Diovan rivals, plant woes pinch Novartis profits

Novartis ($NVS) results got squeezed by Diovan generics on one flank and a plant slowdown on the other. Diovan sales dropped 15% as European generics continued to erode market share. And consumer health faltered 20% as the company suspended production at a Nebraska factory and recalled some products made there.

Overall, sales lagged 2% to $13.74 billion, while net profits dropped 16.6% to $2.31 billion. CEO Joe Jimenez called it a "challenging quarter" and predicted further head winds for Diovan beginning in the third quarter. That's when the blood pressure drug loses patent protection in the U.S. Still, Novartis maintained its 2012 prediction of flat sales and a slightly smaller operating margin.

Not surprisingly, Jimenez emphasized the positive, too: The recently approved multiple sclerosis pill Gilenya will cross into blockbuster territory this year, he said, despite FDA and European Medicines Agency reviews of the drug's cardiovascular safety. "We expect a nice uptake," he said during an earnings call (as quoted by The Wall Street Journal).

Meanwhile, Jimenez said the consumer division is "making progress" on fixing the quality-control problems at its Nebraska plant. As Bloomberg reports, the company expects a "limited portfolio" of products to ship during the second half of this year, and it has farmed out some production to contract manufacturers to keep supplies coming. The plant accounts for about 25% of Novartis' over-the-counter sales, the news service reports.

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