Biotech Values

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NOVARTIS/CEO

CEO says ready to do $1-2 billion bolt-on acquisitions

* China, Russia, Brazil focus for deals; also animal health
* Might add sixth pillar to business when Alcon debt repaid
* Aims to grow operating income margin over next 5 years

By Ben Hirschler
LONDON, Nov 17 (Reuters) - Novartis AG won't reduce investment on the hunt for new drugs and will also search for bolt-on acquisitions, particularly in emerging markets, as it ramps up a group-wide drive to improve efficiency.

Chief Executive Joe Jimenez believes cost-cutting and investment must go hand in hand as the diversified Swiss drugmaker adapts to a tougher healthcare environment.

"We fundamentally reject the idea of those companies that believe they can save their way to prosperity," he told Reuters on Wednesday.

"We must continue to keep research and development strong and the only way we can do this is if we pull costs out of some of our other areas like manufacturing, marketing and sales, and procurement."

Novartis highlighted the three areas as targets for cost-cutting as it set out its long-term strategy.

Swiss rival Roche Holding AG also addressed cost cutting on Wednesday, unveiling a long-awaited plan that will hack 2.4 billion Swiss francs ($2.4 billion) from annual costs from 2012.

Looking relaxed ahead of a briefing for investors in London, the 50-year-old Novartis boss said he aimed to grow operating income margins over the next five years despite loss of sales from top sellers, including blood pressure drug Diovan.

Diovan a $6 billion-a-year product, is about to tumble over the patent cliff, facing generic competition in Europe next year, the United States in 2012 and Japan in 2013.


BOLT-ON BUYS

Jimenez, a former H.J. Heinz Co executive who took over in February, said in the interview he was ready to go for add-on acquisitions as part of its bid to drive growth in its five main units -- pharmaceuticals, consumer health, eye care, generic drugs, and vaccines and diagnostics.

"Bolt-on acquisitions, anything in the $1 billion to $2 billion range per year, will be acquisitions that we will pursue," he said.

"Candidates in China, Russia and Brazil would be potential targets," he added. (maybe a company in the u.s. would be worth a look)

Jimenez is also keen to build up the smaller animal health business, although he declined to comment on Novartis's interest in veterinary assets being sold by Merck & Co Inc and Sanofi-Aventis SA.

Longer term, Novartis could add a sixth "pillar" to its business in a new science-related health area, once it has paid off debt related to the acquisition of U.S.-listed eye care group Alcon.

"Ideally, I would love to increase the market positions of the platforms that we have. But many companies are chasing the same assets within those sectors, so if that weren't possible then we would look to a sixth pillar," Jimenez said.


SEEKING ALL OF ALCON

Novartis is still seeking to clinch 100 percent ownership of Alcon, Jimenez said, but added he could not predict when this deal would be wrapped up.

Novartis, which earlier this year completed its buy of a 77 percent stake in Alcon from Nestle, has so far stuck to its offer to Alcon minority shareholders of 2.8 Novartis shares for each Alcon unit -- a bid Alcon's independent director committee has repeatedly rebuffed as too low.

Novartis's share price has risen since the group originally made the offer in January and a strengthening of the Swiss franc against the dollar has also helped lift the value of the offer, but it is still short of the $180 some Alcon minority shareholders have said they were looking for.

Some analysts have suggested a cash bid might be a better deal for Novartis and minority shareholders but Jimenez said the offer had to be in stock under Swiss merger law, although a cash component was possible. He declined to say if this was under consideration. (Additional reporting by Katie Reid in Zurich; Editing by David Jones and Jon Loades-Carter)