Novartis ($NVS) is still in the midst of defining what it will be going forward, but 2014 looks to be another year of transition for the Swiss drugmaker. It now expects the long-delayed U.S. release of a generic of its blockbuster Diovan to happen in the second quarter and by summer's end hopes to have completed the strategic review that will decide the fate of several of its operating units.
In fact, CEO Joe Jimenez, stressing innovation, said today that it is looking at "potentially unique structures" for the company's over-the-counter drugs, animal health and vaccines units, suggesting joint ventures or partnerships or some yet-unimagined deal, instead of the spinoffs that many investors had hoped for.
Chairman Joerg Reinhardt, who has been leading the review of the company, has said he wants any units the company has to be world leaders. It's been rumored that it might try to do some kind of nontaxable deal in which Novartis would trade its animal health and vaccines units for Merck's ($MRK) consumer health business. Jimenez declined to be more specific about the company's thinking during the company's webcast discussion of its fourth quarter and 2013 earnings.
The company today reported net sales were up 2% both for the quarter and year, hitting $57.9 billion for all of 2013. Sales were up for all of its operating units, including 10% in consumer health. Pharmaceutical sales were up 3%. But core net income was down 3% for the quarter and unchanged for the year. Results were hurt by currency swings, which as Reuters pointed out, took 11% off of fourth-quarter operating income.
For 2014, the company is projecting earnings growth in the low to mid-single digits, but that could end up better, Jimenez said, depending on when a generic of its blockbuster blood pressure drug Diovan makes it to the market in the U.S.
Diovan lost its patent in September of 2012, but the release of a copy has been delayed by 5 quarters now because of regulatory problems faced by Ranbaxy Laboratories, which has the rights to the exclusive generic. That won't go on forever, and Jimenez said today the company stuck a "stake in the ground" for an April release to make its forecast. If that happens, it will have $3 billion in patent expiration revenue to overcome, he said. If it releases later, then investors can expect a better year from the drugmaker.
It also faces the patent loss of leukemia drug Gleevec. To help face those pressures, the company has been slimming down, cutting jobs in both the U.S. and Europe. It is looking for new products like its cancer drug Afinitor and multiple sclerosis pill Gilenya to help it through the patent losses. Gilenya saw sales grow 61% to more than $1.9 billion for the year.
But all has not been rosy with its new products. Last week, European regulators declined to recommend its new heart drug serelaxin, a product that Novartis is counting on bringing in more than $1 billion a year. It is filing for a reconsideration, but if results from another trial are required then potential approval in the EU would be pushed down the road a few years. The FDA has not yet ruled on the product.
Returning to his innovation theme, Jimenez said toward the end of the webcast that new products will be even more important going forward because it's getting harder to just raise prices in the U.S. "The end-game is no more pricing in the U.S. and you better be innovative and build your portfolio" to generate new revenue, or sell more products at the same price, he said.
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