Novartis’ risky strategy in acquisitions

The new strategy of Novartis-in-chief Vas Narasimhan is part of the acquisition of new therapies. Annually 5 per cent of the market capitalisation, i.e. currently about 11 billion dollars are to be paid. This is significantly higher than the approximately 9 billion dollars for their own research.

Behind the big shopping tour, a modified orientation of the group is: Narasimhan wants to focus Novartis from its broad positioning even more on highly innovative therapies. New technology platforms such as gene therapy, in which the in-house research had missed the connection, be purchased. Thus, Novartis is currently more Investor research group.

Novartis is not alone

Also a competitor, Roche uses acquisitions to missed therapy paths to connect. So, the group wants to buy the US gene therapy company Spark for 4.8 billion dollars. In the case of Novartis Acquisitions are currently in focus: Two new therapies with a sales potential of over a billion dollars has bought Novartis so.

The cancer Central Lutathera the French company AAA belonging to the boy blockbusters of the group. And Zolgensma against genetically-muscle wasting-related – this is likely to be a best-seller. But with him, the group was a bad surprise. "Ironically, in Zolgensma, Narasimhans first big purchase as a CEO, are problems with the integrity of the data can do appeared," says Sanjeet Mangat of Aberdeen Standard Investments. The acquisition of the US company Avexis for $ 8.7 billion last year, was the big Coup of the new corporate bosses.

Human error is the reason

The gene therapy Zolgensma is medically as well as financially a success. She saves the lives of babies and young children and is likely to bring to the group, as the most expensive therapy in the world at a price of $ 2.1 million, soon a billion.

But as the toxic data from the study of therapy against muscle wasting Zolgensma for the Reputation of Novartis prove. Because there was data manipulation in the case of impact tests with mice, as this summer it became known. For Enquiries in this regard, Novartis discovered that Avexis had not passed data to the complications in Tests on primates for an extended application to the U.S. FDA.

In this case, this was not a cover-up attempt, but according to Novartis simply to human error in some process steps of Avexis. After then being reported to the FDA last week, stopped a part of the ongoing Experiments on small children.

"Of Novartis is not likely that the group would cover up. But in the case of newly acquired enterprises can be a risk," says Vontobel Analyst Stefan Schneider. The acquisition strategy in the pharmaceutical industry, three fundamental risks: financial, legal, and medical. These three General uncertainties are known. New a reputational risk for Novartis in addition.

Good relationship with FDA

The repeated irregularities can have a considerable impact at Avexis. Because working with the FDA could be more complicated. With your it want to forfeit is not a pharmaceutical company, it decides on studies and Launches on the largest and most lucrative pharmaceutical market in the world.

Since Novartis had for a long time a good relationship with the FDA, it should not be completely destroyed, says Mangat. The group has responded according to its own information instantly, and the FDA is assured that the global quality organization will take at Avexis now a management strategy and a strengthening of the culture of Quality in the Hand, like a Novartis spokesman said.

"The acquisition strategy has helped Novartis to exciting therapy areas, but now it is questionable whether it is Narasimhan manage the trust in the company again," says Mangat.

Created: 07.11.2019, 12:17 PM