Defending the dividend a priority, says struggling Novartis
NOVARTIS is keen to maintain its dividend and is looking to boost growth via mid-sized acquisitions, though big deals are unlikely, the Swiss drug maker’s CEO said in a newspaper interview yesterday.
Like many of its rivals, Novartis is struggling to grow in the face of the expiration of patents on key drugs, particularly Diovan, for high blood pressure. It is relying on new products, such as multiple sclerosis pill Gilenya, to fill the gap.
In 2010, Novartis made headlines when it wrapped up its buyout of the remainder of US eye-care group Alcon for $12.9bn. The Basel-based firm agreed to buy Fougera Pharmaceuticals, a maker of generic dermatology products, for $1.53bn in cash in May.
“Defending the dividend is a priority,” CEO Joseph Jimenez told the SonntagsZeitung. “We want to stick with a good dividend yield.”
Novartis paid a dividend of Sf2.25 a share last year, a yield of 3.9%.
“Then we want to conduct medium-sized acquisitions to boost our growth,” he said.
“In the foreseeable future we’re most probably not going to do any mega takeovers.”
Novartis sees annual revenue of $5.6bn from Diovan, Mr Jimenez said, and the drug’s loss of exclusivity in Europe and the US meant the company would face three “very challenging quarters”.
No new cost-control programme would be announced, though some ad-hoc savings could be made over time, Mr Jimenez said, as other treatments coming on line would help make up for the fall: “Our sales should rise markedly in the secondhalf of 2013.”
For the third quarter, currency effects would shave 3%-4% off operating income, he said, reiterating what he said at the time of the firm’s first-half results in July.
At the time, Novartis confirmed its full-year outlook for net sales in constant currencies to meet those of last year. Although he declined to comment on the third quarter, Mr Jimenez said: “As I said at the presentation of the half-year figures: We’re on course.”
Cancer treatment is an increasingly important area for Novartis, which faces stiff competition in the field from rival Roche Holding, the world leader in oncology. Novartis holds a third of Roche’s shares.
“We’re holding on to our stake, since it’s a strategic decision and so far we’ve done well with it,” Mr Jimenez said. “Should Roche want to raise equity, we’d have to agree with that.” Reuters