Roche and Novartis are competitors in the pharmaceutical market, but they have also been financially connected for the past two decades. Novartis has more than quadrupled the value of its competitors’ equity investments. Novartis is cashing out now.
On Thursday, the two companies announced that Novartis will sell its shares to Roche for US$20.7 billion. Novartis sees this transaction as a way to monetize its investment. In a separate statement, Roche says The repurchase of shares from Novartis will allow the company to regain full strategic flexibility.
Roche has two types of stocks, bearer stocks and non-voting stocks. In 2001, Novartis bought 32 million Roche bearer shares for approximately 4.8 billion Swiss francs (approximately US$2.8 billion), accounting for approximately 20% of the company’s voting shares.exist Financial Statements, Novartis described the transaction as “a financial investment of a potentially strategic nature.” The documents show that Novartis increased its investment in 2002, spending 2.9 billion Swiss francs (approximately 2.1 billion US dollars) to acquire another 11.4% of Roche’s voting shares.As of the end of 2002, Novartis Report Its shares account for nearly one-third of Roche’s voting shares.
When buying shares, Novartis’s then chairman and chief executive officer Daniel Vasella stated that these transactions were “a long-term financial investment that is also strategic in nature.” According to reports, Securities filingThe strategy is a potential merger of two companies headquartered in Basel, Switzerland, but this marriage never happened.this Quoting Financial Times A person familiar with the matter, who asked not to be named, said that Novartis has never held a seat on Roche’s board of directors and will never be able to influence any company’s decision-making. Despite Vasella’s suggestions, sources said that the Hoffman-La Ros family, which controls Roche, rejected the cooperation with Novartis.
Novartis retains its Roche stock, which is a good investment, with an annualized rate of return of 6.6% in Swiss francs (10.2% in US dollars). According to Novartis, over the years, the stock’s earnings and dividends have exceeded $6 billion. But Novartis also stated that it does not regard its investment in Roche as part of its core business or strategy.
On thursday announcement In this transaction, current Novartis CEO Vas Narasimhan stated that his company has concluded that now is the right time to convert Roche’s investment into cash. Narasimhan stated that Novartis plans to “deploy transaction proceeds based on our capital allocation priorities to maximize shareholder value and continue to reimagine the drug.”
This cash can promote more research and development and transactions.Acquisitions in recent years include Acquired The Medicines Company for USD 9.7 billion, The developer of high-cholesterol RNA interference drugs; this Acquired Endocyte, a developer of cancer radiotherapy, for US$2.1 billion; with Acquired AveXis for USD 8.7 billion, Now called Novartis Gene Therapy.In the third quarter financial performance report released last week, Novartis stated that it has started Strategic review Sandoz is the company’s division that sells generic and biosimilar drugs. The company said that all options are open, from keeping the business to spinning it off as a separate entity. As of the end of the third quarter of this year, Sandoz’s sales in 2021 were 7.1 billion U.S. dollars, a 4% decrease compared with the same period in 2020.
If Novartis does sell or divest Sandoz, it will follow the strategy chosen by several of its large pharmaceutical peers.GlaxoSmithKline’s over-the-counter products business was placed in Consumer health joint venture with Pfizer. Pfizer’s generic and generic drugs division is now part of Viatris, a company The business unit merged with Mylan. Merck’s legacy drugs, biosimilars and women’s health products have been Spin-off into a newly listed company called OrganonIn each case, the large pharmaceutical companies stated that these transactions allow them to focus on the development and commercialization of innovative new drugs.
According to sources in the Financial Times, Novartis’ plan to sell its shares was unexpected by Roche. Novartis initiated negotiations and approached the company a few weeks ago. Sources said the negotiations led to the approval of a deal by Roche’s board of directors on Wednesday. Novartis sold 53.3 million Roche shares for 356.93 Swiss francs (US$388.99) per share, a price representing the average price of Roche’s non-voting stocks during the 20 trading days as of November 2.
After the repurchase, Roche plans to cancel these shares. The transaction will not result in any change in Roche’s control, because the company’s founding family will continue to hold the majority of voting shares. The share repurchase still needs to be approved by Roche shareholders. The general meeting of shareholders is scheduled to be held on November 26.
Photo: Sebastien Bozon/AFP, from Getty Images
