Sector News

Can Novartis' CEO resist going for a megamerger?

May 30, 2017
Life sciences

A series of potential asset deals could put $50 billion cash in the hands of Novartis CEO Joe Jimenez.

While he has said he is looking for manageable deals, the company’s pharma portfolio has gaping holes in it, and some analysts are getting anxious the Swiss pharma might squander its opportunity as it did when it bought Alcon, one of the operations Jimenez might unload.

A sale of the the eye care business Alcon could be bring in $25 billion to $35 billion. Novartis paid $60 billion for it 7 years ago.

Another $10 billion might come from Novartis selling its stake in its consumer health JV with GlaxoSmithKline. It has only until next March to decide whether to exercise an option for that 36.5% chunk, Reuters pointed out.

Finally, Novartis has a stake in Swiss peer Roche—which Jimenez’ predecessor bought—that is worth an estimated $14 billion. The company has said it might sell that to do deals.

Jimenez has said he is on the hunt for smaller acquisitions, but as a leader in cancer medicine with no immuno-oncology drug on the market, some investors have worried Novartis might take a run at Bristol-Myers Squibb or AstraZeneca. BMS’ Opdivo is one of the leaders in the immuno-oncology market, and AstraZeneca just this month won FDA approval for its checkpoint inhibitor Imfinzi in bladder cancer.

While Stephen Anness of Invesco Perpetual is all for Novartis selling the assets, he is a bit uneasy about what it would do with with pockets stuffed with cash.

“I would be very cautious about selling stakes … in things to raise a war chest to go and do a massive deal, only for that deal to go and be another poor deal,” Anness said to Reuters.

There has been rumble of rumors that Jimenez might take a run at either BMS or AstraZeneca to move his company’s fortunes ahead. The talk got hot around BMS in February after some disappointments arose for BMS’ blockbuster Opdivo.

Leerink Partners’ Seamus Fernandez earlier this year wrote that Opdivo, Yervoy and the BMS’ burgeoning immuno-oncology pipeline were “a high-value industry asset,” but with BMS’ shares depressed on Opdivo’s stumbles, the U.S. drugmaker could make a juicy target.

A few weeks later, talk surfaced that both Novartis and Roche, as well as Pfizer and even Gilead Sciences, were crunching numbers on a deal. Last year, similar talk about Novartis being interested in AstraZeneca pushed up its shares by 6%.

Of course, merger talk is a staple of the industry and most of it ends up being wishful thinking for investors hoping for a big payday.

While Novartis has not wavered from its insistence that small bolt-ons, up to $5 billion, are what the company is looking for, Reuters pointed out its sales have fallen the last nine quarters at Novartis, Alcon is a big drag on the company and some of its newer drugs have been slow starters. This all puts pressure on the CEO to do something that will impress investors.

As for its prospects for M&A, Jimenez last month acknowledged Novartis is “having a hard time finding value-generating acquisitions” in the $2 billion to $5 billion range “just because prices have moved up quite a bit,” he said.

By Eric Palmer

Source: Fierce Pharma

comments closed

Related News

May 15, 2022

Novo Nordisk and Flagship Pioneering announce a strategic collaboration to create a portfolio of transformational medicines

Life sciences

The companies will explore opportunities to apply Flagship’s innovative bioplatforms – an ecosystem that currently comprises 41 companies – to scientific challenges in disease areas within cardiometabolic and rare diseases and initiate research programmes based on these.

May 15, 2022

BD, Babson set sights on bringing simple blood collection into the home

Life sciences

BD is expanding its long-running partnership with the blood collection company Babson Diagnostics. The two companies have been working together since 2019 on a device that can gather small volumes of blood from the capillaries in the fingertip without requiring any specialized training, and beginning with a focus on supporting primary care in retail settings.

May 15, 2022

CSL’s $11.7B Vifor buy, 2021’s biggest biopharma M&A deal, hits antitrust delay

Life sciences

Wednesday, Australian biotech CSL said (PDF) the regulatory review of its $11.7 billion acquisition of Switzerland’s Vifor Pharma will take “a few more months,” suggesting it won’t be able to close the transaction by June 2022 as previously expected.