Novartis sweetens investors with $5 billion share buyback

Swiss drugmaker Novartis AG has offered investors a $5 billion sweetener through a share buyback programme, signalling a sharper focus on shareholder rewards as it moves away from the big take-overs of the past.
The Basel-based company is carrying out a broad review of operations following the departure of veteran chairman and one-time CEO Daniel Vasella and some analysts had seen scope for an even bigger handout to the company's shareholders.
Novartis said it would allocate capital to the share buyback over two years as well as to a strong and growing dividend and to "bolt-on" or relatively small acquisitions.
"We are now entering our next growth phase and we're focusing at driving continued growth but also on delivering good shareholder returns," Jimenez told investors and analysts in a presentation in London on Friday.
The buyback is part of a $10 billion programme authorised by investors in 2008 and which was partly resumed in 2010 to mollify shareholders in the wake of the company's $39 billion purchase of the rest of eye care firm Alcon.
The latest payout could also help ease concerns ahead of the loss of exclusivity from 2015 on its biggest seller, cancer drug Glivec, that could drag on mid-term growth.
Novartis is also considering options for its non-core assets that lack the scale to become world leaders, but shied away from announcing radical change to its structure on Friday.
Deutsche Bank analyst Tim Race said there could be some disappointment for anyone looking for news of major corporate change, but added: "For us the net takeaway is a small positive resulting from the modest buyback programme."
Race said the buyback could boost consensus earnings forecasts for the company by around 2.5 percent over two years.
Shares in Novartis, which has a stock market value of $214 billion, were trading up 1.1 percent at 73.15 francs by 1426 GMT, compared with a 0.4 percent firmer European healthcare sector. The stock rose as high as 74.25 francs, its highest in nearly seven years.
Novartis had last week taken the first step in a much-anticipated restructuring by agreeing to sell its blood transfusion testing unit to Spain's Grifols SA for $1.7 billion.
The drugmaker was silent about any further plans to sell off or bulk up its business, although it referred to the testing unit sale as one result of its review.