Want a perspective on Novartis' latest results? Pick one. From the glass-half-full point of view, you could say that the Swiss drugmaker's ($NVS) Q4 sales are up 4%, to $14.8 billion, partly because of strong sales of newer meds such as the eye drug Lucentis and cancer treatment Tasigna, and full-year sales grew even more, by 16%. You could say that the Alcon ($ACL) purchase is paying off, as strong growth there helped to buoy the numbers. You could point to the fact that the company hiked its dividend, citing improvement in its core financials.
But the glass-half-empty side has a strong case. Yes, sales grew, but profits tanked. Fourth-quarter net profits dropped by almost half, thanks to $1.5 billion in charges. Sales at the Sandoz generics unit fell on brisk competition for copycat meds. Manufacturing issues pushed consumer health revenues downward for the quarter. The 16% rise in full-year sales was fueled by the weak U.S. dollar.
And the outlook for 2012 leans toward the half-empty side, too. Novartis says margins for this year will be "slightly below" the 27.2% achieved in 2011, the Financial Times points out. Generic competition and pricing pressures will contribute to that slip--and the manufacturing problems could, too, if FDA scrutiny holds up consumer-product shipments significantly.
That expected pinch comes despite several rounds of job cuts and other cost-containment measures announced over the last several months, including 2,000 cuts to the U.S. workforce revealed a few weeks ago. The cost cuts and layoffs "are not expected to fully offset the loss of margin" from, for instance, the loss of patent protection on its big seller Diovan, the company says.
As The Wall Street Journal points out, analysts have expressed a "benign" view of the earnings announcement. The one-off charges were expected, they say, and the 2012 guidance is "respectable." But investors were inclined to follow the pessimistic point of view: The company's shares were down 3.6% on the news, making Novartis the worst-performing European stock of the day.