Urs Naegelin went to great lengths to dispel several rumors that traders hold about Novartis, writes Joe Tooley, an analyst at AG Edwards, in an investor note this afternoon.
High on the list is speculation that Novartis may sell its stake in Roche. Naegelin says that ain't happening. Novartis owns 33 percent of Roche voting shares, which accounts for 6.3 percent of all Roche shares outstanding. This represents what Tooley notes is a â€˜blocking minorityâ€™ and remains a key strategic position for Novartis, preventing a change in control at Roche.
As Tooley points out, Novartisâ€™ position in Roche contributed $290 million in income in 2006, up from $166 million in 2005. And so the drugmaker plans to maintain this position and, at the same time, wants to maintain a good working relationship with its corporate neighbor in Basel, Switzerland. Keeps things in the family, if you will.
Moreover, contrary to trading rumors over the past months, Novartis management has no plans to sell to private equity and hasn't been approached by private equity groups. And finally, Tooley writes, the Novartis team doesn't expect a 'hostile' bid.
One other thing - look for a Galvus update on July 17.