IMS Company Profiles - Report Buyer

IMS COM PANY PRO FILES NOVARTIS
In tro duc tion
• Strong Per for mance For 2008
Strategy Statement
The start of 2009 found Novartis in a pos i tive po si tion in creas ing its div i dends to share hold ers by 25% as
it re ported strong 2008 re sults, with a 9% rise in to tal sales (5% in lo cal cur rency) and net in come up
25%. The com pany’s phar ma ceu ti cal busi ness had bounced back from a dif fi cult 2007 and first half of
2008, and Vac cines and Di ag nos tics and Con sumer Health also con trib uted to growth. The com pany was
ex tremely pos i tive about its R&D pro duc tiv ity re port ing 14 reg u la tory sub mis sions in 2008 and 10 key
ap prov als. For the full year 2008 net sales rose to $41.5 bil lion and net in come grew to $8.2 bil lion. Sales
for the Pharmaceuticals sec tor rose 10% (5% lo cal cur rency) to $26.3 bil lion, sales in Vac cines and Di ag -
nos tics rose 21% (20% lo cal cur rency) to $1.8 bil lion, sales for Sandoz, the com pany’s generics busi ness,
rose 5% (1% lo cal cur rency) to $7.6 bil lion and sales in Con sumer Health rose 7% (4% lo cal cur rency) to
$5.8 bil lion. Al though the US mar ket re mains the com pany’s larg est, ac count ing for 31% of sales, it has
proved the most dif fi cult in re cent times and growth only re turned in the lat ter half of the year. Dy namic
growth for the company is now being seen in Eastern and Central Europe and emerging markets.
There is a ma jor neg a tive ahead for Novartis, how ever, the loss of pat ent pro tec tion for its lead ing prod -
uct, Diovan (valsartan) in Eu rope in 2011 and in 2012 in the USA. An tic i pat ing this “pat ent cliff”, as it is
known, Novartis re ports that it is fo cus ing on three ar eas: its on col ogy pipe line, which it plans to ac cel er -
ate in clud ing new in di ca tions; growth in emerg ing mar kets; and the ac cel er a tion and broad en ing of in di -
ca tions for 13 ma jor pipe line pro jects in the area Gen eral Med i cines. Novartis also con tin ues to fo cus on
im proved pro duc tiv ity, cost flow man age ment and bolstering its product portfolio in general.
In the last de cade, Novartis has sharp ened its fo cus on healthcare. In 2007, it com pleted the di vest ment
of all its nu tri tion busi nesses. In 2008, the com pany com pleted a se ries of ac qui si tions and in vest ments to
bol ster its phar ma ceu ti cal busi ness: the pur chase of a 25% stake in the lead ing eye care com pany, Alcon
(USA), the ac qui si tion of Speedel (Swit zer land) a de vel oper of car dio vas cu lar ther a pies, the ac qui si tion of
Protez (USA), a de vel oper of anti-infectives, and the ac qui si tion of the pul mo nary busi ness of Nektar
Ther a peu tics (USA), which will enhance its respiratory drug delivery capabilities.
Novartis launched the “For ward” ini tia tive in De cem ber 2007 to im prove com pet i tive ness. This ini tia tive
will sim plify or ga ni za tional struc tures, ac cel er ate and de cen tral ize de ci sion-mak ing pro cesses, re de sign
the way Novartis op er ates and pro vide pro duc tiv ity gains. Ap prox i mately 2,500 full-time po si tions are
ex pected to be cut as part of the pro gram. The For ward pro ject pro vided an nual cost sav ings of ap prox i -
mately $1.1 bil lion in 2008, above the tar get of $670 mil lion. The com pany ex pects fur ther sig nif i cant
sav ings for 2009 and the fi nal target of $1.6 billion by 2010 is likely to be exceeded.
In 2008, Novartis CEO Dan iel Vasella has made a num ber of changes to man age ment, no ta bly re plac ing
Thomas Ebeling as Head of Pharma with Jo seph Jimenez. Mr Jimenez, who joined Novartis from a pri vate
eq uity firm, had spent most of his ca reer at the food com pany Heinz. Mr Ebeling was moved to head the
Con sumer Health di vi sion, but in Oc to ber 2008, it was an nounced that he was leav ing the com pany. Dr
Vasella is also re or ga niz ing R&D and in creas ing his com pany’s in volve ment in the fast-grow ing generics
and vac cines sec tors. Go ing for ward Novartis an tic i pates seven ap prov als in 2009 (in clud ing ad di tional
in di ca tions), eight reg u la tory sub mis sions (in clud ing ad di tional in di ca tions) and a large amount of data
from phase III trials to be reported.
© 2009 IMS Health In cor po rated or its af fil i ates Page 7