| The
pharmaceutical industry was surprised on May 7 2001,
when Novartis announced that it had acquired a 20%
voting stake in fellow Swiss-based pharmaceutical
giant, Roche.
The SFr4.83 billion stake, equivalent to approximately
$2.8 billion, was bought from Roche investor Martin
Ebner and his BZ Gruppe Holding company. Ebner, a
Swiss financier, unsuccessfully tried to join the
Roche board in 2000 as part of an attempt to reform
the ownership structure. BZ Gruppe now owns less than
5% of voting stock.
Novartis's stake represents only 3.7% of issued Roche
securities. Roche commented, "For Roche, the current
majority holding is unaffected. Roche will continue
its established strategic and operational direction.
Roche wants to grow organically and will, as before,
additionally consider in-licensing opportunities,
strategic alliances and acquisitions."
50.1%
of Roche's bearer voting shares are still held by
its controlling shareholders, the Hoffmann and Oeri-Hoffmann
families - although they own less than 10% of the
issued securities. In April 2001, the price of the
bearer shares fell, and they are now much nearer the
price of the non-voting shares. This prompted speculation
that Roche was considering a change to its dual (bearer
voting share and non-voting security) share structure,
possibly to assist a major
acquisition or merger.
Roche's performance has slowed in recent years, and
it has only one new product that approaches blockbuster
status, the obesity drug Xenical. The company has
been slipping down the world rankings since its number
four position in 1994, to 11th in 2000, according
to IMS HEALTH's World
Review. Moreover, its pipeline is seen as less
promising than some of its rivals, and at the end
of April 2001 Roche admitted that it was seeking to
cut costs at its drug division, possibly through job
losses.
Although Roche has plenty of cash at its disposal,
it has not made a major acquisition since 1998, when
it acquired German diagnostics specialist Boehringer
Mannheim. It 1994 it acquired US-based Syntex, and
in 1990 a 60% stake in Genentech (now approximately
58.2%). Roche has only two drugs nearing the market:
Pegasys (pegylated interferon-alpha 2a) for hepatitis
C, and Valcyte (valganciclovir), for the treatment
of cytomegalovirus retinitis in AIDS patients. The
launch of Pegasys will be delayed, as the FDA requested
more information in April 2001.
On the other hand, according to IMS HEALTH's R&D
focus drug information service, Novartis has five
compounds nearing the market, in addition to other
new products such as Starlix for diabetes:
| Tradename
|
Compound
|
Indication
|
Status
|
| Attenade
|
d-methylphenidate
|
ADHD
|
US
- pending |
| Elidel
|
pimecrolimus
|
atopic
dermatitis |
US
- pending EU - Phase III |
| Glivec/Gleevec
|
imatinib
|
leukaemia
|
EU,
US - pending |
| Xolair
|
omalizumab
|
asthma
|
EU,
US - pending |
| Zelmac
|
tegaserod
|
IBS
|
EU,
US - pending Japan - Phase II |
|
Source:
R&Dfocus
Novartis is already collaborating with Genentech on
the development of the Xolair anti-IgE monoclonal
antibody for asthma and allergic rhinitis, so a closer
relationship between these two could be one immediate
benefit for Novartis, although Genentech is semi-autonomous.
Both Roche and Novartis have denied that the transaction
is the herald of an outright merger. Not least, this
would probably be blocked by the controlling families.
A combined entity, however, would almost rival new
behemoths Pfizer
and GlaxoSmithKline, with a market share of 6.8%
based on IMS HEALTH figures for 2000 (Pfizer had 7.1%
and GSK 6.9%).
Novartis Chief Financial Officer Raymond Breu gave
three main reasons for the purchase of the Roche stake,
"Roche is currently experiencing slow growth in its
pharmaceutical division, but we think it has quality
research and quality alliances. In the long term this
investment will be a good investment. The second reason
is that it opens up strategic possibilities. The third
reason is we didn't want this package of shares to
fall into competitive hands."
Chairman and CEO Daniel Vasella was equally frank,
"Roche and Novartis are no longer the biggest companies.
Pfizer and GlaxoSmithKline are about twice as big,
which of course raises the issue of competitive size,
although for us it is very clear that performance
comes before absolute size."
IMS HEALTH is currently updating its Pharmaceutical
Company Profiles on Roche and Novartis; the new
profiles should be available at the beginning of June
and July respectively. |
