Analysts said the Nestl�� deal was a positive move for Novartis and saw little reason to be concerned about Tekturna's eventual approval.

Chris Schott, an analyst with Bank of America, was not particularly concerned with the Tekturna news and reiterated his projection that it could come close to reaching blockbuster status.

"An extension of the FDA review is already in our expectations for Tekturna and we do not view this event as an indication of a lower probability of gaining approval for the drug," Schott stated in a research report.

"We continue to view Tekturna as a major long-term opportunity for Novartis and have conservatively modeled roughly $900 million in annual sales by 2010," he added.

Schott also saw positives from the divestiture of Novartis' medical nutrition unit. "Continuing a trend we have seen during the year within the Consumer Health segment, we believe Novartis's divestment will enable the company to realize far higher value from the asset than if the Medical Nutrition business were to remain part of the Company," he stated.

Bank of America did not respond to United Press International's request for a comment from Schott.

Novartis said it was selling its medical nutrition business -- the No. 2 global supplier of nutrition and medical devices for providing essential nutrients to patients with special medical conditions -- in an effort to improve its financial situation and gain strategic options.

"Following our long-term strategy, this divestment continues to enhance our focus on healthcare, further strengthens our financial position and provides strategic flexibility," said Daniel Vasella, Novartis' chairman and chief executive officer.

"We also believe that this transaction offers the ideal fit for the Medical Nutrition business and the best opportunities for Medical Nutrition associates and management," Vasella added.

Novartis said it expects the deal to be completed in the second half of 2007.

Offsetting this news, however, was the company's announcement that the FDA had extended by up to three months its deadline for deciding on Tekturna in order to evaluate a clinical trial involving 30 healthy volunteers looking at potential changes of the lining of the colon.

The concern, which Novartis divulged earlier this month at its R&D day, arose after two rodents developed inflammation of the colon after receiving high doses of Tekturna, but the company said Thursday the clinical trial indicated the drug did not induce any changes in the mucosal lining of the colon in the healthy study subjects.

"Novartis is confident that providing this additional information to the FDA will help secure approval for Tekturna in the (United States)" the company added.

Overall, Schott sees a bright future for Novartis, rating it as his top pick for 2007.

"Trading at roughly a 15 percent premium to the group despite 5-yr sales (10 percent) and (earnings per share 16 percent) growth nearly twice that of its peers, Novartis remains one of our top picks," he stated. "We view the launches of Galvus, Tekturna and Tasigna as the most significant catalysts for Novartis in 2007."

J.P. Morgan analyst Alistair Campbell had similar views about both Tekturna and the Nestl�� deal, but he had more concern about the potential for downsides.

"Results indicated that Tekturna did not induce any changes in the mucosal lining of the colon," Campbell noted in a research report. "However there is a possibility the FDA could request additional long-term safety data, creating further delay."

Campbell projects a U.S. launch for Tekturna in the third quarter of 2007 and said the EU launch, which was expected in the first quarter of 2008, could also be pushed back.

He projects Tekturna sales could reach $1.26 billion in 2011.

Regarding the Nestl�� deal, Campbell said he sees the move "as positive due to its margin-enhancing abilities."

However, he added, "On the negative side, this disposal could raise fears Novartis may make a major acquisition."

He noted the $2.5 billion in cash raised by the deal is in addition to the $9 billion in cash he forecasts Novartis will have on hand by the end of the year.

J.P. Morgan did not respond to UPI's request for comment from Campbell.

Dresdner Kleinwort analyst Ben Yeoh had similar views, saying neither news is that surprising.

"The divestment is a mild positive for the stock, but there are likely to be concerns of how Novartis will spend the money," Yeoh stated in a research note.

"Tekturna news is a slight negative," he added.

Dresdner told UPI Yeoh was not available to comment.

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