Drug maker Novartis AG reported a second-quarter increase in net profit of 19 percent Thursday, as sales in its pharmaceuticals business offset healthcare cost-cutting efforts by some European governments.
The company, based in Basel, Switzerland, reported a net profit of $2.44 billion (1.92 billion euros) compared with $2.04 billion in the same quarter a year ago.
Sales rose 11 percent to $11.72 billion in the April-June period from $10.55 billion the previous year, beating market expectations, according to analysts at Zuercher Kantonalbank. The company also raised its sales growth outlook for the year to mid-to-high single digits from mid single digits.
Novartis share were up 1.1 percent at 54.35 Swiss francs ($51.88) on the Zurich exchange after publication of the earnings report.
"We achieved this great sales growth despite the cost-containment in the EU," chief executive Joe Jimenez told reporters in a conference call.
Greece and Spain — which have been among the hardest hit in Europe's public debt crisis — have already capped healthcare expenditure, while the continent's biggest economy, Germany, is set to follow later this year.
Sales in Novartis' core pharmaceuticals business rose 8 percent to $7.67 billion, with about one third coming from just two drugs: hypertension medicine Diovan and cancer drug Glivec — known as Gleevec in the United States.
The vaccines and diagnostic division saw sales more than double to $564 million, though this was boosted by now completed swine flu programs in Japan and the United States.
Sales in its generics business Sandoz grew 11 percent to $1.97 billion, while consumer health saw a sales growth of 7 percent to $1.51 billion.
Results were affected by $231 million Novartis set aside for litigation and legal settlements, including a class action gender discrimination lawsuit in the United States.
While maintaining that there was no systematic discrimination, Novartis said Wednesday it would pay current and former female employees up to $152.5 million to settle the claims.
"I believe it was in the best interest of Novartis and shareholders to settle this suit," Jimenez said.
Novartis also expects to clear anti-trust hurdles in its acquisition of eye-care company Alcon Inc. during the third or fourth quarter. Some Alcon shareholders continue to oppose the move, but Jimenez said he was confident that Swiss corporate law was on Novartis' side.
"Even if there is litigation we will prevail in the end," he said.
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