Novartis: In need of ‘calcium sandoz’ - Views on News from Equitymaster

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Novartis: In need of ‘calcium sandoz’

Dec 8, 2000

Novartis held an analyst meet yesterday to apprise investors of the latest developments after the hive off the agri business operations. The management announced a takeover of the Ciba CKD, a joint venture with a Korean company, elaborated on the realignment of its ophthalmic business and expressed its intent to divest the remaining portion of its Goregaon (a Mumbai suburb) property. Ciba CKD was a joint venture between Novartis India and Chong Kuon Dang (Korea) for the manufacture of rifampicin, an anti–TB bulk drug. The company bought out the Korean partner’s stake at a price of Rs 7.48 per share. The reasoning for this buyout was the fact that anti–TB is an important therapeutic area for the company (it contributes almost 8% to the company’s turnover) and the management felt that the collaboration was not working out. The management, however, was not willing to specify whether it would merge Ciba CKD with Novartis India in the future.

As far as the divestment of the property is concerned, the management has appointed a real estate consultant Knight Frank to manage the sale. In the current year, the company gave the development rights for a part of the property to Kingston Properties for a price of Rs 66 m. The management did clarify that a part of the property (297,000 square metres of surface area) does face various reservations being in a non–industrial zone and certain rights belong to Ciba Specialties, which was also a part of the erstwhile Hindustan Ciba Geigy.

As far as the realignment of the ophthalmic business is concerned, the business now forms a part of the pharmaceutical business under Mr. Ranjit Shahani. This business, was earlier clubbed with the contact lens business, and was part of Ciba Vision.

As far as the pharmaceutical business goes, the company has plans to introduce four brands Coartem (an anti–malarial), Zometa (anti–cancer), Visodyne (a sight saving product) and Miacalcic (osteoporosis). However, the company’s top brand Voveran (an anti–inflammatory), which contributed almost 18% to Novartis’ turnover, seems to be facing a slowdown, although the management denies it. It’s immuno–suppressant brand Sandimune (which contributes over 12% to Novartis’ turnover) has also been slapped with a 15% import duty, which has raised its costs by 40%. Overall, FY01 is likely to be tough one for Novartis as far as topline growth is concerned and this explains the relatively lower earnings multiple (23X FY01 earnings) vis-à-vis the other MNC pharma companies.


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