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Novartis buys BMS' shelf space

Swiss drugs group Novartis has bolstered its position in the growing OTC marketplace through an agreed $660m (£379m) acquisition of Bristol-Myers Squibb's US portfolio

Swiss drugs group Novartis has bolstered its position in the growing over-the-counter (OTC) marketplace through an agreed $660m (£379m) acquisition of Bristol-Myers Squibb's US portfolio.

Investors welcomed the company's move to expand through its purchase of BMS' OTC unit, which last year amassed sales of $258m, adding to the $1.98bn generated in the same period by Novartis' existing OTC subsidiary.

Analysts have described the cash deal, which will see Novartis pay 2.6 times sales, as a fair price for the BMS' North American OTC portfolio as it allows Novartis, which already ranks as the number two OTC firm in Europe, to strengthen its hold on the US marketplace and broaden its therapeutic range.

The acquired unit features Excedrin, a $160m-earning headache medicine that provides Novartis with an entry into the US adult analgesic marketplace - a sector estimated to be worth around $2bn. The drug, a triple combination of paracetamol, aspirin and caffeine, is the number two product in the area, with 96 per cent consumer awareness, according to Novartis.

Other brands in the BMS portfolio include Keri, a skin care product, Comtrex, for cold and flu, Vagistat, an anti-fungal, 4-Way, a nasal decongestant, Mineral Ice, a topical pain reliever, No-Doz, a sleep medicine, and Bufferin, a systemic analgesic.

ìThe acquisition of these brands, particularly Excedrin, will provide us with critical mass in the OTC market in the US, as well as with key trade customers,î said Paul Choffat, CEO of Novartis Consumer Health.

He added that the acquisition would boost the attractiveness of the company as a partner for switching prescription medicines to OTC status.

ìThe deal makes sense as OTC businesses are consolidating and the fight for shelf space is becoming tougher,î Denise Anderson, of Kepler Equities, noted in the Financial Times.

Analysts also noted that the deal dovetailed efficiently with Novartis' existing OTC product range, complementing the portfolio already sold by the company in North America.

Some in the industry have not ruled out Novartis as a potential buyer for the Boots OTC unit, which is currently for sale, although analysts believe it could involve a transaction worth some $2bn.

News of Novartis' BMS came hot on the heels of a positive announcement from the company that sales and profits had exceeded expectation in the first half 2005. Chairman Daniel Vasella also said the group would be ready to release ìpivotalî clinical data for three new drugs in the second half of the year.

30th September 2008

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