Novartis: Alcon reorg on tap for 2016

(Reuters) — Novartis (NYSE:NVS) has agreed in principle to pay $390 million to settle U.S. allegations that it used kickbacks to speciality pharmacies to push sales of some drugs, the Swiss company said today, hitting 3rd-quarter earnings.

The U.S. Justice Dept. had sued Novartis in a Manhattan federal court, saying the world’s biggest seller of prescription drugs sought illegally to boost sales of drugs covered by Medicare and Medicaid. The $390 million settlement, still pending approval, pushed Novartis’s 3rd-quarter net income down 42% to $1.8 billion.

Novartis’s underlying results also missed analyst forecasts, as weakness at its eye-care business Alcon and a strong dollar offset the benefits of an enlarged cancer drug portfolio acquired from GlaxoSmithKline.

Alcon continued its slump, driven by declining surgical equipment sales and generics competition.

“Alcon had another bad quarter,” wrote analysts from Barclays. CEO Joe Jimenez said an Alcon recovery plan would be unveiled in January.

Jimenez told reporters Novartis had made the disputed payments to ensure patients took the drugs, including treatments to prevent rejection of transplanted organs, but U.S. government attorneys disagreed.

“We’re not admitting liability, it’s something we just believe we want to put behind us,” he said.

Novartis shares fell 2% to 88.60 Swiss francs by 08:00 GMT.

The lawsuit accused Novartis of paying rebates to induce specialty pharmacies to recommend iron-reducing Exjade and immunosuppressant Myfortic.

The maker of painkiller Voltaren said core net income fell 2% to $3.06 billion, compared with an average analyst estimate of $3.13 billion in a Reuters poll. The figure rose 13% at constant currencies.

Sales fell 6% to $12.27 billion, compared with the poll average of $12.62 billion. The number was up 6% at constant currencies.

Novartis’s Sandoz generics unit posted strong sales, led by a 28% increase in sales of biopharmaceuticals, including its Glatopa version of Copaxone to treat multiple sclerosis, to $186 million.

New drugs including heart medicine Entresto, forecast to generate $4.7 billion in sales in 2020 according to Thomson Reuters Cortellis, have not yet contributed significantly to results. “It’s very early to see,” Jimenez said.

Novartis maintained full-year guidance for annual sales to grow at a mid-single-digit percentage rate, with core operating income growing at high single digits, stripping out currency effects.

($1 = 0.9823 Swiss francs)

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