Novartis Deal Scouts Get Significantly More Funding
The Novartis unit that scouts for products, evaluates projects and carries out due diligence has gotten “significantly” more funding, said Joe Jimenez, head of the pharmaceutical division, yesterday in an interview at the companys Basel, Switzerland, headquarters. He declined to quantify the increase, saying it was less than 25 percent.
Switzerlands second-biggest drugmaker needs to replace income from the heart medicine Diovan and the Gleevec cancer treatment when patents expire starting in 2012. The drugmaker plans to make more acquisitions in the next 12 months than the three purchases it made last year, Jimenez said. Novartis is looking to acquire health companies and buy marketing rights for drugs, he said.
“We have increased the funds towards due diligence, search, and evaluation and negotiation significantly,” Jimenez said. Prices for licensing deals “have come down” and “a number of biotechs are running out of money and are more willing to sell.”
Chief Executive Officer Daniel Vasella said yesterday, after Pfizer announced Jan. 26 that it will buy Wyeth, of Madison, New Jersey, for more than $68 billion, that he is sticking to his strategy to buy small companies and invest in research.
Vasellas Strategy
“I dont anticipate well be in a transformational transaction,” Vasella said in a Bloomberg television interview after the company reported earnings. “Our strategy really is to look at additional, smaller acquisitions that fit our existing business.”
Novartis is interested in experimental drugs in the second and final stages of human trials, Jimenez said. He declined to name any potential targets. Cash flow will cover the funding increase, Novartis spokesman Eric Althoff said.
The company may want to broaden its stable of central nervous system treatments and cardiovascular drugs, said Karl Heinz Koch, an analyst at Helvea in Zurich.
“Alzheimers is a sweet spot, and Novartis barely has anything in the pipeline,” he said. The company may also want to add antiviral treatments for Hepatitis C to complement its albuferon medicine, according to Koch.
Eyes Wide Open
In the last year, Vasella agreed to spend $115 million for Nektar Therapeutics pulmonary unit, as much as $400 million for antibiotic maker Protez Pharmaceuticals Inc. and about 1.01 billion Swiss francs ($932 million) for hypertension drug partner Speedel Holding AG. He also paid $10.4 billion in cash for a 25 percent stake in Swiss eye-care company Alcon Inc.
Novartis fell 1.32 francs, or 2.7 percent, to 47.3 francs at the close of Zurich trading. The stock is down 10 percent this year, compared with a 2.6 percent decline in the 18-member Bloomberg Europe Pharmaceutical Index.
Glaxos Acquisitions
Vasellas strategy is similar to that of GlaxoSmithKline Plc CEO Andrew Witty. In a Jan. 8 interview, Witty said adding more vaccines, medicines and consumer products will help wean the U.K. drugmaker off its reliance on one or two bestsellers. A large merger or acquisition would threaten to disrupt the companys own revamped research and development operations, Witty said.
Pfizers bid to buy Wyeth reflects the companys failure to offset looming generic competition to Lipitor, the companys best-selling cholesterol pill, using job cuts, new research priorities and sales in developing countries, analysts said.
“We dont consider it to be of great strategic importance for us directly,” Vasella said. “Pfizer has recognized that certain diversification is positive. For Pfizer, its the logical step to do. Either you grow externally or you grow internally as a main driver.”
Two days after Pfizer announced its bid for Wyeth, Roche Holding AGs majority shareholder agreed to keep its stake in one pool for an unlimited period, protecting Novartiss larger Swiss rival from a takeover as industry mergers are heating up.
Roche is offering $43.7 billion for the 44 percent of Genentech Inc. it doesnt own, a price the U.S. biotechnology company rejected as too low.