Novartis Eyes Consumer, Veterinary Purchases Up to $3 Billion

Novartis AG (NOVN) is willing to spend up to $3 billion on acquisitions of consumer-health or veterinary assets to bolster the drugmaker’s undersized businesses in those areas, Chief Executive Officer Joe Jimenez said.

Novartis also would consider generic-drug, biotechnology or diagnostics purchases, Jimenez said in an interview yesterday at the company’s Basel, Switzerland, headquarters. There’s a dearth of available assets, he said.

“We do expect to make bolt-on acquisitions to these five platforms, and we could do that today,” Jimenez, 51, said. “And when I say bolt-on, I mean anything from $1 billion to $3 billion.” He declined to comment on possible targets or the timing of potential purchases.

Jimenez aims to bolster Novartis’s sales as the company, Europe’s second-largest drugmaker by revenue, prepares to face generic competition to its best-selling prescription medicines, Diovan for hypertension and the cancer drug Gleevec. Other companies also are on the hunt. Announced takeovers in the drug industry have totaled $35.5 billion this year, according to data compiled by Bloomberg, up 28 percent from a year earlier.

Novartis fell 95 centimes, or 1.7 percent, to 54.05 Swiss francs in Zurich trading. The stock has returned 7.7 percent in the past year including reinvested dividends, compared with a 20 percent return for the Bloomberg Europe Pharmaceutical Index.

Photographer: Michele Tantussi/Bloomberg

Novartis AG is willing to spend as much as $3 billion on acquisitions of consumer-health or veterinary assets to bolster the drugmaker’s undersized businesses in those areas, Chief Executive Officer Joe Jimenez said. Close

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Photographer: Michele Tantussi/Bloomberg

Novartis AG is willing to spend as much as $3 billion on acquisitions of consumer-health or veterinary assets to bolster the drugmaker’s undersized businesses in those areas, Chief Executive Officer Joe Jimenez said.

Novartis is still integrating its last big acquisition. The company bought a majority stake in eye-care company Alcon Inc. in August for $28.3 billion, and in April paid $12.9 billion for the remaining publicly traded stock, completing a transaction started by Jimenez’s predecessor, Daniel Vasella.

Gen-Probe Speculation

Acquisitions aren’t essential because the company’s businesses are among the fastest-growing in the industry, Jimenez said yesterday. He declined to comment on speculation by analysts that the company may bid for Gen-Probe Inc. (GPRO), a maker of tests for AIDS and the West Nile virus.

With an estimated $3 billion in sales of non-prescription health products last year, Novartis is seventh-largest in a field led by Johnson & Johnson with $14.6 billion of revenue, according to analysts at Morningstar Inc. Novartis in February hired Naomi Kelman, a manager with J&J, to strengthen the over- the-counter medicines business, Jimenez said.

The company would “would take a very hard look” at any consumer brands to come on the market, Jimenez said. In April, GlaxoSmithKline Plc said its Alli diet pill and Lactacyd soap are among 19 consumer health-care products the U.K. drugmaker plans to sell this year to focus on “priority brands.”

Sanofi-Merck Deal

Novartis reported $6.2 billion of sales last year for its consumer unit, which includes over-the-counter, animal health and the Ciba Vision eye-care operation. The company doesn’t break out sales for the three businesses.

An opportunity last year to buy animal-health businesses fell through. Novartis and Bayer AG were among potential bidders for assets that Sanofi and Merck & Co. planned to sell to satisfy antitrust requirements for a veterinary joint venture, two people with knowledge of the matter said in October. Sanofi and Merck scrapped the venture in March because of antitrust obstacles.

Pfizer Inc. is weighing whether to divest businesses including animal health and over-the-counter medicines. Pfizer had $3.58 billion of veterinary sales last year.

Novartis’s Sandoz unit, which makes generic drugs, may benefit from additional acquisitions in the “sweet spot” of so-called differentiated generics, which are difficult-to- manufacture treatments such as injectable cancer drugs or inhalable respiratory products, Jimenez said.

Biotechnology

The Swiss drugmaker, which is Europe’s second-largest after Roche Holding AG, also would be interested in biotechnology companies with some products in development, Jimenez said.

Novartis would like to expand its diagnostics business, which can produce tests that are given to prospective patients to determine whether a medicine will be effective before the drug is prescribed, Jimenez said. Other areas of diagnostics, including testing for infectious diseases, also are attractive, he said.

For the past 13 years, Novartis and Gen-Probe have jointly developed and sold tests and machinery to screen blood for infections. Gen-Probe hired Morgan Stanley to seek a buyer for the company, according to three people with knowledge of the sale. Gen-Probe has declined to comment.

“The diagnostics space is a very interesting space for Novartis and for many companies,” Jimenez said. He declined to comment on Gen-Probe, which has a market value of $3.9 billion.

To contact the reporter on this story: Eva von Schaper in Munich at evonschaper@bloomberg.net

To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net

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