ZURICH (Reuters) - Novartis NOVN.S boss Vas Narasimhan raised full-year targets on Thursday and announced that $700 million has been set aside in the hope of settling a decade-old lawsuit alleging that the Swiss drugmaker bribed U.S. doctors.

FILE PHOTO: Novartis CEO Vas Narasimhan addresses the Swiss drugmaker's annual news conference in Basel, Switzerland, January 30, 2019. REUTERS/Arnd Wiegmann/File Photo

Shares in the company rose about 5% to their highest since 2015, buoyed by second-quarter results, earnings guidance and the prospect of avoiding trial in a case that began in 2011 as a whistleblower lawsuit filed by a former employee.

The lawsuit, since joined by the U.S. government, contends that Novartis paid millions of dollars in kickbacks to doctors so they would prescribe its products, including hypertension treatment Lotrel and diabetes drug Starlix.

A May trial was canceled as talks began in an effort to settle a case that could result in a multibillion-dollar hit if the company lost in court.

“We’re working in settlement discussions to resolve the civil suit,” Chief Executive Narasimhan told reporters. “We’ve provisioned approximately $700 million.”

A string of alleged ethical shortcomings over two decades have already cost Novartis $1 billion in the United States, China and Korea while damaging a reputation that Narasimhan has made a priority of improving since becoming CEO in 2018.

U.S. prosecutors have declined to comment.

RAISED GUIDANCE

Novartis on Thursday reported a 20% jump in second-quarter core operating income to $3.6 billion with sales up 8% at $11.8 billion, beating an $11.5 billion forecast in a Refinitiv poll.

The company now expects 2019 core operating income to grow at low double-digit to mid-teen percentages, Narasimhan said, up from a previous target in the high single digits.

Sales growth is expected in the mid-to-high single digits, against previous guidance for a mid-single-digit percentage.

Its Entresto heart failure medicine registered an 81% leap in second-quarter sales to $421 million. Inflammation drug Cosentyx, the company’ top seller, reached $858 million, up 25%.

The company’s Innovative Medicines business achieved a core operating margin of 35.4%, hitting Narasimhan’s mid-term target ahead of schedule.

“The margin for the quarter was particularly convincing for Innovative Medicines,” said Vontobel analyst Stefan Schneider. “The raised FY guidance does not look ambitious.”

Novartis also revised full-year sales forecasts for its Sandoz business, lifting them broadly in line with last year or possible low-single-digit growth as its copies of Roche's ROG.S Mabthera, AbbVie's ABBV.N Humira and Amgen AMGN.O and Pfizer's PFE.N Enbrel capture market share in Europe.

SANDOZ REVAMP

Narasimhan called the result a positive surprise, adding that a revamp of Sandoz to make it an autonomous division within Novartis, which some analysts speculate could herald an eventual sale, remains “a couple-of-years journey”.

He also highlighted the second-quarter launch of gene therapy Zolgensma, the world’s most expensive drug at $2.1 million per patient, for deadly spinal muscular atrophy (SMA), saying he was pleased with its progress.

Payers are grappling with its high one-off cost, but Narasimhan on Thursday said that children under two -- the initial patient group for which U.S. regulators approved the medicine -- have access when physicians request it.

“We’re on track and fully in line with what we expected,” Narasimhan said.