At $388.99 per share, the sale price reflects the volume-weighted average price of Roche’s non-voting equity certificates over the last 20 trading days ending on Nov. 2, the companies said. The deal covers roughly 33% of voting rights in Roche.

Novartis acquired the stake between 2001 and 2003 for about $5 billion as a long-term financial investment that it said delivered “significant, recurring earnings contribution and cumulative dividends in excess of $6 billion.” Over the holding period, this translated into an annualized return of 10.2 % in US dollar terms and 6.6% in Swiss francs. Today, the drugmaker said it no longer considers the investment in the pharma rival to be part of its core business and it is therefore not a strategic asset.

“After more than 20 years as a shareholder of Roche, we concluded that now is the right time to monetize our investment,” Novartis CEO Vas Narasimhan said in a statement, adding that the divestment is consistent with its strategy as a “focused medicines company.“

Market reports noted that the share sale comes at a time when Roche’s value on the SIX Swiss Exchange is trading at all-time highs, thanks in part to some of its products being used as Covid treatments.

Novartis will report a core adjusted gain of about $14 billion from the sale of the stake under income from associated companies. The transaction still must be approval by Roche shareholders, at an extraordinary general meeting on Nov.26.

In announcing plans for the transaction, Novartis said the proceeds will be used in line with its capital allocation priorities to “enhance strong returns to shareholders.“ Analysts and other observers are now perusing stock market developments and gazing into their crystal balls and other technical tools to gain insight into what the Swiss drug giant may pick up next.

In a conference call to present financial results at the end of October, Novartis CFO Harry Kirsch said  the drugmaker’s priorities for future capital speding include investment in the internal business, growing its dividend, bolt-on acquisitions and in-licensing, as well as share buybacks. Likely bolt-on targets could be businesses engaged in oncology, cardiovascular disease and novel gene therapies.

Author: Dede Williams, Freelance Journalist