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Roche and Novartis in merger and acquisition talks?

Posted on 18 October 2013

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Merger and acquisition rumor mill :Roche Holding AG  founding families want the Swiss drugmaker to stay independent, Chief Executive Officer Severin Schwan said, squelching speculation that circulated since a board member at crosstown rival Novartis AG (NOVN) said last month a merger could make sense.

“Nothing has changed with regards to Roche’s position towards Novartis,” Schwan said in a conference call with reporters today. “The families Hoffmann and Oeri have repeatedly stated they’re committed to Roche’s independence.”

Novartis board member Pierre Landolt said a merger could make sense “from an objective point of view” in a September interview with Basler Zeitung. The newspaper, based in Basel, also the home of both Swiss drugmakers, quoted Landolt as saying that combining the companies would make a European “pharmaceutical champion.”

Schwan has told investors Roche may make smaller deals to strengthen its core diagnostics and pharmaceutical businesses. In a Bloomberg interview in September, he predicted Roche will buy companies worth less than $1 billion, with a bigger deal comparable to the $3.4 billion purchase of Ventana Medical Systems Inc. in 2008 occurring from “time to time.”

Roche isn’t into “mega-mergers,” the executive repeated in a teleconference with investors today. “We are firmly committed to bolt-on acquisitions.”

Novartis holds 33 percent of Roche’s voting shares. Former Chairman Daniel Vasella amassed the stake more than a decade ago but was unable to persuade Roche’s founding families -- who control 50.1 percent of the voting shares -- to agree to a merger. Family members Andre Hoffmann and Andreas Oeri serve on Roche’s board, Hoffmann as vice chairman.

Rare Diseases

Roche quashed rumors last month that it was preparing a bid for BioMarin Pharmaceutical Inc. (BMRN), a U.S. biotechnology company that would have given the Swiss drugmaker a portfolio of medicines to treat rare diseases. Schwan denied a report that Roche was raising financing for the deal. The company was also said to have been weighing a bid in July for Alexion Pharmaceuticals Inc. (ALXN) No Alexion offer has materialized.

The drugmaker looked at 1,500 deal opportunities -- mostly small deals, licensing possibilities and collaborations -- last year, resulting in about 50 deals, Schwan said.

Roche today confirmed the 2013 forecasts it gave in January, including an increase in sales at constant exchange rates in line with last year’s pace. Sales climbed 4 percent on that basis in 2012. Roche also aims for core earnings per share to grow faster than sales.

Cheaper Biosimilars

Third-quarter sales rose to 11.6 billion Swiss francs ($12.7 billion) from 11.3 billion francs a year earlier, as demand for Roche’s main cancer medicines in the U.S. and China offset slower sales increases at its diagnostics division. That beat the 11.5 billion-franc average of 11 analysts’ estimates compiled by Bloomberg.

“It was a decent, quiet sales quarter,” Tim Anderson, a New York-based analyst for Sanford C. Bernstein & Co., wrote in a note to investors. Anderson has an outperform rating on Roche’s shares.

Roche fell 0.5 percent to 244.3 francs in Zurich. The shares have returned 37 percent this year compared with a 20 percent return in the Bloomberg Europe Pharmaceutical Index.

The company is racing to build its portfolio of new drugs before cheaper biosimilar copies of two of its bestsellers -- Rituxan for leukemia and Herceptin for breast cancer -- reach the market. New drug successes in cancer, where Roche already is market leader, have been tempered by failures in medicines outside that field.

Roche doesn’t release quarterly earnings reports.

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  1. […] Merger and acquisition rumor mill Roche Holding AG founding families want the Swiss drugmaker to stay independent, Chief Executive Officer Severin Schwan said, squelching speculation that circulated since a board member at crosstown rival Novartis AG said last month a merger could make sense.  […]

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