Novartis Aims to Beat $1.9B in Cost Savings By Year's End
Novartis (NYS: NVS) has two things to say. It now expects more bang for its buck from Alcon. The eye-care acquisition, which cost Novartis $51 billion, will deliver high single-digit to low double-digit sales growth, plus $350 million in cost savings by 2013, the company says. And it's looking to surpass last year's $1.9 billion in savings by the end of 2011; it's already racked up $1.2 billion in cost cuts so far this year.
Previously, the Swiss drugmaker had forecast $300 million in savings from the integration of Alcon. And the eye company's sales have traditionally grown by 7% to 9% per year, while Novartis' Ciba Vision eye-care unit typically posted lower growth than that, Reuters notes.
"[The Alcon] transaction was about long-term growth and not just cost synergies," CEO Joe Jimenez said in a statement. "We believe that Alcon has significant growth potential by leveraging the Novartis expertise in research, market access, and reimbursement, among others."
Novartis is also touting sales growth at its pharma unit, which will soon take a hit from the loss of patent protection on the blood-pressure blockbuster Diovan. Sales of recently launched products grew by 47% for the first half of 2011, year-over-year, the company said. The company expects this sales growth, plus cost cuts and emerging-markets expansion, to "enable the company to absorb the impact of patent losses and maintain robust margins."
Analysts weren't blown away by the strategy update, but did say the sales projections were slightly better than they'd expected and put a number to its cost-cutting goals should help investors get a better read on the company's progress. "If you look at their quarterly numbers, they are taking out costs, but they've never communicated future cost savings in such a way that people can plug it into their models," Bernstein's Jack Scannell told Bloomberg. "A more explicit approach will give investors a bit more confidence."
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