In the first six months of 1999, Novartis Group sales from continuing businesses reached CHF 16.3 billion, an increase of 1% in local currencies (+1% in Swiss francs). Thanks to continued growth of the Healthcare Division (+6% in local currencies) and the dynamic development of Consumer Health (+8% in local currencies) the Group was able to overcome the anticipated
drop in sales of its Agribusiness Division (–9% in local currencies) which suffers from adverse market conditions.

The Group continues to invest in key growth drivers, managing the rejuvenation of its product portfolio, and will complete phase III trials for several potential pharmaceutical “blockbuster” compounds.

In Agribusiness, project “Focus”, launched last month, will strengthen competitiveness and provide a foothold for future growth.

Group First Half Sales

*Consumer Health: RedLine, Roland, OLW, Wasa, Eden, Italian sugar free brands

Healthcare (+6% in local currencies)

Pharmaceuticals (+6%), continued to shift resources to strategic products, improving marketing and sales productivity to extend the dynamic performance of key growth drivers. The benefits were reflected in the strong sales growth of the new-class antihypertensives Diovan and Co-Diovan (Diovan combined with the diuretic hydrochlorothiazide), which increased sales by 90% and have now captured a substantial share of the expanding US and global markets. Other products posting good growth were: Aredia (bone metastasis, +57%), Miacalcic (osteoporosis, +14%), Sandostatin (acromegaly, +7%), Foradil (asthma, +23%), and the cholesterol-lowering agent Lescol (+11%). Novartis maintained its lead in the transplantation franchise as Sandimmun/Neoral (+12%) achieved double-digit growth in spite of generic competition. Lamisil (fungal infections, +11%) continued to outperform the market. Voltaren (anti-rheumatic, –12%) expectedly came under increased pressure from generics and the introduction of new competitor products. Pharmaceutical sales increased 10% in the US, offsetting the subdued performance in Brazil owing to the economic situation and a slow-down of Voltaren sales. Solid performances were reported in Japan with a strong contribution from the recently launched Lamisil tablets and from Lochol (cholesterol-lowering agent). Spain and Germany also delivered good sales expansion. Comtan (Parkinson’s disease) has been successfully launched in eight countries and Exelon (Alzheimer’s disease) was granted “approvable” status by the FDA in May and is now approved in 50 countries around the world.

Generics (+13%) again reported impressive growth, driven mainly by the dynamic retail generic pharmaceuticals business in Germany and in the US. Generic bulk pharmaceuticals also contributed to growth, whereby the strongly performing cephalosporin business more than offset price erosion in the erythromycin and penicillin markets.

CIBA Vision’s sales (+3%) were driven by the contact lens products Focus DAILIES™ (daily disposable contact lenses) and Focus Monthly Toric (monthly disposable soft contact lenses to correct astigmatism), as well as by Ophthalmic Pharmaceuticals, in particular Zaditen (anti-allergic eye drops) and Arteoptic/Ocupress (glaucoma beta-blocker treatment). The conventional lens and lens-care businesses continued to face strong competition, particularly in the US. The roll-out of Focus DAILIES™ has been extended to 17 countries, and the response to Focus NIGHT & DAY™, the revolutionary extended-wear lenses approved in Europe in April and introduced in eight countries, has exceeded all expectations. The acquisition of Mentor’s intraocular lens business, announced in May, marked CIBA Vision’s entry into the growing ophthalmic surgical market. 

Agribusiness (–9% in local currencies)

In response to the difficult market environment in agriculture, Agribusiness recently launched project “Focus” to reduce costs, invigorate marketing and, through re-allocating resources, concentrate on the development and commercialization of the most promising products. The planned reduction of 1 100 jobs worldwide will generate annual savings of CHF 100 million, the full effect of which will be seen after two years. Provisions for a one-time personnel restructuring charge of CHF 90 million have been made in the first half.

The foreseen decline in Crop Protection sales (–11%) reflects difficult market conditions – particularly acreage reductions and price pressures – in the US and in Europe. In addition, levels of crop disease in certain important markets were low. These factors could not be offset by the positive trend seen in the Asia Pacific region, particularly in Australia. Herbicides and Fungicides continued to be the most adversely affected businesses. In Insecticides, priority on key products has resulted in strong performance, especially of Curacon. Actara/Cruiser, a very promising new
insecticide, has now been registered in 19 countries, whilst the new generation fungicide Flint was successfully introduced in Switzerland, its first test market.

Seeds (–6%) also faced heavy price pressure and acreage reductions in corn, both in Europe and in the NAFTA region. In oilseeds, sunflowers showed excellent growth in Europe, whereas soybean sales were down in NAFTA as a result of the increased practice of using farm-saved seed. In contrast, new competitive sugar beet varieties performed well in Europe, as did vegetables and flowers in both Europe and NAFTA.

In Animal Health (–6%), the farm animal segment was squeezed by poor demand because of historically low commodity prices. Capstar, an innovative, fast-acting flea control product, was launched in Australia and Switzerland, its first markets. Together with Program it will extend Novartis’ franchise in flea control.

Consumer Health (+8% in local currencies)

The new Consumer Health Division extended the impressive start made at the beginning of the year, with Medical Nutrition achieving dynamic growth. OTC and Health & Functional Nutrition also performed well. Following FDA approval for over-the-counter availability in March and after just four weeks on the market, Lamisil cream has become number one in the US athlete’s foot cream category. The success of Gerber “Nature Lock” in the US and continued growth in Latin
America underpinned the strong performance in Infant & Baby Nutrition. With the sale of Eden and Wasa, announced in April, the Division has successfully completed the program initiated last August to divest its non-core businesses as part of the merger of its Self-Medication and Nutrition arms.

Outlook

Novartis will further invest in its growth drivers, strengthen marketing and sales operations, and at the same time move forward to prepare the regulatory submissions and the launch for its new pharmaceutical products. While third quarter growth in Pharmaceuticals will be soft compared to a strong third quarter in 1998, the company anticipates continued sales growth in Healthcare and Consumer Health for the full year in 1999, and an unchanged difficult marketplace for Agribusiness. Novartis is confident that project “Focus”, implemented by the new leadership team in Agribusiness, will strengthen competitiveness and greatly improve performance in the long term.

Full half-year results will be published on 26 August 1999.

First Half Sales

 Second Quarter Sales

*Consumer Health: RedLine, Roland, OLW, Wasa, Eden, Italian sugar free brands

Novartis is a world leader in Life Sciences with core businesses in Healthcare,Agribusiness and Consumer Health. In 1998, Novartis Group sales were CHF 31.7 billion, of which CHF 17.5 billion were in Healthcare, CHF 8.4 billion in Agribusiness and CHF 5.8 billion in Consumer Health. The Group annually invests more than CHF 3.7 billion in R&D. Headquartered in Basel, Switzerland, Novartis employs about 82 000 people and operates in over 140 countries around the world.

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