Novartis (NYSE:NVS) may be pointing the way for the pharmaceutical industry.
The Swiss pharmaceutical giant reported that second-quarter revenue rose 12% to $7 billion from the same period last year, a respectable gain on strength in its key drugs, particularly in the oncology area. More importantly, though, operating earnings for the quarter jumped 22.6% to $1.8 billion from $1.5 billion.
Novartis was quick to point out that its operating margin increased 0.6% in the first half of the year. Productivity seems to be a major watchword at the firm, as it shows up repeatedly in its quarterly updates. The focus appears to be producing results, especially in research and development (R&D). Over the last four years, the company has won approval for 11 novel -- not knockoff -- drugs.
Sales and marketing also appears to be doing its part, since of the company's top 20 selling medicines, 13 had double-digit growth in the first half of 2004. Of course, it helps that Novartis' portfolio is relatively fresh: Its top seller in the first half of 2004, with $1.5 billion in sales, was the hypertension drug Diovan, which was approved in 2002. The next two drugs in line, Gleevec and Zometa, with respective sales of $757 million and $526 million, were approved in 2001.
Not that other firms are standing still on the productivity front. Merck (NYSE:MRK), which continues to wrestle with its demons, is pushing through a number of changes in the information technology area under its new chief information officer, according to the IT publication Baseline. And Pfizer (NYSE:PFE), which has had its share of mixed results, is maintaining solid earnings expectations for 2004 despite trimming its top-line estimates, based on its belief that it can keep costs down.
The real rewards to productivity, though, come from improved output in R&D. In that area, Novartis may have something special.
Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.
