Novartis chairman floats idea of business review to appease investors

Wed Aug 14, 2013 9:51am EDT
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By Caroline Copley

ZURICH (Reuters) - Less than two weeks into the job, Novartis AG's NOVN.VX new chairman is seeking to appease investors by suggesting the Swiss drugmaker will review some of its underperforming businesses in coming weeks.

Global drugmakers have stepped up the pace of restructuring, as investors clamor for management to unlock value trapped inside large firms.

Basel-based Novartis has faced calls from investors and analysts to sell off or expand some of its smaller divisions, including its vaccines and diagnostics unit and the consumer health business which includes over-the-counter drugs and an animal health arm.

In an interview published on Wednesday, chairman Joerg Reinhardt defended the firm's diversified strategy, but stressed Novartis would only hang on to businesses that are among world leaders.

He also raised the specter that Novartis could make a $10 billion acquisition, which would be its first major deal since it bought the rest of leading eye care firm Alcon for $39.3 billion in 2010.

"A division should also be attractive enough from a financial point of view to be kept in our portfolio. It is clear to me that portfolio management at a company of our size must be actively pursued," Reinhardt, who took over as chairman at the start of August, told the Basler Zeitung newspaper.

Rivals are doing the same. Abbot Laboratories (ABT.N: Quote) split off its innovative drugs into Abbvie (ABBV.N: Quote), and Pfizer (PFE.N: Quote) spun out its animal health unit into Zoetis (ZTS.N: Quote). British drugmaker GlaxoSmithKline (GSK.L: Quote) has also put its soft drinks brands Lucozade and Ribena up for sale.

Reinhardt is no stranger to Novartis. He worked for the drugmaker for 28 years before leaving to go to Germany's Bayer (BAYGn.DE: Quote) after he lost out on the CEO job to Joe Jimenez.   Continued...

A man walks past the logo of Swiss drugmaker Novartis AG in front of a plant in Basel October 25, 2011. REUTERS/Arnd Wiegmann