Ever wondered why Novartis and Roche do not compete ? #Pharma


 

Glivec (Gleevec) film tablet made by Novartis.

 

Expectations of structural change and divestments will be reignited by the Symonds announcement, note analysts at Deutsche BankOne particular conundrum for investors is the 33 percent shareholding that Novartis holds in its compatriot Roche. Jimenez has ascribed an intangible value to the shareholding, which allows the company to have some say in any acquisitions Roche would choose to make that required the issuance of new shares. Investors may feel that the money could be spent more effectively elsewhere, particularly as Novartis’ financial stake in Roche is something of a Vasella heirloom and reminder that the former CEO often talked up the possibility of a Swiss mega merger.

 High-profile personnel changes at Novartis drive analyst speculation as CEO delivers consistent message 

 

(Ref: ViewPoints Desk)

In quick succession to the announced departure of chairman and former CEO Daniel Vasella in January, Novartis announced on Wednesday that Jon Symonds would leave the company at the end of 2013 after four years as CFO.

Despite CEO Joseph Jimenez using the company’s Q1 analyst call to drive home the message that Novartis remains committed to its current growth strategy, the departure of Symonds was a key focus for analysts in notes that were subsequently circulated to investors, and has fuelled speculation that further changes could be afoot.

Insight, Analysis & Opinion

Speaking about his pending departure at the end of the year, Symonds suggested that it was a positive time for a new CFO to take over. That man is the current CFO of Novartis’ pharmaceuticals division Harry Kirsch, who will preside over an emerging post-2013 growth narrative, added Symonds.

There remains some scepticism, however, and Bernstein analyst Tim Anderson suggested that the reason for Symonds departure is not completely clear. Furthermore, added Anderson, close proximity to the departure of Vasella raises the question ‘what next?’

Operationally, analyst reaction to Kirsch’s appointment was mixed. Echoing comments made by both Jimenez and Symonds on the Q1 conference call, analysts at Credit Suisse pointed to a strong record in driving productivity gains within the pharmaceuticals division (during a period characterised by EU austerity measures and generic competition) as a strong precedent for his impending role.

But it is the surprise nature of Symonds departure that analysts have found more difficult to interpret – one conclusion being that Jimenez is keen to appoint his own team and move the company away from the dominant shadow of Vasella (seeViewPoints: Was he worth it? Vasella commits loyalties to his Novartis legacy) Symonds was viewed by many analysts as a driver of improved capital allocation, with some suggesting that his operating role would be enhanced by the departure of the chairman.

Expectations of structural change and divestments will be reignited by the Symonds announcement, note analysts at Deutsche Bank. One particular conundrum for investors is the 33 percent shareholding that Novartis holds in its compatriot Roche. Jimenez has ascribed an intangible value to the shareholding, which allows the company to have some say in any acquisitions Roche would choose to make that required the issuance of new shares. Investors may feel that the money could be spent more effectively elsewhere, particularly as Novartis’ financial stake in Roche is something of a Vasella heirloom and reminder that the former CEO often talked up the possibility of a Swiss mega merger.

See also:

 

 

INDIA -How power, metal sectors are in quagmire of indebtedness


Banking District

Banking District (Photo credit: bsterling)

 

Most loans under stress are largely in the two sectors

Shishir Asthana / Mumbai Aug 06, 2012,  BS

Moneycontrol report says Essar Steel is under stress for servicing its Rs 23,000-crore loan from banks. The company is 30 days behind schedule to make its interest payment. The report says that around 18-20 banks have provided the amount to the company, with one state-owned bank having an exposure of Rs 9,000 crore.

With over Rs 2 lakh crore of loans up for restructuring, market has been either focusing on high debts of individual companies or the entire sector, which is causing a lot of stress on banks’ financials. However, a recent report by Credit Suisse points out to the rising risk in the banking circle on account of concentration of loans to business houses.

In a report titled House of Debt, Credit Suisse points out that over the past five years while bank loan growth has been 20%, loans to 10 business groups have increased by five times. Their loan currently is equivalent to 13% of bank loans and more importantly it is 98% of banking system’s collective net worth. In terms of concentration risk, Indian banks are more risky than their Asian and BRIC counterparts. Concentration of top 10 groups to bank loans in China is 1% as compared to 13% in India.

The table shows the exposure of banks to various corporate groups. While average group debt to operating profit (EBITDA – earnings before interest tax depreciation and amortization) is 7.6 times, four of the 10 groups have an interest coverage ratio of less than one. In other words four of these groups are barely making enough profit to meet their interest payment.

Worst is that loans which are under stress are in largely the same sector (power and metals) across groups and in some cases to various companies within the same group.

Recognising their high leverage and poor profitability, these groups are looking at bringing to at asset sales under pressure from their lenders. Unfortunately the assets are all from the same sectors (cement plants/infrastructure/power) which are finding fewer buyers. In power sector each of these groups has 2,000-4,500 MW of capacities being commissioned over the next three years. These account for 70% of power plant to be commissioned by the private players and all of them face the same issues of gas/coal supplies and power purchase agreements (PPA) signed at much lower tariffs.

While market has factored in most of the issues of individual company and sectoral debt issues, inter-dependence of companies within the group, pledging of group company shares and guarantees of group companies make the issue trickier.

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