Seeking to boost shareholder returns, Novartis readies new $11B buyback round

Just as Swiss drug giant Novartis works to wrap up one massive share buyback program, the company has decided to roll out another.

Novartis is preparing to kick off a share buyback round aimed at repurchasing up to 10 billion Swiss francs ($11 billion) worth of company shares in the next three years.

The new initiative, greenlighted at Novartis’ annual general meeting last week, will see the Swiss pharma buy up to 10% of its own registered stock.

The fresh round comes even as Novartis can still buy shares worth 6.5 billion Swiss francs under an existing authorization, according to a company notice (PDF).

Novartis in late 2021 launched a $15 billion share buyback program funded by the $20.7 billion windfall from selling its stake in rival Roche. Novartis expects that buyback program to wrap up this year.

Companies typically launch share buybacks to return value to shareholders by boosting share prices. But after some ups and downs, Novartis’ stock price has largely remained the same today compared with the end of 2021. Out of 15 healthcare peers, Novartis ranked No. 12 for total shareholder return for the 2020 to 2022 period, according to the company’s own 2022 annual report.

As a result, CEO Vas Narasimhan’s 2022 pay in a long-term performance plan was “heavily affected,” the report said. Thanks to the reduced long-term award payout, Narasimhan’s total compensation for 2022 slipped 25% compared with 2021.

Novartis is undergoing a companywide transformation, including a major restructuring that could save about $1.5 billion in annual costs by 2024. The company is also in the process of spinning off its generics and biosimilars business Sandoz.

Meanwhile, Narasimhan has outlined two pillars of Novartis’ capital allocation strategy: investing in organic and bolt-on growth drivers and returning money to shareholders.

In addition to repurchasing shares, Novartis has been increasing its dividend. For 2022, Novartis increased its dividend for the 26th consecutive time, growing it by about 3% to 3.2 Swiss francs per share.