Edited from: 2008 annual report and “Novartis increases dividend by 25% based on strong 2008 results from strategic healthcare portfolio”, 28 January 2009.
Novartis states that its strategy for 2009 will focus on “investing to achieve sustainable growth” through achieving more productivity gains, further improving cash flow management and continuing to focus on its product portfolio. Novartis further states that it has made significant progress in recent years to focus and strengthen its healthcare businesses, stepping up investments in innovation, expanding in high-growth markets and improving operational efficiency.
Novartis completed a series of targeted acquisitions and strategic investments in 2008, led by the purchase in July of a 25% stake in Alcon (eye care business) from Nestlé. The $10.4bn cash purchase is part of an agreement providing future rights to take majority ownership. The second step, Novartis says will be to acquire the remaining 52% Alcon stake held by Nestlé between 1 January 2010, and 31 July 2011 for up to $28bn.
The company says that it has made sustained investments in R&D and innovation. Novartis completed 14 major submissions in the US, Europe and Japan during 2008. The drug Afinitor, a potential breakthrough for advanced kidney cancer, was among three Novartis submissions that the US Food and Drug Administration (FDA) accepted in 2008 for priority review.
The vaccine Menveo for protection against four meningococcal meningitis serogroups was submitted in 2008 for US and EU approval. Other submissions include QAB149 (US/EU), a once-daily bronchodilator for chronic obstructive pulmonary disease (COPD) and plans to become a cornerstone for future combination therapies; the antibody ACZ885 (US/EU) for initial use in targeted autoimmune diseases such as Muckle-Wells Syndrome; and a single-pill combination of the high blood pressure medicines Diovan and Tekturna/Rasilez (US).
In R&D, the company states that Extavia (interferon beta-1b) was launched in Germany and Denmark in January 2009 to start the European rollout of this medicine for patients with certain forms of multiple sclerosis (MS).
Extavia is the same medicine as Betaferon/Betaseron, which is marketed by Bayer Schering and was the first beta interferon treatment for MS. Novartis gained rights to its own branded version in agreements with Bayer Schering reached after Novartis fully acquired Chiron. Novartis plans to launch Extavia in the US in 2009.
Novartis is further expanding in high-growth markets with a longer-term perspective, particularly among the leading emerging markets of Brazil, China, India, Mexico, Russia, South Korea and Turkey. The company’s net sales from these seven markets rose 18% to $4.3bn in 2008. Emerging markets across the world generated net sales growth of 13% to $10bn, according to Novartis, rising faster than established markets to represent 24% of net sales in 2008 compared to 22% in 2007.
The company says that operational efficiency initiatives have made progress to improve speed, flexibility and productivity while freeing up resources. On this basis, it has launched a company wide project “Forward” to provide annual cost savings of approximately $1.6bn in 2009 and 2010.
“As investments in R&D increase and pressure on drug prices becomes more intense, efficient cost management becomes even more important. To achieve our objectives, we need to further streamline our organisation and processes so that decisions can be made more quickly and be more systematically implemented”, says chairman and chief executive officer, Daniel Vasella.
“In the context of the economic uncertainty and volatility of the global market, it is increasingly clear that we took the right step in launching the Forward initiative. Our aim is to save $1.6bn by 2010. The initiative also enabled us to simplify our organisational structure and accelerate decision-making processes”, continues Vasella.
Ahead of the anticipated loss of patent protection for the blood pressure treatment Diovan starting in 2011 in Europe, and in 2012 in the US, Novartis is investing in three focused areas to help drive growth through this period as well as the Pharmaceuticals Division. Goals of these investments include:
(1) accelerate the oncology pipeline, including faster expansion into new indications;
(2) accelerate growth in targeted emerging markets by building up commercial
organisations; and
(3) accelerate and broaden indications for 13 major pipeline projects in general
medicines.
These targeted actions build on expectations for ongoing dynamic growth from recently launched products, which contributed $2.9bn of net sales in 2008, as well as current expectations for the approvals and fast uptake for a number of projects now in late-stage development.
Looking ahead, Novartis expects another year of “record” net sales and earnings in 2009, targeting “superior growth” in a challenging environment. The company's net sales are expected to grow at a mid-single-digit rate in 2009, while pharmaceuticals net sales are expected to grow at a mid- to high-single-digit rate, both in local currencies.
“In 2009 we anticipate another year of record results in net sales and earnings. All the elements for success are in place: products, resources, creative thinking, a determination to succeed through an even greater focus on our customers, as well as a competent management team that is distinguished by ambition and integrity. There are many changes taking place at the moment, but one thing remains constant: patients need the best and most cost effective medicines”, concludes Vasella.
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Financial highlights: Novartis, year ended 31 December
|
|
2008 |
2007 |
2006 |
2005 |
2004 |
|
Sales ($ m) |
41,459 |
38,072 |
37,020 |
32,212 |
28,247 |
|
R&D ($ m) |
7,217 |
6,430 |
5,400 |
4,846 |
4,077 |
|
Net Profit ($ m) |
8,163 |
6,540 |
7,202 |
6,141 |
5,601 |
|
Total Assets ($ m) |
78,299 |
75,452 |
68,008 |
57,732 |
52,488 |
|
Diluted earnings per share ($) |
3.59 |
5.13 |
3.06 |
2.63 |
2.37 |
|
Number of Employees |
96,717 |
98,200 |
101,000 |
90,924 |
81,392 |
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Novartis Chemicals
Company Structure
Novartis is a pharmaceuticals, consumer health, generics, eye-care, and animal health company. Novartis was created by the merger of Ciba-Geigy and Sandoz in 1996. In 2000, it spun off its crop protection and seeds sector and merged it with the agrochemicals business of AstraZeneca.
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