TRENDS & PERSPECTIVES
Another pharmaceutical giant may be eyeing at getting more involved in the IVD business. In April, after Novartis AG (Basel, Switzerland) announced that it had agreed to buy from Nestlé SA (Vevey, Switzerland) its 77% stake in Alcon Inc. (Hunenberg, Switzerland), the head of Novartis suggested that other acquisitions by the company could be forthcoming.
“One can assume that we will not do an acquisition on this scale and not in this area. Medium-sized acquisitions, which are not planned at the moment, would still be possible,” said Daniel Vasella, Novartis’ chief executive officer, in an interview with Swiss weekly newspaper Sonntag. “Diagnostics is a field worth expanding, so are vaccines and generics.”
Novartis officials could not be reached for further comment on the company’s plans for getting more involved in the IVD business.
Even though analysts are skeptical of any drug firm getting involved in the IVD business, they do see some possibilities for Novartis.
“While I don't think that getting into IVDs is the best choice for a pharmaceutical company, it does provide some interesting angles to the business, although it requires skilled management,” says Manfred Scholz, PhD, president of Scholz Consulting Partners (Medford, MA). “The areas that can benefit most from a drug-diagnostics combination are oncology and infectious-disease management. Naturally, that would be a fit for Novartis. Although the acquisition of Chiron may have nurtured a possible extension, Novartis will probably have to look at other acquisitions to build a viable business.”
Novartis made its major entry into the IVD industry when it received regulatory approval for its acquisition of Chiron Corp. Under the terms of the deal, Novartis acquired the remaining 113 million Chiron shares that it did not own for $45 per share in cash, or a total of approximately $5.1 billion. In 2007, Novartis completed its acquisition of Chiron.
At that time, industry analysts believed that Chiron was in a position to be bought, especially after the U.K. Medicines and Healthcare Products Regulatory Agency suspended the company’s license to manufacture influenza vaccines.
“Chiron’s share price had fallen dramatically due to the Fluvirin debacle, not because of its IVD business,” said David K. Lugg, director of healthcare ratings services at Standard & Poor’s (New York City). “The company’s board of directors evidently reasoned that the market was not appropriately valuing the company. The logical buyer was Novartis, which already owned about 42% of the shares. Because of this preexisting relationship, this transaction should not be seen as a harbinger for the rest of the IVD industry.”
Novartis officials publicly stated that the company pursued an acquisition of Chiron primarily to expand its vaccine business. Industry analysts believed that it made sense for Novartis to acquire Chiron considering the synergies between the two companies.
“The key to this acquisition certainly was not the blood-testing business, but giving Novartis a growth platform in the attractive vaccines business in which Chiron is ranked number five in the world,” said Christian Wenk, director of corporate ratings at Standard & Poor’s. “Novartis’s plan is to integrate Chiron’s biopharmaceuticals business into its ethical pharmaceutical business, and to realize $200 million in cost savings by combining with a company it knew well and already had a large stake in.
“At the same time, this acquisition should not change the face of the IVD industry. Except for Roche and to a lesser extent Bayer and Schering-Plough, the big European pharmaceutical companies are not focusing on diagnostics.
However, this did not mean that Novartis has no plans at all for IVDs. Novartis planned to establish a new division called Novartis Vaccines & Diagnostics. This division consists of two business units: Novartis Vaccines and Chiron, which is the blood-testing and diagnostics group. The documents stated that “the current blood-testing business, combined with some of Novartis’s in-house diagnostic expertise, provide the platform to grow and expand this business unit and to investigate opportunities in molecular diagnostics.”
Vasella’s statements may have been prompted by recent developments at other major pharmaceutical companies and the agreements they reached with IVD companies.
Last September, Celera (Rockville, MD) entered into a research collaboration with Merck & Company Inc. (Whitehouse Station, NJ), to develop biomarker and pharmacogenomic tests for cancer patients.
Last November, GE Global Research (Niskayuna, NY), and Eli Lilly and Co. (Indianapolis) signed a three-year collaborative research agreement.
