Novartis profit beats forecasts as its overhaul begins to pay off

Adam Hignett
NOVARTIS posted forecast-beating first-quarter profits yesterday as the Swiss pharmaceutical company showed the benefits of its comprehensive restructuring.

Top-line figures were hit by the strength of the US dollar as reported revenues fell seven per cent to $11.9bn (£7.9bn) during the period compared to the year before. Net income was also hit by currency fluctuations, declining four per cent to $3.2bn in the quarter, down from $3.3bn in 2014.

However, underlying growth was more promising, with both revenues and income posting modest gains when stripped of currency considerations up three and eight per cent respectively.

The underlying growth rates come after efforts by chief executive Joseph Jimenez to increase productivity and increase margins started to filter through. Cost cutting and a streamlining of back office functions helped lift profit margins by 1.7 percentage points.

In addition, the significant restructuring which occurred through its $20bn asset swap with GlaxoSmithKline allowed the firm to dump peripheral projects. Novartis is starting to benefit from a series of transactions, valued at around $25bn, that have refocused the drug group’s efforts on three core areas: pharmaceuticals, generics and eye care.

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