Novartis has disclosed roughly $19.4 billion in deals in the past five years. CEO Vas Narasimhan says there’s more to come.
Novartis is looking to make more deals, with CEO Vas Narasimhan foreshadowing more of the same approach in the under $5 billion range. The foreshadowing came at the Swiss pharma’s investor day Thursday, when the acquisition of Kate Therapeutics was also announced.
“Importantly, there’s no change to our M&A strategy,” Narasimhan told investors during a presentation.
Novartis is continuing to invest in its own business, while keeping an eye out for possible bolt-on acquisitions, such as the Kate buy worth up to $1.1 billion. The CEO said Novartis is best when sticking to deals in the sub-$5 billion range, with recent acquisitions hovering around the $1 billion mark for total potential deal value.
“We look at the $5 billion. Selectively look at the larger deals, but if you think about the last eight years, [there’s] only two deals that we’ve done in that larger space and we’re going to stay consistent with that in the future,” Narasimhan said.
This sounds pretty similar to a strategy being employed across pharma, with companies mainly sticking to smaller, bite-size deals rather than massive transformative transactions. But Novartis is differing in the companies it targets. Narasimhan said the sweet spot for his team is preclinical or earlier-stage research companies with candidates in Phase I or II. Kate, for example, is still in pre-clinical development across all six neuromuscular assets in its pipeline.
“[That’s] where we have a differentiated view versus the market, based on our understanding of the science, that’s where we have the opportunity to create value.”
The company has disclosed roughly $19.4 billion in deals in the past five years, beginning with its biggest, the $9.7 billion buyout of The Medicines Company.
Novartis is “unchallenged” on its balance sheet, Narasimhan said. And as the deals are executed, the company is conducting share buybacks and maintaining a dividend for shareholders.
Pipeline Cuts
All of this creates new opportunities, as Novartis cruises out of a period of pipeline cuts. Narasimhan said that about 40% of pipeline projects have been pared back across the portfolio since the third quarter of 2021, with research teams have becoming much more disciplined.
“You’ll all know well that the historical data shows that Novartis has been pretty consistent as a leader in the number of drugs that are approved, but rarely in the top quartile or top half in the value of those medicines,” Narasimhan said. “We took that data to heart and really wanted to rethink how we approach our pipeline.”
At the same time, Novartis plans to spend about $400 million through 2028 on technology developments, boosting capabilities in radioligand therapies, RNA therapeutics, cell and gene therapies and novel format biologics, Narasimhan said. Other investments will be focused on bolstering data science and AI capabilities to increase the probability of success in clinical trials, he added.
“We know in the past, when we’ve gone in and out of technology platforms, we haven’t fully realized them. So the hope is to stay consistent over time and really get the benefits of these technology platforms.”
Novartis currently has more than 30 assets in its pipeline, which are expected to fuel mid-single-digit growth after 2029. The company has guided 5% growth in net sales in the 2024 to 2029 timeframe.
