Novartis

Novartis

Revenues 2012: $56.673 billion (reports in dollars)
Revenues 2011: $58.566 billion

Novartis ($NVS) has always been a box-of-chocolates sort of company. Brand-name prescription drugs, over-the-counter medicines, veterinary products, dietary supplements, diagnostic tests, generics--they're all healthcare products of one sort or another, but diverse enough for variety's sake. When the Swiss drugmaker acquired full control of vaccine maker Chiron in 2006--and bought eye-care company Alcon in 2010--they added two more flavors to add to its assortment of sales.

But over the last 18 months, the company might well have quoted Forrest Gump's catchphrase. Novartis didn't know what it was going to get from a couple of its assorted companies. Its Lincoln, NE, plant ran into trouble with the FDA for manufacturing violations. Soon, Novartis was recalling a raft of consumer drugs and supplements--including Triaminic, Excedrin, Maalox and Benefiber products. Animal health products were pulled, too. The facility had to suspend production to work on its quality problems. And that suspension hit the company's consumer-health business hard. Its sales dropped by 19% to $3.735 billion last year, and many key products still haven't returned to store shelves.

Novartis CEO Joseph Jimenez

Likewise, Novartis' vaccines business continued to falter. The Vaccines and Diagnostics unit reported sales of $1.858 billion, down 7% from last year's $1.996 billion, partly because of pandemic flu vaccine sales the previous year. And the division posted a loss for the second year in a row, this time of around $250 million. It's hoping that a couple of new FDA approvals, including the new cell-culture flu shot Flucelvax and the meningococcal immunization Bexsero, will help turn the tide. (If not, word is that Novartis might sell the unit.)  

The company could and did expect declines in its branded pharma business for 2012. Diovan and a combination drug, Diovan HCT, were both slated to lose patent protection last year, and though CEO Joe Jimenez had plans to preserve a good chunk of the brand's sales, Novartis knew the blockbuster franchise would suffer, pulling the entire pharma unit down with it.

But once again, a surprise came--this time, a positive one. In the U.S. Novartis only got head-to-head generic competition for the combination pill, not Diovan itself. Ranbaxy Laboratories, which has first-to-market rights on the drug, didn't roll out its version when the Diovan patent expired. So while pharma sales were essentially flat at $32.153 billion for 2012 (down 1%, but up 2% in constant currencies) it could have been worse.

Products approved since 2007--including the vision-loss treatment Lucentis, multiple sclerosis therapy Gilenya, rare-disease treatment Ilaris, and cancer treatments Afinitor, Jakavi and Tasigna--made up 35% of 2012 pharma sales. And branded-drug sales grew in emerging markets by 6%, including double-digit increases in China and India. Pharma sales in those markets hit $7.4 billion.

The one unit whose sales didn't drop in 2012? Alcon. The division brought in $10.225 billion, up 3% from $9.96 billion in 2011. Its sales of prescription eye drugs grew by 5%; its contact lens business grew by 4%; and surgical products grew by 8%. It's looking for even more growth from the latter next year, particularly in emerging markets, where cataract surgery and other eye procedures are less common--at least for now. Alcon hopes to expand that market, partly with the help of a training program for healthcare providers. In China, for instance, less than 1% of the 170 million Chinese over 60 have cataract surgery. A new eye drug developed with ThromboGenics, Jetrea, was launched in the U.S. in mid-January and is expected to launch soon in Europe.

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Where should pharma go? Depends which CEO you ask

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