Roche to buy back stake from Novartis for $20.7 billion

by John R. Fischer, Senior Reporter | November 11, 2021
Business Affairs
Roche will buy a stake of its common stock from Novartis for a total consideration of $20.7 billion
Healthcare company Roche has agreed to buy a stake of 53.3 million bearer shares of its common stock from Novartis in a bilateral transaction for a total consideration of $20.7 billion.

Novartis acquired the stake between 2001 and 2003 for a total consideration of $5 billion as a long-term financial investment. This gave it approximately 33% of aggregate outstanding bearer shares in Roche and resulted in recurring earnings contribution and cumulative dividends exceeding $6 billion. The holding period of the stake saw an annualized return of 10.2% in U.S. dollars and 6.6% in Swiss CHF.

But Novartis now says the financial investment no longer fits with its core business and is no longer a strategic asset. It will report a gain from the sale of the stake in income from associated companies of approximately $14 billion, which will be core adjusted.

“After more than 20 years as a shareholder of Roche, we concluded that now is the right time to monetize our investment. Today’s announcement is consistent with our strategic focus, and we intend to deploy the proceeds from the transaction in line with our capital allocation priorities to maximize shareholder value and continue to reimagine medicine,” said Novartis CEO Vas Narasimhan in a statement.

Roche expects mid-single-digit sales growth at constant exchange rates for the full year and is aiming to increase the dividend in Swiss francs for 2021.

The deal is subject to approval by Roche stakeholders, which will evaluate it at a meeting to be held on November 26. The board of directors for the company has already approved the repurchase, which will be debt-financed by Roche.

Roche also recently entered into two new partnerships this fall, one with PathAI to jointly develop an embedded image analysis workflow for pathologists. Users will be able to use PathAI image analysis algorithms from within NAVIFY Digital Pathology, the cloud version of Roche’s uPath enterprise software. Facilitating this access to the algorithms will be Roche’s Digital Pathology Open Environment, which allows pathologists to securely access third-party AI-powered technology alongside Roche’s own AI-based image analysis tools.

This agreement with PathAI is among the first to expand digital tools through the Roche open environment, and is one of the first in which PathAI will distribute its AI technology through a third-party platform.

The other partnership is with Medial EarlySign and will be a multistage collaboration in which both
develop and validate clinical data solutions that will help providers accelerate their ability to detect serious diseases early using personalized digital health technology. The partnership is expected to bring new machine learning solutions to the market that will enhance data flow between stakeholders and support clinical decision-making quicker and with more accuracy.

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