S&P Downgrades Novartis AG (NVS) From Buy to Hold

S&P Downgraded Novartis AG

From Buy to Hold, yesterday. The price target was cut from 66 to 60 on the European traded shares. There was no equivalent price target given for the NY traded shares, as the report came from S&P Europe. Here are a few quotes from the report: “Novartis announced today it has stopped development of two late-stage pipeline assets - Mycograb (antifungal) and albinterferon alfa-2b (Hep C). The relating intangible asset impairment totaling US$590 million will be taken in the third-quarter. The loss is partially offset by disposal proceeds (US$390 million) from the sale of Enablex to Warner Chilcott

to be recorded in fourth-quarter. We believe the news adds downside to the foreseeable negatives, given its new products and recently approved Gilenia will not mitigate the overall maturing portfolio and austerity-led pricing pressure. While Novartis is less dependent on its top 3 products at 25% of its Pharma-related sales in first half 2010, versus an average 36% in European pharmaceuticals, we are wary of the patent expirations over 2012-15. Thus, we downgrade to Hold and cut our blended 12-month target to CHF60 (CHF66). /S. Matsubara”