling drug with $1.2 billion in sales in the second quarter, loses patent protection in 2012. Tasigna, a drug to treat leukemia in patients who no longer respond to the company's best- selling cancer medicine Gleevec, was approved for sale in the U.S. in October and in Europe the following month.

BLOOMBERG