Roche CEO scuttles Novartis merger talk

Roche CEO Severin Schwan

Hoping that a Basel-based dynamic duo will take on the pharma market together? Don't, says Roche CEO Severin Schwan. He made it quite clear that the Swiss drugmaker's founding families, who still control 50.1% of the company, have no interest in merging with crosstown rival Novartis.

"Nothing has changed with regards to Roche's position toward Novartis," Schwan said in announcing third-quarter earnings today. "The families Hoffman and Oeri have repeatedly stated they're committed to Roche's independence."

The latest chatter about Roche ($RHHBY) and Novartis ($NVS) joining forces started when a Basel newspaper interviewed Novartis board member Pierre Landolt. He put forth the idea that the two drugmakers could combine into one big, European pharmaceutical "champion." To his mind, new chairmen at the helm of both companies could negotiate a deal that their predecessors would not.

Asked about the idea, Schwan politely said Roche would consider working with Novartis if the right opportunity came along. That diplomatic response apparently didn't do enough to quash the merger talk. So, today Schwan took the more direct, explicit approach.

Fact is, neither Roche nor Novartis really needs the push of a megamerger--and both consider the idea more disruptive than constructive. Indeed, Novartis CEO Joe Jimenez told Bernstein analyst Tim Anderson as much earlier this month. And Roche's third-quarter numbers only serve to highlight its ability to stand alone: Sales beat analyst expectations at 11.6 billion Swiss francs, or about $12.7 billion. For the first 9 months of the year, the company boosted sales by 6% to 34.9 billion francs, aided by double-digit growth in the U.S. and emerging markets.

Plus, Roche has some recent R&D successes to tout, namely the approvals of new breast cancer treatments Perjeta and Kadcyla. With longtime blockbuster Herceptin facing biosimilar competition in the coming years, the company needed this next generation of treatments to fill in when the time comes. "I am very encouraged by the uptake of our new cancer medicines, Perjeta and Kadcyla," Schwan said in a statement. 

Roche isn't problem-free; its California-based Genentech research arm has pumped out promising new products, but its Basel-based R&D hasn't been as successful. Still, Schwan figures that small deals--mostly less than $1 billion, he told Bloomberg in September--are the way for Roche to go. So, Landolt will have to put his merger hopes to bed.

- read the release from Roche
- get more from Bloomberg
- here's more from FierceMedicalDevices on the Q3 results

Special Reports: Top 10 Drugmakers in Emerging Markets - Roche - Novartis | Top 15 Drug Launch Superstars - Kadcyla