DAVOS, Switzerland - Swiss drug maker Novartis AG reported a 47 per cent drop in its fourth-quarter net profit Wednesday, citing a slate of exceptional costs from the ending of clinical trials to manufacturing problems and layoffs.
The Basel-based company said its net profit reached $1.21 billion in the fourth quarter, compared with $2.32 billion in the same period in 2010. Sales rose four per cent to $14.78 billion in the Oct.-Dec. period.
"We experienced some disappointments in the fourth quarter, with Tekturna/Rasilez and with the need to improve our quality standards at some manufacturing sites," Chief Executive Joseph Jimenez said in a statement.
Novartis recently halted a clinical trial into wider uses of the hypertension drug Tekturna, which is known as Rasilez outside the United States, after it was found to cause increased complications in patients already taking other common hypertension drugs.
The company said it took an exceptional charge of $900 million in the fourth quarter as a result of the trial ending.
Two other experimental drugs were also dropped, leading to one-off charges of $160 million in the fourth quarter.
Manufacturing problems led the company to recall several over-the-counter drugs from the U.S. market earlier this month. The company closed the Lincoln, Nebraska, facility where the products were manufactured and took a charge of $115 million for the temporary production halt.
Novartis said it would also book charges of $288 million for over 2,000 job cuts announced last year. Many of those were in the United States, where the company expects to see a sharp dip in sales with the expiry of another hypertension drug, Diovan.
"I am quite bullish on the future growth prospects for the company once we get Diovan out of the base," said Jimenez.
In a conference call, Jimenez told reporters that he didn't expect any further job cuts in 2012 "unless conditions change."
The results were in line with analyst expectations, but shares fell 2.5 per cent to 50.70 Swiss francs ($54.58) on the Zurich exchange as traders focused on the company's cautious outlook for 2012.
"We consider the current results to be very strong, but the outlook particularly for 2012 will likely disappoint investors," Zuercher Kantonalbank said in an analyst note.
Novartis received 19 regulatory approvals worldwide in 2011, including 15 for new drugs.
Jimenez said his company supported a European medicines agency investigation into its multiple sclerosis drug Gilenya, following the death of one patient.
Gilenya contributed $494 million to sales results last year.
"We are confident that Gilenya will continue to be a growth driver," said Jimenez.
For the full year 2011, Novartis reported a net profit of $9.25 billion, down seven per cent from $9.97 billion the previous year.