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Profits tumble for Novartis

First-quarter net profit falls by 18 per cent, partly due to suspension of production at a US manufa

The Swiss health-care company Novartis has reported a net income of $2.33bn for the first quarter of 2012 – an 18 per cent decline, compared to $2.82bn for the same period last year.

The results were affected by a strong US dollar and weaker sales of the blood-pressure drug Diovan, which faces patent expiry. New products have so far been unable to compensate entirely for the drop in Diovan sales. 

The company's net sales declined 2 per cent to $13.74bn (2011: $14.03bn), while operating income decreased 17 per cent to $2.82bn ($3.41bn).

However, net sales increased in the pharmaceuticals division by 2 per cent to $7.84bn (2011:7.7bn). Products launched since 2007 generated $2.6bn of net sales. These products – Lucentis, Tasigna, Afinitor and Gilenya – now represent 33 per cent of division sales, compared to 26 per cent in the same period last year. Afinitor, an oral inhibitor of the mTOR pathway used across multiple diseases, made a strong contribution in the first quarter, with sales of $143m. 

Alcon net sales increased 5 per cent to $2.54bn, led by strong growth in the surgical division (9 per cent). Ophthalmic pharmaceuticals sales grew 5 per cent, while vision care grew 1 per cent.

Sandoz net sales declined 10 per cent to $2.12bn, against a very strong first quarter last year ($2.37bn).

Vaccines and diagnostics net sales were down 19 per cent to $299m (2011: $371m) but the contrast was mainly due to an exceptionally strong first quarter in 2011, which benefited from the release of bulk pediatric shipments.

Net sales for consumer health – which comprises OTC and animal health – declined 20 per cent to $932m (2011: $1.17bn), impacted by the suspension of production at a factory in Lincoln, Nebraska. 

Joseph Jimenez, CEO of Novartis, said:

Novartis Pharmaceuticals and Alcon divisions delivered strong growth and operating leverage in the first quarter. Group net sales performance was impacted by Sandoz, which was up against a strong year-ago base with enoxaparin exclusivity, and by consumer health, which was impacted by the suspension of production at the Lincoln, Nebraska, manufacturing site.

We are making progress remediating the quality issues at the Lincoln site, as well as the three Sandoz production sites.
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Is anyone prepared to solve the NHS funding crisis?

As long as the political taboo on raising taxes endures, the service will be in financial peril. 

It has long been clear that the NHS is in financial ill-health. But today's figures, conveniently delayed until after the Conservative conference, are still stunningly bad. The service ran a deficit of £930m between April and June (greater than the £820m recorded for the whole of the 2014/15 financial year) and is on course for a shortfall of at least £2bn this year - its worst position for a generation. 

Though often described as having been shielded from austerity, owing to its ring-fenced budget, the NHS is enduring the toughest spending settlement in its history. Since 1950, health spending has grown at an average annual rate of 4 per cent, but over the last parliament it rose by just 0.5 per cent. An ageing population, rising treatment costs and the social care crisis all mean that the NHS has to run merely to stand still. The Tories have pledged to provide £10bn more for the service but this still leaves £20bn of efficiency savings required. 

Speculation is now turning to whether George Osborne will provide an emergency injection of funds in the Autumn Statement on 25 November. But the long-term question is whether anyone is prepared to offer a sustainable solution to the crisis. Health experts argue that only a rise in general taxation (income tax, VAT, national insurance), patient charges or a hypothecated "health tax" will secure the future of a universal, high-quality service. But the political taboo against increasing taxes on all but the richest means no politician has ventured into this territory. Shadow health secretary Heidi Alexander has today called for the government to "find money urgently to get through the coming winter months". But the bigger question is whether, under Jeremy Corbyn, Labour is prepared to go beyond sticking-plaster solutions. 

George Eaton is political editor of the New Statesman.