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Novartis pays $16bn for GSK's oncology portfolio

Swiss company strikes series of deals, including one to step away from vaccines

NovartisNovartis has struck a series of major deals to transform its business, acquiring GSK's oncology portfolio for $16bn and selling its vaccines business to the British pharma company for up to $7.05bn.

The two pharma giants will also combine their consumer healthcare businesses, whose revenues last year totalled around $10.9bn, to create a new joint venture, which GSK will have a majority interest.

The deals are expected to be completed during the first half of 2015 and will fundamentally reshape both companies' businesses.

For Novartis the draw is a stronger stake in oncology – where it is already the third biggest pharma company behind Amgen and Roche.

Novartis will gain products such as Votrient (pazopanib), Mekinist (trametinib) and Tyverb (lapatinib), as well as opt-in rights to GSK's current and future oncology R&D pipeline, which - despite some recent missteps - will focus on cancer immunotherapy, epigenetics and tumour environment.

In turn Novartis will exit vaccines, selling its all its non-influenza interests, including its meningitis B shot Bexsero, to GSK for an initial cash consideration of $5.25bn with subsequent potential milestone payments of up to $1.8bn and ongoing royalties.

The flu business will still be divested, but Novartis said this would be carried out under a separate sales process.

Joseph Jimenez, CEO of Novartis, said: "The transactions mark a transformational moment for Novartis. They focus the company on leading businesses with innovation power and global scale. They also improve our financial strength, and are expected to add to our growth rates and margins immediately.”

GSK will have an equity interest of 63.5 per cent in the new, as yet unnamed, consumer business, which will be led by Emma Walmsley, who is appointed CEO designate. GSK's CEO Sir Andrew Witty will chair a board that will be made up of directors from both GSK and Novartis.

Sir Andrew said: “This proposed three-part transaction accelerates our strategy to generate sustainable, broadly sourced sales growth and improve long-term earnings.

"Opportunities to build greater scale and combine high quality assets in vaccines and consumer healthcare are scarce. With this transaction we will substantially strengthen two of our core businesses and create significant new options to increase value for shareholders.”

GSK said the deals would increase its annual revenues by around $2.2bn to $45.3bn (on a 2013 pro forma basis) and fundamentally re-shape its revenue base, splitting them across pharmaceuticals (62 per cent), consumer healthcare (24 per cent) and vaccines (14 per cent).

Following completion, around 70 per cent of GSK's revenues would be focussed around four key franchises: respiratory, HIV (through its ViiV Healthcare joint venture), vaccines and consumer healthcare.

• Meanwhile, Novartis has also signed a separate deal with Lilly to divest its Animal Health Division for around $5.4bn to focus more fully on its portfolio of pharmaceuticals, eye care and generics.

Article by
Dominic Tyer

22nd April 2014

From: Research, Sales

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