Bloomberg News

Swiss Stocks Drop on Novartis Earnings; Health-Care Shares Fall

January 26, 2012

Jan. 25 (Bloomberg) -- Swiss stocks dropped, snapping two days of gains as health-care shares dragging the Swiss Market Index lower, after Novartis AG posted quarterly results that missed analysts’ estimates.

Lonza Group AG sank 13 percent after 2011 profit fell and the world’s biggest maker of drug ingredients said it will replace its chief executive officer. Novartis, Europe’s biggest drugmaker by sales, declined 2.5 percent after posting fourth- quarter results. Roche Holding AG, the world’s biggest maker of cancer drugs, slipped 2.8 percent after making a hostile bid for Illumina Inc.

The SMI, a measure of the biggest and most actively traded companies, retreated 1 percent to 6,073.36 at the close in Zurich. Even so, the gauge has climbed 2.3 percent so far this year amid signs that the U.S economy is recovering and as investors speculated that the euro area will contain its sovereign-debt crisis. The broader Swiss Performance Index lost 0.9 percent today.

The Federal Reserve will release rate forecasts for the first time today. The Fed will leave the benchmark rate unchanged today, according to a Bloomberg survey of economists. The central bank has left its target for overnight loans between banks in a range of zero to 0.25 percent since 2008 and last month reiterated that economic conditions may warrant “exceptionally low” rates at least through mid-2013.

Lonza slumped 13 percent to 53.15 Swiss francs, its biggest slide since 2009. The company reported that 2011 net income fell to 154 million francs ($165 million) including the acquisition of Arch Chemicals Inc. The company also said Chairman Rolf Soiron will lead its management as it seeks a new chief executive officer to replace Stefan Borgas.

‘Challenging Situation’

“The fact that Stefan Borgas has to leave the company in our view underpins how challenging the situation at Lonza is,” Carla Baenziger, an analyst at Vontobel Holding AG, wrote in a note to clients today.

Novartis AG declined 2.5 percent to 50.70 francs after saying sales probably won’t grow this year and profitability will be hurt as the drugmaker’s biggest-selling medicine loses U.S. patent protection. The company also said its operating- income margin will be “slightly below” last year’s.

Fourth-quarter net income excluding some costs rose to $3 billion, or $1.23 a share, from $2.8 billion, or $1.14, a year earlier. Analysts had predicted $1.24 a share, the average of 14 estimates compiled by Bloomberg.

Roche, Petroplus Drop

Roche slipped 2.8 percent to 160 francs, its biggest drop in two months. The company offered about $5.7 billion in cash for Illumina Inc. to bolster cancer-drug sales, the third time since 2007 it’s made a hostile bid for a U.S. company.

Roche proposed paying $44.50 a share for Illumina, 18 percent more than yesterday’s closing price. The drugmaker will put the offer directly to shareholders after the San Diego-based company was “unwilling to participate in substantive discussions.”

Petroplus Holdings AG, the refiner that yesterday said it planned to file for insolvency, slid 13 percent to 21 centimes, extending yesterday’s 84 percent tumble.

--Editor: Will Hadfield

To contact the reporter on this story: Corinne Gretler in Zurich at cgretler1@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net


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