Novartis would sell its Roche stake without a premium, CEO says

By Emily Wasserman May 25, 2016 9:30am

Novartis ($NVS) has been reluctant to sell its big stake in neighboring Swiss pharma Roche ($RHHBY) unless it got a premium. Now, the company is changing its tune.

Novartis “would potentially make a decision to exit without a premium if the opportunity were right,” CEO Joe Jimenez told investors at an event this week in Basel, Switzerland, as quoted by Reuters. The company has explored its options for selling its Roche shares, which amount to about 13.70 billion Swiss francs ($13.81 billion), but held back on making moves.

Lagging sales for Novartis’ Alcon eye care unit and its new heart drug Entresto might be changing Jimenez’s position, Reuters points out. Novartis could generate some extra cash for dealmaking by selling its 33% stake in Roche on the open market.

But the company could also encounter some hurdles by taking this route. Novartis holds about 33% of Roche’s voting shares, and getting together that large of a block of shares on the open market is no easy feat, Bernstein analyst Tim Anderson said last month in a note to investors.

Still, “Novartis is in a time of need, having had setbacks with both Alcon and Entresto, and investor sentiment is languishing,” Anderson said in his note. And it’s “distinctly possible” that the company would use the cash for a deal, he added.

A sale would also end rumors of a potential merger between Roche and Novartis. In 2014, after Joerg Reinhardt took over as Novartis chairman, some said that the company was pushing Roche for a deal. “Two pharma groups working in the same location have many topics in common,” Reinhardt said at the time, even though he denied interest in a merger.

- read the Reuters story

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