Novartis reported Thursday that third-quarter net income rose 10 percent to $2.3 billion

compared with the year-ago period, helped in part by strong sales of newer products, which accounted for 20 percent of net sales in the quarter, and slightly exceeding analysts' estimates of $2.2 billion. The company also provided further insight into its proposed offer to Alcon's minority shareholders.

Quarterly revenue from prescription drugs increased 5 percent to $7.6 billion, with revenue from Diovan increasing 1 percent to $1.5 billion, and Glivec/Gleevec sales climbing 4 percent to $1 billion. Both drugs will begin to lose patent protection in the US in 2012, and Diovan also faces competition from Teva's generic version of Merck & Co.'s Cozaar, which was approved in the US in April.

The Swiss drugmaker is looking for sales of newer products to offset these losses, and in the third quarter recorded a 19-percent uptick in revenue from Lucentis to $398 million and a 30-percent increase in sales of Exforge to $222 million. However, the company recorded charges of $590 million in the third quarter related to the discontinuation of the development of two drugs.

Revenue from Novartis' generic unit gained 18 percent in the three-month period to $2.2 billion compared with the same time last year. The company received US approval for a generic version of sanofi-aventis' blood thinner Lovenox earlier in the year, and the drug recorded $292 million in third-quarter sales. Revenue from the drugmaker's vaccines and diagnostics division increased 16 percent to $632 million, and overall revenue grew 13 percent to $12.6 billion.

Healthcare reform in Europe reduced Novartis' core pharmaceutical sales by 6 percent in the region, and Novartis CEO Joe Jimenez warned that US healthcare reform will negatively impact the company next year. "We haven't provided an outlook for 2011, but the US healthcare reform will have an impact," Jimenez said, adding that the company's "strong focus on R&D...cost controls...and drug launches should help us.

" Bank Rahn & Bodmer analyst Birgit Kulhoff noted it was "slightly disappointing that they haven't included a clearer outlook" for the business. "This is especially true for 2011, since Novartis will slowly start to lose patent protection for blockbuster heart drug Diovan," Kulhoff commented.

For 2010, Novartis kept its full-year sales guidance of "mid-to-high single digits" in constant currencies, with the inclusion of its 77-percent stake in Alcon in the last four months of the year expected to boost sales to the "low- to mid-teens" range.

Commenting on the Alcon takeover, Jimenez suggested that Novartis is already starting to work with Alcon at "arm’s length," despite not having full control of the company. However, he declined to comment on speculation that Novartis could raise its offer, noting only that "we will see how things play out.

" Nonetheless, the company indicated that Alcon's minority shareholders should now reconsider its offer of 2.8 Novartis shares for each Alcon share as Novartis' current share price and the strength of the Swiss Franc has edged up the offer to about $167.3 per Alcon share, which is close to the $168 per share price that Novartis paid for Nestlé's stake in the company.

Andrew Weiss, an analyst with Bank Vontobel, said the rise in Novartis' share price eases pressure on Jimenez to improve the terms for Alcon's minority shareholders. "The offer is just short of $168, and at $168 it will be difficult for the IDC to block a merger," Weiss commented, referring to Alcon's independent directors who are seeking a higher offer from Novartis. "The terms are good, the price is in line," he added