Novartis has reached a definitive agreement with GlaxoSmithKline (GSK) to acquire GSK’s oncology products, divest its vaccines business (excluding flu) to GSK, and create a new joint venture by combining their consumer divisions.
Under the terms of the definitive agreement, Novartis will pay $14.5bn to GSK and up to $1.5bn contingent on a development milestone to acquire its oncology products. Novartis would have opt-in rights to GSK’s current and future oncology research and development pipeline.
Novartis is expected further reinforce its oncology business and improve the growth profile of the combined portfolio with the acquisition of GSK’s oncology products. The addition of GSK products is expected to expand Novartis’ position in targeted therapies and small molecules.
Excluding its flu business, Novartis will divest its Vaccines business to GSK for $7.1bn ($5.25bn upfront and up to $1.8bn in milestones) plus royalties.
Under GSK’s ownership, Novartis Vaccines would become part of a world leader in the vaccines segment. The combined business is expected to have a compelling position in pediatric and meningitis franchises, Novartis claims.
A new joint venture will be created between Novartis OTC and GSK Consumer Healthcare, which Novartis will own a 36.5% share of and have four of 11 seats on the joint venture’s board.
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In addition, Novartis will have customary minority rights and exit rights at a pre-defined, market-based pricing mechanism.
The newly formed joint venture is expected to generate approximately $10bn in annual sales and would establish leading positions in four key OTC categories, including wellness, oral health, nutrition and skin health.
The geographic footprint would span all regions, with scale and commercial presence in the developed world, as well as in key emerging markets such as Brazil, China, Mexico and Russia.
Subject to GSK shareholders and anti-trust approvals, the deal is expected to close during the first half of 2015.
Novartis has also announced a definitive agreement to divest its animal health division to Eli Lilly for approximately $5.4bn. Subject to approvals, the transaction with Lilly is expected to close by the end of the first quarter of 2015.
Novartis CEO Joseph Jimenez said: "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.
"We have also created a world-leading consumer healthcare business in our joint venture with GSK. We believe the divestment of our smaller vaccines and animal health divisions will enable us to realize immediate value from these businesses for our shareholders, and those divisions will benefit from being part of large, global businesses that are also leaders in their segments.
"Patients will benefit from even higher levels of innovation that this focus may afford. Looking ahead, this positions Novartis well for future healthcare industry dynamics."
Novartis claims that the transactions with GSK and Lilly represent a transformation for the company and are expected to improve its sales and core operating income growth rates, while improving margins.
Image: Novartis’s Basel headquarters. Photo: courtesy of Novartis AG.