There are no safe havens in the stock market. Every stock carries risk. But some less than others. This column features stocks that have shown one or more of the following characteristics: less volatility, better earnings, larger market caps, safe and increasing dividends. In these times of turmoil, our goal is to show readers better opportunities for investing with fewer risks.

October 20, 2008 - Novartis AG (NVS-NYSE) provides healthcare solutions that address the needs of patients and societies worldwide. Its Pharmaceuticals division researches, develops, manufactures, distributes, and sells pharmaceuticals in therapeutic areas, including cardiovascular and metabolism; oncology and hematology; neuroscience; respiratory; infectious diseases, transplantation, and immunology; ophthalmics, dermatology,gastrointestinal, and urinary; and arthritis and bone.

Novartis' Sandoz division develops, produces, and markets drugs, as well as pharmaceutical and biotechnological active substances. Its Consumer Health division includes three units: Over-The-Counter Medicines (OTC), Animal Health, and CIBA Vision. OTC unit offers self medications; Animal Health unit provides veterinary products for farm and companion animals; and CIBA Vision unit markets contact lenses, lens care products, and ophthalmic products. Novartis has strategic alliance with Morphosys AG for the discovery and development of biopharmaceuticals; and with Intercell AG to develop and manufacture various vaccines to prevent life-threatening viral and bacterial diseases and influenza vaccines. The company was founded in 1895 and is headquartered in Basel, Switzerland.

Earnings just came out, better than expected. Still the stock traded a little lower after the news. Here's why: The company will cut 550 sales jobs as part of an ongoing restructuring, the pharmaceutical company announced. Novartis said the cuts will be made "in a socially responsible manner." More than half of the cuts will come from leaving vacant positions open. The job cuts come on top of a global round of 2,500 reductions announced in December.

In contrast to some of its competitors, though, Novartis has a business that's staying steady. The company said sales increased by 12 percent in U.S. dollars, to $10.75 billion, in the third quarter. Net income increased by 32 percent, to $2.08 billion.

The company's vaccines and diagnostics business grew sales by 16 percent, to $666 million. But the company already is bracing for the big hit it will take in 2012, when top-selling blood pressure drug Diovan loses patent protection. Diovan accounted for $4.3 billion of Novartis' sales in the first nine months of 2009 - more than 10 percent of the company's total revenue.

So how can this scenario be appealing to conservative investors? The answer lies in the company's aggressive cost cutting and a pipeline of new drugs as well as strong earnings and a healthy balance sheet. Furthermore, exept for Diovan, the other drugs losing their patent protection won't severely impact the company.

On the negative side: Two drugs seeing strong generic competition are Lamisil and Lotrel. 4 more drugs, including Diovan, will lose patent protection in 2011 and 2012. Furthermore, there's been a marketing suspension of Zelnorm, a treatment for irritable bowel syndrome.

On the plus side: the company is cutting costs, mostly through layoffs or closing out of retired positions, by $1.6 billion by 2010 which is about 5% of 2007's expenses. It's branched into vaccines by acquiring Chiron, a maker of meningitis vaccines, two of which are scheduled to launch soon, beating competitive products from Glaxo, Wyeth, and Sanofi. There's also sales from Novartis' own generic division, Sandoz. Analysts see sales of $7.9 billion in 2008 for this unit which puts it in second place in the generic world behind Teva. It accounts for about 17% of total sales. By 2011 to 2013, analysts expect it to contribute 19% of operating profits.

There are good indications of strong products coming from the company's core drugs with names like Reclast, Tekturna, Lucentis, QAB149 (COPD), the Exelon Patch, Exforge and several others. Another division doing well: consumer products. Recently the company bought 25% of Alcon, a U.S./Swiss eye-care company for $11 billion. It can buy 52% more for $28 billion.

More numbers: Earnings should be $3.72 this year, up from $2.80 last year, $4.00 next year. Stock has a very low beta of .21. Forward P/E is 13. Price to Sales was 2.80 for the last 12 months. Price to Book is 2.23. Profit margin was 29.94% in the last 12 months while Operating Margin was 20.6%. Return on Equity was 14.8%. The company has $16.20 billion in cash or $7.16 a share. Debt to Equity is .21 and the Current ratio is 1.63. Book Value per share is $22.80. There's an annual divdiend of $1.58, paid once a year on June 30 for a yield of 2.9.

Novartis, like all drug companies, is feeling the pressure from generic competition. But it's fighting back with new drugs and a division that produces generics as well. The balance sheet is solid. The stock price is down about 15% from its recent all time high. Over the last 6 years, the stock has steadily climbed higher while the rest of the market, in general, has seen rough volatility. Check this one out if you're looking for a drug manufacturer.

Company Web site: www.novartis.com

- Ted Allrich