Novartis AG plans to buy back $5 billion of stock over two years and said it will expand in faster-growing areas of health care such as treatments for skin and heart diseases.
The share repurchase will begin immediately, the Basel, Switzerland-based company said in a statement before the company's annual investor day today. Novartis will develop new business segments in dermatology, heart failure, respiratory illnesses and cell therapy, it said.
"Novartis has reached an inflection point, having fully integrated Alcon and reduced debt," said Chief Executive Officer Joseph Jimenez. "We are now further sharpening the execution of our strategy to strengthen shareholder value through science-based innovation in high-growth segments of health care where we have the global scale, competitive advantage and the right capabilities to win."
The buyback is part of a 10 billion-Swiss franc ($11 billion) plan announced in 2008, of which 7.6 billion francs is still available. Part of the mandate was used to mitigate the effect of the purchase of eye-care unit Alcon on Novartis shareholders, Eric Althoff, a spokesman for Novartis said in a telephone interview.
Manufacturing sites
Novartis rose as much as 2.3 per cent to 74 francs in Zurich and was up 2.2 per cent at 9:22 am local time. The stock has returned 31 per cent this year, compared with 27 per cent for the Bloomberg Europe Pharmaceutical Index, before Friday.
Novartis said it wants to save 3 to 4 per cent of total sales over the next two years by focusing on procurement, consolidating research sites and reviewing its manufacturing sites. The company had $56.7 billion in sales last year.
The drugmaker also said a review of its pipeline will lead to more approvals and higher sales by 2017. Novartis's stable of cancer drugs and sales are set to grow annually for the next five years, despite the anticipated loss of exclusivity on its cancer drug Gleevec, the company said.
The Alcon unit is now set to grow at a mid- to high-single digit rate. The company said last month group sales would do better than previously expected.
The company, Europe's biggest drugmaker by sales, has begun a review of units such as its animal-health operation that lack global scale.
Novartis announced this month it would sell its diagnostics unit to Grifols SA for $1.68 billion, part of a strategic review of the company's market segments. The company now has three units with global scale: pharmaceuticals, the eye-care business Alcon and the generics arm Sandoz, Jimenez said. Novartis has said it wants its businesses to be among the industry leaders or will otherwise consider divesting them.
The company has identified its animal-health business as a top candidate for a sale, people familiar with the matter said this month. Novartis is also considering selling its over-the-counter medicines unit and the vaccines operation, they said. No final decision on those assets has been made, the people said.
