Novartis AG (NOVN) will focus more on cancer, GlaxoSmithKline Plc (GSK) on vaccines and Eli Lilly & Co. (LLY) on animal health as the drugmakers announced a series of deals for a total of as much as $28.5 billion today.
The transactions, as well as a plan to form a consumer-health joint venture with Glaxo, are part of an overhaul of the pharmaceutical industry spurred by the loss of sales as best-selling medicines lose patent protection. Pfizer Inc., the world’s biggest drugmaker, sold its infant-nutrition business to Nestle SA for $11.9 billion in 2012, and then last year spun off its animal-health unit.
Novartis agreed to buy cancer drugs for as much as $16 billion while selling most of the company’s vaccines division to Glaxo for $7.1 billion and its animal-health unit to Lilly for $5.4 billion.
For Glaxo, the deals shift the company away from prescription drugs and toward consumer products and vaccines, which are less vulnerable to the patent life cycle. The new joint venture with Novartis will be the second-largest consumer health care company by revenue, trailing only Johnson & Johnson, and it will control 29 percent of the global vaccine market. It also signals a willingness to sell off promising drugs that other companies may be better positioned to market.
Glaxo and Novartis’s consumer-health venture will have about 6.5 billion pounds ($10.9 billion) in revenue, Glaxo said. The U.K. company will have majority control, with an equity interest of 63.5 percent.
“What this transaction does for GSK is it takes one of the leading position in consumer health care and truly elevates us to a global leadership position,” Witty said on a conference call. “It gives us a very rare, extremely rare opportunity to substantially strengthen our vaccine business. And it finds a home for our nascent oncology business.”
Glaxo said the transaction will probably be completed during the first half of 2015 subject to approvals. The company said it expects to return 4 billion pounds to shareholders after the completion of the deal and will maintain its commitment to increasing dividends.
Source: Bloomberg
