Lately, the large-cap pharmas have been like catastrophe insurers, in that most news has been negative and the absence of material news is considered positive. From this perspective, Novartis' (NYSE:NVS) third quarter is a good one.

Net sales from continued operations were up 9% in U.S. dollars; the Sandoz generics division and former Chiron vaccines division picked up the slack for its branded pharmaceutical drugs. Branded pharmaceutical product sales only accounted for 1.2 percentage points of overall sales growth, despite being Novartis' largest division. The slow growth was a result of the continued impact of the sales halt on Zelnorm in the U.S. and multiple generic launches on top drugs like Lamasil.

Backing out one-time charges and discontinued operations, Novartis' operating income was up 3% year over year. Due to a change in its tax rate and all these one-time charges, its earnings per share came in at $0.68 for the quarter. It may, however, be better to look at its nine-month EPS figure of $2.40 (absent some of these charges) to get a better picture of where Novartis stands through three-fourths of 2007.

Just like many of its other big pharma peers, Novartis has continued to focus on cutting costs and slimming down by selling non-pharmaceutical-related lines of business like its Gerber unit. It is also placing a heavier emphasis on developing biologics similar to rivals like AstraZeneca (NYSE:AZN), with 25% of its preclinical compounds geared toward more generic-drug-resistant biologics.

Being a large-cap pharma with many compounds on the market doesn't necessarily mean a drugmaker is a diversified and safe investment. Just look at Pfizer's (NYSE:PFE) dependence on Lipitor and the troubles that that drug is causing. Still, the overall picture of Novartis is of a diversified drug developer that is moderately growing earnings with branded pharmaceuticals that are hitting a bit of a sales soft patch.

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