Novartis Poised for Growth Despite Concerns

Barron's is reporting that Novartis should outperform over the next two years despite the loss of patents and concerns over their purchase of a majority stake in Alcon (NYSE: ACL).

Novartis purchased a 77% stake in Alcon for $38.7B this year. Observers are concerned by "potential dilution as Novartis battles to buy the rest of the fast-growing eye-care company from minority holders."

The expiration of patents is also an issue looming over Novartis.

According to Barron's , "Over the next five years, Novartis will lose patents on key drugs. Hypertension drug Diovan, its most important drug at $6 billion annually, or about 14% of total revenue, loses patent protection in stages during 2011-13, and will most likely be hurt by generic competition."

Amid these concerns Novartis has a dividend yield of 3.5% and can potentially have total returns of 25% to 30% over the next two years.

Channing Smith, a money manager at Capital Advisors, "expects low-double-digit earnings growth, much higher than the industry average, supported by Alcon, improving margins, new drugs that will surprise on the upside, and expense controls."