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Novartis 4Q Profit Up 54 Percent

Swiss drug maker reported 54 percent rise in fourth-quarter net profit to $2.32 billion on strong sales and favorable exchange rates.

GENEVA (AP) -- Swiss drug maker Novartis AG on Tuesday reported a 54 percent rise in fourth-quarter net profit to $2.32 billion on strong sales and favorable exchange rates, and announced the appointment of Joe Jimenez as its new chief executive.

Earnings per share rose 53 percent to $1.01 from $0.66 in the same quarter of 2008, when Novartis posted a net profit of $1.51 billion.

Results met analysts' expectations and Novartis shares rose 2 percent to 56.80 Swiss francs ($54.21) on the Zurich exchange.

The company also said it would pay a fine of $185 million to U.S. authorities in connection with an investigation of how it marketed its epilepsy drug Trileptal.

It increased by $318 million -- to $397 million -- its set-aside for civil and criminal proceedings related to the marketing of its epilepsy drug Trileptal in the United States.

Novartis said its U.S. subsidiary NPC has been cooperating with parallel civil and criminal investigations by the U.S. Attorney's Office for the Eastern District of Pennsylvania into allegations it marketed Trileptal for unapproved uses, as well as into payments made to healthcare providers.

The company recently entered into a settlement, which still requires court approval, that would see NPC plead guilty to a misdemeanor violation of the U.S. Food, Drug and Cosmetic Act and pay a fine of $185 million, it said.

"NPC is currently negotiating with the EDPA to resolve civil claims relating to Trileptal," Novartis said.

Sales of Novartis products, which include the hypertension drug Diovan and anticancer drug Glivec -- known as Gleevec in the United States, rose 28 percent to $12.93 billion in the September-December period from $10.08 billion the previous year.

"The fourth quarter has been especially strong," outgoing CEO Daniel Vasella told reporters in a conference call, noting that Novartis benefited from better exchange rates and the shipment of $1 billion worth of swine flu vaccine in the final three months of 2009.

Vasella said the planned takeover of eye-care company Alcon Inc., which has met with resistance from some minority shareholders, would "propel Novartis to the global leadership position in eye-care and create a new growth platform."

Novartis said it has appointed Jimenez, the head of its global pharmaceuticals division, to succeed Vasella from Feb. 1. Jimenez, a U.S. citizen, is a graduate of Stanford University and the University of California, Berkeley. The 50-year-old previously worked for The Clorox Company, ConAgra, the H.J. Heinz Company and AstraZeneca plc before joining Novartis in 2007.

"After 14 years as CEO it is the right time to complete the carefully planned CEO succession process, which started over a year ago," Vasella said. The 56-year-old medical doctor, who is regarded in his native Switzerland as a symbol of the country's powerful pharmaceutical industry, will retain his post as chairman of the board.

Novartis offered a positive outlook for 2010, predicting mid-to-high single digit growth in its pharmaceuticals division and mid single digit growth overall. Vasella said much would depend on whether the Alcon deal proceeds as planned. "That is the swing factor," he said.

Novartis, which already owns 25 percent of Alcon, has said it will buy Nestle SA's 52 percent stake for $28 billion in cash before carrying out a merger with Alcon that would give it control of the remaining 23 percent held by minority shareholders.

Some minority shareholders have launched legal action in protest against what they perceive as an unfairly low offer to them of approximately $153 per share, compared with $168 per share that Novartis is paying Nestle.

"Obviously we think that our offer is fair," Vasella said.

He gave a cautious outlook on future orders for its vaccine for swine flu, or H1N1, saying demand may not hold up now that many countries perceive the pandemic to be milder than previously thought.

"I don't know what the demand will be ... but it will be fairly moderate," Vasella said.

Novartis has been investing heavily in new products, anticipating the expiry of patents on some of its blockbuster drugs in the coming years. The company said it has received regulatory approval for more than 30 new drugs and is currently working on 145 pharmaceutical projects.

Novartis also announced it will propose an increased dividend of 2.10 francs ($2.02) per share at its Feb. 26 annual general meeting. In addition, it plans to ask shareholders to approve executive pay packages and introduce a so-called 'clawback clause' in future contracts to ensure it can retrieve unjustified bonuses.

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