Analysts give Novartis buyout move positive nod

Switzerland-based Novartis bought 51.7 percent of Speedel on Wednesday, bringing its current stake in the fellow Switzerland-based company to 61.4 percent. It planned to buy the remaining shares in a public tender offer. Total costs of the takeover are estimated to be 907 million Swiss francs, or $880 million.

The companies jointly developed Tekturna.

"The deal signals Novartis' confidence in Tekturna and its commitment to the cardiovascular space," said Cowen and Co. analyst Steve Scala, in a note to investors. "The deal should allow Novartis to capture the full economics on Tekturna and its combinations, by eliminating royalty payments and manufacturing fees."

He reaffirmed a "Outperform" rating on Novartis and said Tekturna sales could reach $175 million in 2008 and eventually grow to $1.1 billion in 2015.

Novartis is also gaining three midstage development drugs aimed at cardiovascular conditions.

Meanwhile, Goldman Sachs analyst John Murphy reaffirmed a "Neutral" rating on Novartis, saying the deal gives the company full access to a new generation of developing cardiovascular drugs. The impending patent loss on the blood-pressure drug Diovan in 2012 increases the importance of the deal, he added.

But, Tekturna sales have so far been disappointing, he added, and will not likely improve until there are additional positive outcomes study data.

"If Tekturna becomes the success that Novartis management expects, then the cost of this deal will not appear high," he said.

Lehman Brothers analyst Johannah Walton, meanwhile, reaffirmed a "Overweight" rating, calling the buyout move an internal vote of confidence for Tekturna's sales potential.