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Novartis Stake in Roche will be sold without Demanding Premium, says Company CEO

Novartis Stake in Roche will be sold without Demanding Premium, says Company CEO
In a surprise move that was announced on Wednesday, shares worth nearly $14 billion in rival company Roche would be sold by Swiss drugmaker Novartis without demanding a premium. This was announced by the Chief Executive of Novartis, Joe Jimenez.
Last month, news agency Reuters had reported that with the aim of garnering cash for new deals, Novartis has been discussing options with banks for selling its Roche shares worth about 13.70 billion Swiss francs ($13.81 billion).
Under former Chairman Daniel Vasella, Novartis had plans to acquire Roche and that had prompted the former to build up its one-third stake in Roche voting stock between 2001 and 2003. However the merger never took place and now Novartis intends to sell the stocks.
Reflecting the difficulty of recreating such a large position in the open market, in the past, Jiminez has said he would want a premium price for the Roche stake.  But on Wednesday, he said that is no longer a dealbreaker.
"We would now think through that, and would potentially make a decision to exit without a premium, if the opportunity were right," Jimenez told investors at an event in Basel.
Jimenez, of late, has been under pressure to improve growth after difficulties with the company's eyecare unit Alcon and new heart drug Entresto and it would make sense for him to push for the sale at this moment, opines analysts.
On Wednesday Novartis announced that it remains confident annual sales will peak at around $5 billion, despite first-quarter sales of $17 million after it had won a favorable industry recommendation for Entresto last week.
The company stuck to its 2016 forecast for Entresto of $200 million in revenue.
The drug division of the company was split last week into two separate units. One of the units would focus on cancer drugs while the other would focus on the rest of Novartis' drug portfolio. The company has also seen the exit of seven top executives from the company this year that included drugs chief David Epstein who resigned last week.
There has been a law suit in the US against the company alleging that the company‘s sale force ran a decade-long doctor kickback scheme involving sham events that led to overcharging the federal government. While disputing all the allegations, Novartis is fighting the case in the court.
Novartis had moved away from its aggressive "results-oriented" sales approach, Jimenez said.
"We had to shift the culture of the company in terms of a compliance standpoint," he told investors. "High-risk" speaker programs for older products that had the potential to blur the line between education and inappropriate drug promotion are being eliminated by the company, he added.
Organic growth, boosting dividends, "bolt-on" acquisitions and share buybacks were the areas of priority for cash utilization by the company, said Chief Financial Officer Harry Kirsch.
Trimming their decline this year to 9 percent, the stocks of Novartis rose 1 percent to 78.65 francs. In line with a 1.1 percent gain in the European sector index .SXDP,  Roche's non-voting stock was up 1 percent and its illiquid voting stock rose 1.2 percent.

Christopher J. Mitchell

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