UPDATE 1-Novartis sweetens investors with $5 billion share buyback
* $5 bln buyback to take place over two years
* Targets 3-4 pct productivity gains per year through 2015
* No mention of plans for further divestments
ZURICH, Nov 22 (Reuters) - Swiss drugmaker Novartis offered a sweetener to investors on Friday by starting a $5 billion share buyback programme, but shied away from announcing any radical surgery to its structure.
The Basel-based pharmaceutical firm is carrying out a broad review of operations following the departure of veteran chairman and one-time CEO Daniel Vasella, and is considering options for its non-core assets that lack the scale to become world leaders.
In a statement on Friday before an investor day in London, Novartis said it would allocate capital to a strong and growing dividend, bolt on buys and a $5 billion share buyback to take place over two years.
"Novartis has reached an inflection point, having fully integrated Alcon and reduced debt," Chief Executive Joe Jimenez said.
Some analysts had called for Novartis to throw a sweetener to shareholders in the form of a buyback ahead of the loss of exclusivity on its current biggest seller, cancer drug Glivec from 2015 that could drag on mid-term growth.
The company said it would continue to cut costs to improve productivity by consolidating its research sites worldwide and expects to deliver roughly 3-4 percent in productivity gains per year through 2015.
NO BIG BANG OVERHAUL
Expectations had run high prior to Friday that Novartis might use the event to reveal whether it planned to take the knife to more parts of its businesses.
Last week, Novartis took the first step in a much-anticipated restructuring by agreeing to sell its blood transfusion testing unit to Spain's Grifols for $1.7 billion.
But the drugmaker kept silent about any further plans to sell off or bulk up its business in its statement.
Novartis is not alone in pondering divestments. The healthcare industry is in the midst of a dealmaking wave as global drugmakers shed underperforming assets to extract trapped value, while simultaneously trying to bolster their new drug pipelines by buying up smaller firms.
There has been speculation that its animal health unit, which Citi analysts estimate could have an enterprise value (equity plus debt) of roughly $4 billion, could be next on the block. But some analysts have become more cautious about the scale of any restructuring at the Swiss firm.
"We think it will not be as dramatic as some have hoped for," Jefferies analysts, who were among the earliest champions of a strategic overhaul, wrote in a note last month.
Novartis also updated investors on its pharmaceutical business and highlighted cancer drugs, including LDK378 for non-small cell lung cancer, as among the most promising treatments in its pipeline.
It said it would start phase III trials for its experimental drug LEE011 in breast cancer in December, which analysts at Bernstein said could mean quicker-than-expected competition for Pfizer's palbociclib, also in phase III development.