Novartis Looks at Up to $5 Billion Deals in Cancer, Generics

  • Drugmaker’s CEO says big industry M&A may create new targets
  • Novartis pipeline makes large deals lower priority: Jimenez

Novartis AG, Europe’s second-biggest drugmaker by sales, said it’s looking for acquisitions that cost between $2 billion and $5 billion to bolster its position in areas including cancer and the development of copycat medicines.

“If there were pipeline assets that were late-stage in either oncology or pharma, those would really be the bull’s eye,” Chief Executive Officer Joe Jimenez said in a phone interview Tuesday after the company reported a decline in third-quarter profit excluding some items. Assets that could strengthen its generics business are another target, he said. The company’s products include treatments for heart disease and skin conditions.

Across the industry, an increase in large-scale acquisitions would probably force companies to divest assets, leading to potential opportunities for Novartis, he said. Big transactions are a lower priority for Novartis because of the company’s pipeline of a dozen potential blockbusters that may reach the market over the next three years, the CEO said. The values of potential targets also remain a hurdle to doing deals, according to Jimenez.

“If you look at recent prices of some of the biotechs that have gone recently, even though there has been a correction, it’s still at a level where it’s difficult to determine if you are ever going to create value,” he said.

Novartis fell 1.3 percent to 73.65 as of 12:14 p.m. in Zurich trading. The stock has declined 15 percent this year.

‘Bullet-Proof’

A new corporate structure to better integrate the Swiss company’s units makes it easier to add new businesses and lowers costs in an uncertain pricing environment, he said. The company in August decided to fold its specialized cell and gene therapies unit into other parts of the company.

“It’s all designed to make sure we bullet-proof the company for the next 10 years,” he said. “No matter what the health-system environment looks like, this is going to make us more nimble.”

Any decision on whether to sell its stake in rival drugmaker Roche Holding AG depends on how the proceeds could be invested and the amount of income that comes into the company from holding the shares, Jimenez told reporters on a call Tuesday following speculation about a possible sale of the shares.

“Redeploying those funds in ways that would result in additional value for Novartis shareholders would be a key criterion,’’ he said. “If we are scanning the universe in terms of bolt-ons, use of funds would come into play.”

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