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Pharmaceuticals operating income climbs 19% to USD 5.3 billion In Pharmaceuticals, operating income expanded significantly faster than net sales, rising 19% to USD 5.3 billion. This resulted in a margin expansion of 0.8 percentage points to 28.4% of net sales from 27.6% in 2003. An improvement of 0.8 percentage points in Cost of Goods Sold COGS ; as a percentage of net sales, mainly from productivity gains and improved product mix, was an important contributor. Marketing & Sales expenses as a percentage of net sales fell 0.2 percentage points to 33.0% of net sales based in part on sales-force productivity improvements, particularly in the US. Research & Development expenses rose 13% on investments in the Novartis Institutes for BioMedical Research NIBR ; and late-stage clinical trial programs. However, R&D expenses declined 0.4 percentage points to 18.8% of net sales as fewer upfront development costs were paid compared to 2003. Other Operating Expenses increased 56% as a result of several factors, including a decline of USD 171 million in hedging gains and lower income from product divestments compared to 2003, which included a one-time gain of USD 178 million from the sale of the Fioricet Fiorinal product line. General & Administrative costs fell to 3.5% of net sales from 3.6% in 2003. Consumer Health operating income declines 11% to USD 1.2 billion Operating income declined 11% to USD 1.2 billion despite strong expansion in OTC, Animal Health and CIBA Vision. One-off charges of USD 120 million were recorded, which included USD 37 million in restructuring charges and related impairments on property, plant & equipment at Sandoz, a one-time inventory write-down of USD 18 million in Animal Health, one-time costs of USD 14 million associated with the acquisition of Mead Johnson and the creation of a USD 51 million provision in Medical Nutrition to cover legal liabilities related to an investigation by the US Department of Justice in the US enteral pump market. Novartis Nutrition Corporation is currently in the process of negotiating a possible settlement of that portion of the investigation directed against it. Excluding these one-off items, operating income would have declined 1% to USD 1.3 billion and the operating margin would have been 13.3% of net sales compared to 14.9% in 2003. 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Investment Conclusion: Enough with the year-end review analysis and 2007 outlook. What will happen next week at the JP Morgan Healthcare Conference and why? News, perceptions, sentiment, fears. We have not been to all 25 of these but more of the H&Q than the JPM to show our age ; . Through the lens of our formal and informal ; specialty pharmaceutical coverage and the fullness of time, we offer a few thoughts to consider, which we filter through our new pharmaceutical paradigm prism pricing power is weakening, low cost, global scope dictates survival, Washington matters more than ever now, and consolidation is expected to accelerate, in our view. We believe the stocks to own in front of the conference include: Teva Pharmaceutical Industries TEVA: Buy ; , Shire Pharmaceuticals SHPGY: Buy ; our top conference pick with New River NRPH: Buy ; , the clear derivative to own, and Nektar Therapeutics NKTR: Buy ; Nektar is not presenting but two partners are ; . In our view, stocks to sell or avoid in front of the conference include: Amylin Pharmaceuticals AMLN: Hold ; , MannKind Corp. MNKD: Hold ; and Forest Laboratories FRX: Sell ; . Most provocative may be Barr's BRL: Buy ; CEO Bruce Downey who will likely articulate a vision of biogenerics in the context of the recently completed PLIVA acquisition and the power shift in Congress that occurred yesterday. Perhaps the most compelling private company story, Sirtris, may frustrate many investors who realize that resveratrol may not reach the market before 2012, but fortunately, millions of cabernet grapes have been harvested well in advance in anticipation of this pending news, which among other things, may help Alkermes ALKS: Buy ; the week after next. Happy New Year! Presenting Monday, January 8: Teva Pharmaceuticals TEVA ; , AstraZeneca AZN ; , Roche Nektar [NKTR] Derivative ; and Amylin AMLN ; Teva Pharmaceuticals TEVA ; : Will a change in Congress change sentiment? This is a global growth story, an overlooked undervalued emerging markets stock, with more accretive U.S. generic acquisitions with Impax Labs IPXL ; topping the short list worth an estimated $0.15 EPS in 2007 or Merck KGA's generic business which could add $0.25 or maybe both complementary to IVAX and easier to integrate, in our view. If TEVA is smart, it will announce both of these deals by mid-February and can suspend 2007 guidance until 2008, or at least buy some time. ! Batting clean-up on opening day in the ballroom is as visible as it gets and trading at historic low multiples yes, below the S&P and historic growth rates ; , and with all of Wall Street already frightened about a low growth scenario for 2007, explain how 2006 50% + earnings growth resulted in TEVA losing 28% of its value. At this juncture, it is difficult to imagine what TEVA could say to make the stock go lower and there seems no shortage of incremental buyers for TEVA. Let's start with the one place where TEVA belongs, but still doesn't get the obvious respect it deserves, in our view: top weighting in emerging markets. Maybe if TEVA listed in the Budapest, Moscow and Santiago exchanges, the market would wake up. So look for George Barrett to hit the global growth story hard where TEVA is in 80 countries outside of the U.S. and try to reconcile how if the emerging market were up over 30% in 2006, how did TEVA fall nearly 30%? Next, TEVA will have to apologize to shareholders for making IVAX instantly accretive and monetizing generic Zocor, Zoloft and Pravachol, which generated some extra $500M in cash in H2: 06, paradoxically eroding shareholder value. Impax Labs IPXL: NR ; and TEVA can help each other right now. But that makes one think that if TEVA could make the elephant IVAX jump out of a hat, then pulling a rabbit out of its hat should be a cinch. So while Impax Labs has fallen off Wall Street's radar screen literally the stock was halted and is not expected to open until at least January 17 as management institutes the ultimate strategic response to Sarbanes-Oxley: don't file any quarterly financial reports which it hasn't for over a year - as it frets about how to recognize revenues from partner TEVA across its strategic alliance ; , Impax Labs most certainly must be on TEVA's. And with the late December addition of Wellbutrin XL exclusivity.
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Storm-wrecked hospitals and a housing shortage in New Orleans prompted the largest percentage of Louisiana State University medical-school spring graduates in at least 17 years to leave Louisiana for residency training, school officials announced Thursday. Still, the results could have been worse, considering the catastrophic flooding wrought by Hurricane Katrina just six months ago on the city's main teaching hospitals, Charity and University, said Dr. Larry Hollier, chancellor of LSU Health Sciences Center. "I thought this was actually a fairly good match, considering what we went through, " he said. "The thing that this signifies to me is that there still is a tremendous amount of interest among future doctors ; in remaining in the city." In raw numbers, the loss is not dramatic. About 44 percent of the 172 New Orleans medical graduates will remain in the state, down from about 51 percent of the 166 last year. The loss of some key doctors to train residents at teaching hospitals in the area also prompted some graduates to seek training programs in other states, Hollier said. He predicted the numbers will rebound next year. "This is about the lowest it could get, " he said. "We'll be building back." Gauge of medical trends The numbers were released Thursday when medical students across the nation learned where they will go for their residencies. Known as Match Day, the moment completes months of interviews by seniors at medical centers both close to home and far away. Students and hospital officials rated each other, and that information was put into computers to produce the pairings, which were kept in sealed white envelopes until seniors nationwide started ripping them open at the same moment: 11 a.m. CST. LSU's match results are an important barometer of medical trends in the state because only Louisianians may attend LSU's medical schools in New Orleans and Shreveport. It is commonly accepted wisdom that most doctors set up their practices where they complete their residencies. Therefore, a sharp rise in the number of LSU students leaving Louisiana to complete their education could foretell a future drop in the supply of doctors in the state. This year, 76 of the 172 New Orleans graduates and 49 of the 92 Shreveport graduates will complete their training in Louisiana. Last year, 85 of 166 New Orleans graduates and 61 of 100 Shreveport graduates were accepted at residency programs in the state. Only two other times since 1990 -- in 2001 and 2003 -- have a majority of LSU graduates left the state for residencies. Tulane also sees drop Louisiana's other medical school, Tulane University's, also reported a drop in the number of its graduates staying in Louisiana for further training: 16 percent, compared with 23 percent last year and prednisone. Sulfate, 54 potassium chloride cr, 58 potassium chloride er, 58 potassium chloride er, 59 potassium chloride sa, 59 potassium chloride, 59 potassium chloride, 59 potassium chloride, 59 potassium citrate extended-release, 59 prandin, 29 pravachol, 30 pravastatin sodium, 31 prazosin hcl, 31 prazosin hcl, 42 precose, 27 pred mild, 53 pred-g s.o.p., 8 pred-g s.o.p., 53 pred-g, 8 pred-g, 53 prednisolone sulfacetamide, 12 prednisolone sulfacetamide, 53 prednisolone acetate, 43 prednisolone acetate, 53 prednisolone sodium phosphate, 43 prednisolone sodium phosphate, 43 prednisolone, 43 prednisolone, 43 prednisol, 53 prednisone intensol, 43 prednisone, 43 prednisone, 43 prefest, 48 premarin, 48 premphase, 48 premphase, 48 prempro, 48 prempro, 48 prenatabs obn, 59 prenatal 19, 59 prenatal formula 3, 59 prenatal plus nf, 59 prenatal-h, 59 prevacid i.v., 41 prevacid naprapac, 19 prevacid naprapac, 41 CMS Approval Date: 07 2007 Material ID: S5917034 5917058 7654. See appended electronic signature page ; Thomas W. Abrams, R.Ph., MBA Director Division of Drug Marketing, Advertising, and Communications.

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