New medicine lacks competition, Novatris profit forecast raise

The Europes biggest drug-maker raised its profit and sales forecasts as generic competition for the Diovan blood-pressure medicine failed to materialize in the U.S. This means earnings will fall by a lower percentage this year, while sales will climb by similar amount, both excluding currency swings, Switzerland-based company said in a statement today. Novartis previously estimated 5-6 percentage decline in profit this year and had predicted sales would be flat comparing to 2012.

Novartis said it expects to lose $2.7 billion in sales to generic competition this year, which is 23% less than it previously forecast, as it continues to benefit from Ranbaxy Laboratories Ltd.’s failure to market a similar version of the Diovan hypertension drug. Diovan sales in the U.S. amount to about $100 million a month, the company has said.

“Management looks like it is taking advantage of the Diovan windfall to invest in marketing and R&D,” Jeffrey Holford, an analyst at Jefferies International Ltd., said in a report to clients today cited by Bloomberg. He recommends buying the shares.

As one of companys top competitors for the flagship blood-pressure medicine Diovan is failing to win regulatory approval, Novatris is piling gains which are likely to extend to the third quarter as well.

As drugmakers such as Novartis try to boost sales growth using diversification in various medicine segments, there is heightened interest in acquiring biotechnology companies. Onyx Pharmaceuticals Inc. this month rejected a bid from Amgen Inc., saying it stays on the market till it receives an offer suited to the value of the company.

“We are always thinking of bolt-on acquisitions,” Jimenez said on the call, defining them as deals of between $2 billion and $5 billion. Jimenez declined to comment on whether Novartis is interested in buying Onyx.

Novatris shares are down 0.36% today. The on year gain of the company is more than 30%.