By Sam Cage
ZURICH (Reuters) - First-quarter net profit at Swiss drugmaker Novartis AG rose 10 percent to $2.31 billion, helped by cost cuts and the weak dollar, easily beating forecasts and sending its shares up more than 5 percent.
Novartis, which is digesting the $39 billion acquisition of eye-care company Alcon Inc , also confirmed its full-year forecast on Monday.
"Compared to competitors' results we consider Novartis figures to be quite okay," DZ Bank analyst Thomas Maul said. "The second half of 2008 should offer some more upside."
Europe's second-largest drugmaker by market value faces the same problems as many of its peers, with earnings growth expected to slow due to the loss of exclusivity on some of its drugs, pricing pressures and more complicated paths to market.
But Novartis benefited from dollar weakness -- with nearly a third of its sales in the United States and as it reports results in dollars, a cost-cutting program at its drugs unit in the first quarter, and a one-off gain of $115 million from the divestment of some mature products.
The company had savings of $160 million in the first quarter from its restructuring program, which aims to save $1.6 billion to combat increased competition and tighter regulations, helping to boost profitability at its core pharmaceuticals unit in the first quarter.
Group sales beat forecasts with a 9 percent rise to $9.91 billion and its shares rose 4.7 percent to 50.65 Swiss francs by 0842 GMT, having hit 51.20, compared with a 1.1 percent gain in the DJ Stoxx European drugs sector .
But Landsbanki Kepler analyst Denise Anderson said full-year guidance remained modest and warned that the next big product launches were not likely before late 2009.
"We therefore see any significant share price increase today as a good exit point," Anderson said.
Drug revenue was up 6 percent at $6.26 billion, despite generic competition to blood pressure tablet Lotrel and epilepsy medicine Trileptal, and fell 3 percent in local currencies, at the top end of the company's previous forecast.
DRUG DEVELOPMENT
Novartis trades at about 11 times forecast 2009 earnings, according to Reuters data, a premium to other European large-cap drugmakers such as GlaxoSmithKline Plc and Sanofi-Aventis SA , due to its greater diversity and longer exclusivity on key products.
But Novartis is cheaper than its local rival Roche Holding AG , with a 2009 multiple of 13 thanks to its promising new drugs and limited exposure to copy-cat generic competition.
Novartis reported mixed fortunes on its new drugs, saying it did not expect to resubmit diabetes treatment Galvus -- once seen as a major growth driver but which has suffered delays because of safety problems -- for U.S. approval until 2010.
Zelnorm, an irritable bowel syndrome treatment that ran into concerns of a possible link to heart attack and strokes, will not be resubmitted for U.S. approval.
But Novartis said its Extavia multiple sclerosis drug would be filed for U.S. approval soon and launches on both side of the Atlantic are seen in early 2009.
Cancer drug RAD001 and Menveo meningitis vaccine should both be filed for approval later this year. Novartis said.
(Editing by Louise Ireland)