UPDATE 3-Novartis raises sales goal as new drugs sell well

* Q2 EPS rises to $1.06 vs poll forecast $1.05

* Core EPS $1.20 versus $1.18 market expectation

* Raises full-year sales goal

* Sticking to its offer for Alcon minority shareholders

* Shares rise 0.6 percent, in line with sector index

(Releads, adds detail, analyst comment, updates shares)

By Katie Reid

ZURICH, July 15 (Reuters) - Novartis AG (NOVN.VX: Quote, Profile, Research) kicked off the Big Pharma reporting season on a positive note by raising its full-year sales goal on the back of strong demand for its newest products, shrugging off drug price cuts across Europe.

The Swiss drugmaker's second-quarter earnings per share rose 18 percent to a forecast-beating $1.06 as higher-than-expected demand for its pandemic flu vaccine also boosted its top line. [ID:nLDE6681HC]

Novartis, which also said on Thursday it was sticking by its offer to buy out minority shareholders in eyecare group Alcon (ACL.N: Quote, Profile, Research), bumped up its full-year group sales guidance to mid- to high-single-digit growth rates in constant currencies.

This is in line with its forecast for its pharmaceuticals unit as key drugs like top-selling Diovan perform well.

Investors will now eye results from rivals GlaxoSmithKline (GSK.L: Quote, Profile, Research) and Roche (ROG.VX: Quote, Profile, Research) next week for more clues as to how the sector is coping with European governments' efforts to wrestle with record budget deficits by slashing drug prices.

"(The) guidance uplift despite EU price cuts should be seen as a positive for both Novartis and the entire sector given investor uncertainty on the impact of EU price cuts," analysts at Deutsche Bank said in a note.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ For a related preview please double click on [ID:nLDE66B12L] For graphic on companies see http://r.reuters.com/fej96m For more on pricing pressure in Europe see [ID:nLDE6501DZ] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

Novartis had been able to offset the lower prices in Europe with volumes from its new products, which now account for some 20 percent of group sales, Chief Executive Joe Jimenez told journalists on a conference call.

"We were able to insulate Novartis from that cost containment that some of our peers may see when they announce their results in the coming days," said Jimenez, an all-American collegiate swimmer now battling the price cut tide.

STRONG PIPELINE

Uncertainty about how Novartis will clinch the buyout of Alcon have weighed on its shares this year, overshadowing the strength of its pipeline. [ID:nLDE6661RT]

"Our forecasts suggest that Novartis has one of the better revenue growth profiles through 2015, despite losing Femara in 2011 and Diovan in 2012 to generics -- this is partly driven by the pending acquisition of Alcon," Bernstein analysts said, adding cancer drugs Glivec and Tasigna were likely to grow for the foreseeable future.

At 1034 GMT, shares in the group were trading 0.6 percent higher, largely in line with the European drugs sector (.SXDP: Quote, Profile, Research).

Blood pressure drug Diovan was performing well in the face of new generic competition, Jimenez said. A generic version of Merck & Co's (MRK.N: Quote, Profile, Research) rival drug Cozaar was launched recently.

Jimenez, who took over as CEO this year, added he was bullish on eye drug Lucentis despite the possibility some countries may start to use Roche's Avastin as a cheaper alternative. [ID:nLDE65915P]

One fly in the ointment, however, was that Novartis' cancer drug Afinitor failed in a late-stage study in advanced carcinoid tumours -- success in this indication would give it an extra boost on its way to becoming a blockbuster.

But analysts said this was not a major setback and the group may yet be able to publish positive data after looking at the trial results again with regulatory authorities.

CONFIDENT ON ALCON

Novartis, which agreed to buy a 77 percent stake in Alcon from Nestle (NESN.VX: Quote, Profile, Research), is holding firm on its offer of 2.8 Novartis shares for each Alcon share despite fierce opposition from Alcon's independent director committee. [ID:nLDE667034]

The bid, which equates to around $143 per Alcon share, is significantly below both the average price of $168 paid to Nestle and Alcon's Wednesday closing price of $156.11.

It is a big deal for avid fly fisherman Jimenez to land.

Novartis is buying Alcon to diversify and insulate itself from the effects of losing patent protection on big selling medicines, but many analysts have said it is paying too much.

The group expects its purchase of the majority stake to close either late in the third quarter or in the fourth quarter, and it still plans to push through buying the remaining 23 percent under Swiss law, Jimenez said.

Novartis trades at around 9.4 times 2011 earnings, at a discount to Swiss rival Roche , but at a premium to AstraZeneca Plc (AZN.L: Quote, Profile, Research) and GlaxoSmithKline thanks to its promising pipeline. (Editing by Michael Shields)

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