Sale of blood transfusion test unit boosts Novartis Q1 profit

Reuters with
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Two days after announcing a radical overhaul of its structure, Novartis posted first-quarter profit that beat expectations boosted by an exceptional gain from the sale of its blood transfusion test unit.

The Swiss company said first-quarter net profit jumped 24 percent to $2.97 billion, beating the mean estimate of $2.7 billion in a Reuters poll. The figure was boosted by higher operating income which included a $900 million pre-tax gain from the divestment of its blood transfusion test unit to Spain's Grifols last November.

Net sales inched up 1 percent to $14.022 billion, compared to the average estimate of $14.246 billion.

The drugmaker's first-quarter results come two days after it announced deals worth over $25 billion to simplify its structure, strengthen its cancer portfolio and exit underperforming businesses.

The overhaul reflects a wider trend among big pharmaceutical companies to focus on a smaller number of businesses with global scale as the industry contends with dwindling healthcare budgets.

Marking the conclusion of a year-long portfolio review, Novartis said it would buy GlaxoSmithKline's cancer drugs for up to $16 billion, while GSK will acquire Novartis' vaccines unit for up to $7.1 billion.

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The two companies will also set up a joint venture in consumer health. In a separate transaction, Novartis also agreed to sell its animal health unit to Eli Lilly for $5.4 billion.

Sales at Novartis' pharmaceuticals division slipped 1 percent hit by generic competition for its bone repair drug Zometa and a slowdown of sales of its leukemia drug Glivec in the United States.

The company is banking on new products such as multiple sclerosis pill Gilenya and cancer drug Afinitor to help it grow sales and profits through Glivec's upcoming patent expiry. Sales of its so-called "growth products" rose 17 percent to $3.2 billion.

Novartis confirmed its guidance for sales to grow in the low-to-mid single digits this year in constant currencies, while core operating income is expected to grow ahead of sales.

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Pharma deal flurry 'start of things to come': Pro

"It is a very dynamic landscape at the moment...These big pharma companies are scrambling for the best assets to take them forward," James West, health care analyst at Results Healthcare, told CNBC on Thursday after Novartis's results were announced.

He added that pharmaceutical giants that streamlined their businesses could prove attractive to investors.

"If you have a specialized company that can be very attractive to investors… you will see those high multiples there."