Novartis has further strengthened its focus on healthcare by selling its medical nutrition business to fellow Swiss firm Nestle for just over $2.5 billion.
Daniel Vasella, Novartis’ chief executive, said that the divestment was part of the company’s long-term strategy of focusing on pharmaceuticals, and he added that it “further strengthens our financial position and provides strategic flexibility.”
The medical nutrition unit, which has some 2,000 employees, is expected to generate $950 million in sales for 2006 and around $90 million of operating income. However, it was somewhat surprising to see that Nestle was not buying Novartis’ baby food subsidiary Gerber instead, which had been the initial rumour. Last month, Dr Vasella told analysts that nutrition is not a core business any more, so a Gerber sale in the near
future would not be surprising.
The news of the sale has excited analysts, who are now wondering what Novartis will do with the pots of cash it has. Dresdner Kleinwort maintained its ‘buy’ rating on the stock and said it viewed the sale, which is expected to be completed in the second half of 2007, as positive, since it confirms that healthcare is the core business.
Three-month extension to Tekturna review
The sale to Nestle overshadowed disappointing news for Novartis that US regulatory approval for Tekturna (aliskiren), a renin inhibitor for hypertension partnered with Swiss biotech group Speedel, will be delayed by up to three months as the Food and Drug Administration reviews new data. Speedel shares slipped over 2.5% on the news.
The agency will evaluate findings from a study submitted by Novartis in early December of 30 healthy volunteers who received Tekturna at the proposed 300mg once-daily dose for eight weeks to study potential changes of the colonic mucosa.
Novartis added that it was confident that the new data will be enough to ensure US approval, but nevertheless it is the second delay the firm has faced in the last month as the FDA also extended its review period on Galvus (vildagliptin) for type 2 diabetes.