According
to Pharma industry analysts Novartis really is considering selling off a few of
its units, in deals that could be worth $15 billion to $20 billion. And no,
Roche and Novartis aren't likely to
embark on any big joint projects, much less consider a merger.
This is how
Bernstein Research analyst Tim Anderson sees it. He visited both Swiss
drugmakers recently and talked with the companies' top brass. Both seemed
intent on quashing talk of a crosstown merger, recently triggered by Novartis
board member Pierre Landolt's enthusiastic comments on the prospect. Novartis
chief Joe Jimenez told Anderson that Landolt's opinion was his own and might
not be shared; Roche CFO Alan Hippe said mega-mergers are too disruptive, and
his company just isn't interested in them.
Rather than
eyeing a big merger, Novartis may be on the verge of slimming down instead.
Novartis chairman Joerg Reinhardt started a strategic review almost as soon as
he moved into his office, sparking talk of Pfizer-esque unit sales. He said
Novartis wouldn't go all-pharma again, but Novartis has its eye company,
Alcon--which means animal health, consumer health, vaccines and diagnostics
could all be sold off without restricting the company solely to prescription
drugs.
And that,
apparently, is exactly what Novartis is considering. "[W]e were struck by
how openly Mr. Jimenez seemed to acknowledge that its consumer health, animal
health, and vaccines & diagnostics businesses are on the block,"
Anderson wrote in an investor note, adding, "It seems that Novartis will
be making final decisions with those units fairly soon."
Lately,
unit sales and spinoffs are a Big Pharma trend, kicked off by Pfizer. The CEO
of the world's largest drugmaker decided that smaller would be better, and the
company has since sold off its nutrition business and spun off its animal
health unit, Zoetis. Now, the company is preparing to rejig its operations into
three distinct units, each with its own discrete financial reporting--which
could be the prelude to a bigger break-up. Meanwhile, Abbott Laboratories spun off its prescription drug business,
AbbVie, and GlaxoSmithKline CEO Andrew
Witty announced that he'd segregate some older products into a new business
with its own reported numbers.
So, when
Reinhardt stepped in at Novartis, pharma-watchers speculated that he might undo
some of his predecessor's diversification moves. For instance, the purchase of
the vaccines company Chiron, which hasn't paid off as Novartis had hoped.
Might Roche
be interested in buying any of Novartis's businesses? "Not likely, in our
view," Anderson wrote. He outlined a few other possibilities for
collaboration but deemed all of them rather unlikely. The two companies share
the eye drug Lucentis and the respiratory drug Xolair, so that's common ground,
but Hippe declared that Roche would be keeping its late-stage prospects in
those fields to itself. "It may just be lip service that Novartis and
Roche might become closer in the future," he wrote. "This would not
be unusual."