Novartis Q2: Generic Sales Decline Is a Warning for Pfizer, Sanofi and Abbott

Last Updated Jul 16, 2009 12:14 PM EDT

Novartis' Q2 2009 results sound a warning for companies banking on a move into generics to shore up the future for their companies: Novartis' generic unit, Sandoz, performed weakly in both Q2 and the first half of the year, while its branded pharma section grew strongly.

Novartis total revenues were down 2 percent $10.6 billion; net income was down 10 percent to $2 billion.

But click on these snapshots from Novartis' earnings release, which show the revenue contribution from its various divisions.

In Q2, there is a dollar decline and only anemic local currency growth in Sandoz. It's the same in the first six months. But in its branded pharma products, the company is growing in both dollars and foreign currency.

It's just a snapshot, but it's something to consider for Pfizer, Abbott Labs and Sanofi-Aventis as they all prepare big pushes into generic marketing in hopes of finding a stable, long-term revenue base to offset the damage from branded patent expirations.

BNET has noted before that growing sales in generics is one thing, but maintaining margins is another. Novartis' results -- which come before Pfizer et al have really hit the ground in this category -- suggest that even growing generic sales is a tough task.