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Swiss drugmaker Novartis has announced plans to return $15bn to shareholders after failing to find anything compelling enough to buy.
The company, which is sitting on a large cash pile after selling its stake in domestic rival Roche in 2021, on Tuesday announced a new share buyback programme after completing one of similar size last month.
Chief financial officer Harry Kirsch said the company had not found any “bolt-on” acquisition targets it was convinced would improve returns and had decided against pursuing any large deals.
“If we were to find more bolt-on acquisition targets that we could spend the capital on, where we have high conviction that . . . we could generate an attractive return for shareholders, we would rather do that,” he told reporters, as Novartis raised its full-year earnings forecast.
After a strong performance from its innovative medicines division in the first half, Novartis now expects revenues for the full year to increase at a high single-digit pace, up from an earlier prediction of mid-single digit.
Core operating income, meanwhile, is forecast to grow in the low double digits, up from an earlier prediction in the high single digits.
Shares in Novartis were up just over 3 per cent in early trading on Tuesday, but have languished this year.
Chief executive Vasant Narasimhan has been trying to focus the business on more profitable drugs since he took over in 2018. As part of that plan, the company is spinning off its generics drugs division Sandoz.
The business, which has about $10bn in annual revenues, had attracted interest from private equity groups before the rapid rise in interest rates chilled dealmaking.
“The current interest [rate] environment does not make it easy for them [private equity firms],” Kirsch told reporters on Tuesday, but noted that any viable offers would be discussed by the board.
The planned spin-off of Sandoz would be in the “best interest” of shareholders, Kirsch insisted, adding that their feedback had been “very positive”. Assuming shareholders approve the plan, the spin-off is expected to happen by early October, he said.
Novartis said its second-quarter sales rose 7 per cent to $13.7bn.
“Our growth drivers and rich pipeline continue to provide confidence in our midterm growth outlook,” said Narasimhan.
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