Novartis "unlikely" to make bid for Serono

Serono has attracted a lot of interest Keystone

Swiss pharmaceutical giant Novartis is unlikely to make a bid for Geneva-based biotech company Serono, according to Zurich Cantonal Bank analysts.

This content was published on January 13, 2006 - 10:28

The Basel-based firm had been regarded as a potential bidder, along with other United States or British firms, but Serono may favour other options such as a merger or expansion.

Serono hired investment bank Goldman Sachs to explore strategic alternatives in December, prompting mass speculation that pharmaceutical companies are queuing up to buy the world's third-largest biotech company.

Novartis has featured heavily in this speculation, but Zurich Cantonal Bank pharmaceuticals analyst Hernani de Faria does not think Serono fits into their plans.

"Novartis normally has a look at companies that are available. Serono is interesting because it is not small and is leading in certain areas, particularly with its multiple sclerosis [MS] drug [Rebif]," de Faria told swissinfo.

"But I do not think Novartis will go for Serono because they are developing their own MS drug, they are well positioned globally and do not need to take over Serono's market share."

Last year, cash-rich Novartis shelled out billions of francs in acquisitions and alliances with such firms as Chiron, Hexal and Alnylam. But the Basel-based giant is showing signs of being more circumspect this year, choosing not to bid for Berna Biotech.

Other interested parties

De Faria believes Serono will prove more attractive to the likes of US company Pfizer, the world's largest drug maker, or GlaxoSmithKline in Britain.

"Companies looking for additional products or who do not have a strong biotech position will pay more for Serono than Novartis," he said.

"There are some US companies who may think they need to add more products to their portfolio, strengthen their pipeline or gain a foothold in Europe."

But Serono may not necessarily be looking to sell despite announcing its intentions to explore different options, according to Zurich Cantonal Bank Serono analyst Yasemin Ersan.

Serono is in a healthy position despite being landed with a multi-million dollar fine in the US in December after being found guilty of criminal conspiracy charges in relation to its Aids treatment drug Serostim.

MS drug

Serono produces a range of fertility drugs in addition to Serostim, but Ersan believes the company is exploring other avenues because of an over-reliance on the success of its MS drug Rebif.

"It is no secret that the Serono management is not satisfied with the valuation of the company," she told swissinfo.

"Serono are by no means a one product company, but Rebif contributes a high proportion of growth and profitability. That is not a problem for the moment, but if other orally-taken MS drugs appear on the market in the mid-term it would represent a huge competition threat.

"Serono may be thinking of buying or licensing other products or it may make sense to merge or sell to a stronger player in the marketplace. I am sure they are keeping their options open."

swissinfo, Matthew Allen in Zurich

Key facts

Serono is the world's third-largest biotech concern, with 4,900 employees and operates in 44 countries, with production facilities in eight countries and sales in over 90 countries.
In 2004 Serono generated a turnover of $2.46 billion and posted a net income of $494 million.
The company has products in four therapeutic areas: reproductive health, multiple sclerosis, growth and metabolism (treatments for HIV-associated wasting and growth deficiencies) and dermatology.

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