Novartis AG, Swiss pharmaceuticals, has reported that the company’s profit may decline by 46% to $1.2 billion on charges in the fourth quarter this year as the competition between rival companies has increased too much. Not only competition but reduction in drug prices and more investment on innovative therapies are also responsible for lower profits. Last year’s fourth quarter profits were $2.27 billion.
Overall the company has seen $9.25 billion of net profit fall this year despite of the increasing sales of 16% to $58.57. Fourth Quarter sales increased by 4% to $14.781 billion.
Earnings per share has also been dropped from $0.94 in the prior year quarter to $0.48 in this year’s quarter.
“While productivity measures and margin improvements on products launched since 2007 are important contributions to improving profitability, they are not expected to fully offset the loss of margin from generic competition (and) price erosion,” Novartis said on Wednesday.
Still Novartis believes that the financial performance in the year 2012 would be in line with the performance in 2011.
Joseph Jimenez, CEO of Novartis, said about the results,
Novartis achieved solid sales growth and strong operating leverage in the fourth quarter and for the year as a whole. We maintained our innovation momentum this year, achieving 15 key approvals and expanding our already robust pipeline. We also improved core margins through targeted productivity initiatives. However, we experienced some disappointments in the fourth quarter, with Tekturna/Rasilez and with the need to improve our quality standards at some manufacturing sites. We are committed to ensuring one single high quality standard across Novartis and will invest the necessary resources to achieve this goal in all divisions. Novartis is well positioned as we face the expected patent expirations and will continue discovering new treatments to improve the health of patients across the globe.