Novartis reportedly considering selling Roche stake – could more M&A follow?

Novartis aims to dispose of its 13.5 billion Swiss franc (£9.6 billion) stake in rival Roche according to press reports – a move that would end years of rumours that the two local rivals could merge, but fuel speculation that Novartis is looking to M&A to boost revenues.

Novartis has reportedly hired banks to support the process to sell the stake, worth 33% of Roche’s voting shares.

The move suggests the company’s top management is gearing up for a fresh round of M&A following a $20 billion asset swap deal with GlaxoSmithKline (GSK) last year, and at a time when a key cancer drug is facing generic competition for the first time.

Novartis built up the shares as a basis for a possible merger more than a decade ago, but the plan never happened.

Tim Anderson, analyst at Bernstein, told Reuters that Novartis could be planning biotech or ophthalmology acquisitions with the proceeds.

The European patent on big-selling cancer drug Gleevec (imatinib) is also due to expire in the coming months, and it began facing generic competition in the US in February. Sales of Gleevec fell 20% in constant currency terms to $834 million in Q1 compared with the same period last year, the company said in results announced last week.

Although Novartis beat market estimates in first-quarter figures announced last week, net income still fell 13% to $2.79 billion. Sales of new heart drug Entresto (sacubitril+valsartan) have disappointed with full-year sales of just $17 million.

Under the terms of the GSK deal Novartis offloaded its vaccines business, but gained nearly all of GSK’s cancer drugs, excluding therapeutic vaccines.

The deal left Novartis with more than 20 cancer drugs and options on GSK’s oncology pipeline at a time when the market for cancer drugs is growing.

Two years ago, Novartis’s chairman, Joerg Reinhardt confirmed that the two companies wanted to remain independent.

This followed a report in 2013 that board member Pierre Landolt had suggested the merger should go ahead.

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