Bloomberg News

Novartis Raises Revenue, Savings Forecasts for Alcon Unit

September 13, 2011

(Updates with closing share price in fifth paragraph.)

Sept. 13 (Bloomberg) -- Novartis AG, Europe’s second- biggest drugmaker by sales, raised its sales target and cost savings forecast for Alcon, the eye-care company it finished acquiring this year.

Alcon aims to expand sales by a high-single to low-double- digit percentage, Basel, Switzerland-based Novartis said in a statement today. The maker of contact lenses and equipment for eye surgery previously forecast growth in the mid- to high- single digits. Novartis expects savings in the unit of $350 million a year by 2013, it said, compared with previously forecast savings of $300 million.

Productivity improvements across Novartis contributed to more than $1.2 billion in savings in the first half, and the total for the year will probably exceed the $1.9 billion achieved in 2010, the drugmaker said. It hadn’t previously predicted 2011 cost savings.

“If you look at their quarterly numbers, they are taking out costs, but they’ve never communicated future cost savings in such a way that people can plug it into their models,” Jack Scannell, an analyst at Sanford C. Bernstein Ltd. in London, said in an interview today. “This may be one of the reasons the stock has been a bit of a disappointment. A more explicit approach will give investors a bit more confidence.”

Share Performance

Novartis rose 55 centimes, or 1.2 percent, to 48.35 Swiss francs at the 5:30 p.m. close of trading in Zurich. The stock has declined 8.2 percent this year including reinvested dividends, compared with a 0.2 percent gain for the Bloomberg Europe Pharmaceutical Index.

Novartis is betting on Alcon, which it bought in stages for $50 billion starting in 2008, and new products such as the Gilenya multiple sclerosis pill to boost sales as older products such as the Diovan hypertension drug face competition from generics.

Trevor Mundel, the global head of development for the pharmaceutical division, is leaving Dec. 1 to join the Bill & Melinda Gates Foundation as executive director of the global health program, Novartis said in the statement. His successor will be named shortly, the company said.

Novartis executives were speaking to analysts in London today about the company’s strategy and the integration of Alcon, which Novartis finished acquiring in April.

--Editors: Robert Valpuesta, Thomas Mulier

To contact the reporter on this story: Simeon Bennett in Geneva at sbennett9@bloomberg.net

To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net


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