Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

Sometimes disappointing shareholders is the friendliest thing a company can do.

Novartis has been sitting on a massive $12.8 billion stake in Roche since 2003. The company earlier this year said it was considering selling the stake -- at a premium or not. But Swiss newspaper Sonntagszeitung reported Monday such a sale is on hold, with Novartis reluctant to sell until it can use the cash on a big acquisition. Otherwise, shareholders might just demand Novartis give the cash to them, in buybacks or a special dividend.

On its third-quarter earnings call Tuesday, Novartis dismissed that report and said it continues to evaluate a sale. CEO Joe Jimenez said the proceeds could be used to finance smaller "bolt-on" deals.

But patience may indeed be the best policy, and the company likely needs to think bigger than bolt-ons. Though it narrowly beat analyst earnings expectations for the third quarter, Novartis is struggling mightily. Delaying a sale until the company truly needs the cash is the right move, even if it irks shareholders. 

Rough Year
Struggles in its eye-care unit and with the launch of a new heart-disease drug have pressured Novartis shares this year
Source: Bloomberg

Gleevec, a blood-cancer drug that was the company's best-seller last year, is now facing generic competition. At $830 million, third-quarter sales topped expectations. But the company is already over the edge of the patent cliff and will soon tumble.  

Cliff Diving
The blood-cancer drug Gleevec has been a Novartis stalwart for years, but its period of market exclusivity is ending, along with its status as a sales leader
Source: Bloomberg

Its eye-care division Alcon, which accounted for 20 percent of revenue in 2015, has been a disaster. Sales have declined for seven consecutive quarters, and margins are deteriorating. The company sees "signs of progress," but a return to growth has evaded it so far. 

Sales at Novartis's Alcon eye-care division have fallen for seven straight quarters
Source: Bloomberg

Entresto, a heart-disease drug approved last year that Novartis expects to reach $5 billion in peak sales, has utterly failed to gain traction and missed sales expectations in the third quarter, despite extra marketing spending. Analysts have slashed more than $3 billion from estimates for 2019 sales over the past year.

Wrench in the Hype Machine
Analyst sales expectations for Entresto have fallen off a cliff as hoped-for sales growth has failed to materialize
Source: Bloomberg

Novartis says it has 12 new products or line extensions that are potential "blockbusters" in its pipeline, countering the need for a big deal. But if Alcon and Entresto continue to struggle, or if the pipeline under-delivers, then Novartis may need that Roche stake in reserve for more than the sort of $2-to-$5 billion deals on which it is currently focused.

There's no particular reason to hurry unless something the company really wants becomes available or attractively priced. The stake's value approached $15 billion when the market was higher last year, suggesting patience might help Novartis net a few extra billion.  

And the stake's $400 million-plus dividend payment is nothing to sneeze at -- and it's not worth sacrificing for bolt-on-type deals that might not produce much more cash.  

Post Peak
Novartis' one-third stake in Roche is not worth quite as much as it was in past years as the company evaluates a sale
Source: Bloomberg

Novartis expects its woes will be mostly behind it by the end of 2017, according to Tuesday's earnings call. Its Roche stake is a handy ace in the hole in case it's wrong. There's no reason to play it too soon.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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Max Nisen in New York at

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Mark Gongloff at