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Novartis reviews business; analyst urges selling OTC unit

Novartis reviews business; analyst urges selling OTC unit

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BASEL, Switzerland — Novartis will start a strategic review of its units as early as next week, and at least one financial analyst thinks the company should shed the over-the-counter medicines unit that includes the company's plant in Lincoln.

In an interview Tuesday at Novartis's Basel, Switzerland, headquarters, Chairman Joerg Reinhardt said the company would consider divesting parts of the business as well as bolstering it with acquisitions.

"We will start next week to look at our portfolio based on strategic perspectives going forward," Reinhardt said. While smaller deals remain attractive, "Novartis would be willing to invest significant money for a very good opportunity. I don't think a $10 billion acquisition is out of reach."

Reinhardt, who took over as chairman this month, is facing investors' calls to unwind parts of the company his predecessor Daniel Vasella built, including a stake in Roche Holding, Switzerland's other major drug company, or to jettison or revamp less-profitable divisions such as the vaccines business. The company probably will come to a decision on its composition over the next few months, Reinhardt said.

"Novartis is a diversified business; it will continue to be a diversified business," Reinhardt said. "On the other hand, I believe active portfolio management is part of the strategic management of the company."

The Swiss company has five units: the Alcon eye care business; pharmaceuticals; vaccines and diagnostics; the Sandoz generic-medicines division; and consumer health care, which includes over-the-counter medicines and animal health products. Novartis wants its businesses to be among the industry leaders or will otherwise consider divesting them, Reinhardt said.

In a note Aug. 9 to investors, Citigroup analyst Andrew Baum said Reinhardt should consider "all strategic options" for the vaccines unit, which "has failed to deliver." The OTC business should be sold, and the animal health division needs "more aggressive management to compete with industry leaders," Baum said.

The consumer health division, which sells the Excedrin pain reliever and the Theraflu cough and cold treatment, returned to growth in the first quarter after manufacturing woes in Lincoln caused the plant at 10401 U.S. 6 to shut down in December 2011.

The plant remains mostly shut down, and Novartis this year announced a plan to cut 300 positions over two years -- about 40 percent of its workforce -- and limit production going forward to just Excedrin and TheraFlu, as well as the animal health product Sentinel.

Julie Masow, a Novartis spokeswoman, said Wednesday she had no updates on the status of the Lincoln plant. Masow also said she could not comment on Baum's note to investors.

In his comments, Reinhardt said, the consumer health business remains attractive long term. "However, again, Novartis is not among the top players, and it will be necessary to strengthen that business going forward, if we decide to stay in it."

Building the OTC business will require more than one acquisition and so will take more time, he said.

"It will not happen overnight," Reinhardt said.


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