Novartis AG (ADR) (NYSE:NVS) released the results from its second quarter this morning, posting core earnings per share of $1.34 and earnings per share of $1.05 on net sales of $14.6 billion. Analysts had been expecting the drug maker to post earnings of $1.43 per share on $14.9 billion for the quarter.

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Breaking down Novartis’ earnings

The drug maker reported $8.2 billion in net sales from its pharmaceuticals division, with a 5 percentage point volume growth partially offset by competition from generic drugs. Net sales for its Alcon division were $2.8 billion, driven by growth in its Ophthalmic Pharmaceuticals and Surgical segments and strong performance in emerging markets. Net sales of Sandoz rose 5% to $2.3 billion due to an 11 percentage point growth that more than offset 7 percentage points of price erosion.

Growth products grew by 18% to $4.7 billion or 32% of the group’s net sales. Russia and China led the drug maker’s strong performance in emerging growth markets. Operating income rose 6% to $3.1 billion in the quarter, while core operating income was $3.8 billion. Core operating margin rose 1.1 percentage points due to improvements in the company’s pharmaceuticals division. Free cash flow rose 38% year over year, mostly because of higher operating income and lower net working capital.

“Novartis delivered solid financial performance with core margin expansion in the second quarter and first half,” said Novartis CEO Joseph Jimenez in a statement. “Pharmaceuticals, in particular, showed improved productivity, driving core operating leverage for the Group.”

Novartis updates progress, reaffirms guidance

Novartis reported that its lung cancer drug Zykadia received approval from the U.S. Food and Drug Administration. Its heart failure drug LC696 received an FDA Fast Track designation, while its immunotherapy treatment CTL019 received Breakthrough Therapy status. The company also secured exclusive ex-U.S. rights to its ophthalmology drug Fovista and a positive CHMP opinion for its glaucoma drug Simbrinza. Novartis also signed a licensing agreement with Google Inc (NASDAQ:GOOGL) (NASDAQ:GOOG) for smart lens technology.

The drug maker also reconfirmed its 2014 guidance of low to mid-single digit net sales growth and core operating income to grow ahead of sales.