Novartis AG and Roche Executives Continue to Deny Merger Ambitions
October 12, 2015
By Mark Terry, BioSpace.com Breaking News Staff
Analysts and investors love to speculate on big mergers and acquisitions, but rumors that Novartis AG and Roche might merge into a huge European-based drug company have been waved away by company executives.
Clearly a Roche-NVS merger is of interest to analysts, because this isn’t the first time the subject has come up, nor is it the first time the company executives have said it won’t happen. Way back in March 2014, Reuters ran a story in which outgoing Roche Chairman, Franz Humer, denied any interest in a merger. When asked if he wanted the two companies to stay independent, Joerg Reinhardt, chairman of Novartis said, “Absolutely.”
And analysts are asking again. At least part of the reason the subject comes up is that Novartis already owns a 33 percent stake in Roche Holding AG. “On paper, you can generate a lot of value, that is true,” Reinhardt told Bilanz Business Talk in a recent interview. “Our philosophy is, we want to grow organically.”
Novartis’s Reinhardt, says, “I would from our perspective, certainly for the foreseeable future, rule out” any large takeovers.
In addition, both companies are near each other, in the city of Basel, Switzerland. And they are, obviously, competitors.
Not that Novartis’s strategy is always that easy to understand. In August the company announced it was acquiring the remaining rights to Ofatumumab from UK-based GlaxoSmithKline for more than $1 billion. The company had bought the rights to the drug earlier for oncology, which is marketed as Arzerra. The new deal was for the rights to develop and market it for multiple sclerosis (MS). The biggest competitor for the drug is Roche’s ocrelizumab.
If Roche’s ocrelizumab is approved for MS in 2016, it would be on the market in 2017. If Novartis manages to develop Ofatumumab for MS, it probably wouldn’t be on the market until 2019.
“It’s a joke,” said Fabian Wenner, an analyst at Kepler Cheuvreux in Zurich in an interview with Bloomberg Business. “Patients either want better convenience than the old drugs or they want better efficacy, and Ofatumumab is offering neither of those things. The chances of this being successful in MS and generating any sales are zero on my view.”
It’s possible that Novartis is looking at “other auto-immune conditions,” for the drug and believes it can expand the uses for the drug beyond cancer and MS, such as systemic lupus erythematosis, rheumatoid arthritis, scleroderma, and type 1 diabetes.
Novartis also announced in January a big three-part deal with GSK. In that deal, GSK acquired Novartis’s vaccine business, except the influenza vaccines, and created a consumer healthcare joint venture. It sold off its oncology portfolio and related research and development activities to Novartis, as well as the rights to two pipeline AKT inhibitors.
Roche, for its part, is not known for large acquisitions with the exception of its 2009 acquisition of Genentech for $46.9 billion. It has made numerous smaller acquisitions, such as Seragon Pharmaceuticals in 2014 for $725 million, and Santaris Pharma for about $250 million. Just last week the company acquired San Francisco-based Adheron Therapeutics for up to $580 million.
In a September interview with Reuters, Severin Schwann, chief executive officer of Roche, said he felt biotechnology was in a “bubble,” which drove up the prices of medium-sized companies. He think the bubble will burst. Although this concern hasn’t kept the company from buying smaller companies, he said of bigger deals, “For us, none of them make sense and when I see this all the time, I am worried that valuations are too high.”