Novartis Overhauls Portfolio With Deals Worth $25 Billion
Novartis AG unveiled Tuesday a sweeping overhaul of its product portfolio, selling two units and buying another in a series of transactions worth more than $25 billion.
Basel-based Novartis said it is acquiring the oncology unit of Britain΄s GlaxoSmithKline PLC for around $14.5 billion. The Swiss pharmaceutical giant is also selling its vaccines unit to Glaxo for $5.25 billion. Both deals include provisions for milestone payments that could raise the total values.
Novartis and Glaxo are also planning to combine their consumer divisions, which sell medicines that don΄t require a prescription.
The deals fundamentally reshape Novartis, which has been conducting a review of its businesses since last year. The transactions bring it higher-margin products, such as cancer drugs, and remove the low-margin vaccine business, which depends on scale.
The overhaul refocuses the diversified company on areas in which it has scale to compete. The new structure marks a sea change from the era of former Chairman Daniel Vasella, who built Novartis into a sprawling health care conglomerate through acquisitions.
“The transactions mark a transformational moment for Novartis,” Chief Executive Joe Jimenez said. The company said it expected sales, core operating income growth rates and margins to improve because of the deals.
The transactions also reshape GSK, focusing its business on respiratory, HIV, vaccines and consumer health products. Those four areas will account for roughly 70% of the British company΄s total sales.
GSK will take charge of the combined consumer health operations, which will be one of the world΄s largest over-the-counter drugs business with annual revenues of around GBP6.5 billion ($10.9 billion). Glaxo will own 63.5% of the business, which will be run by its current consumer health head, Emma Walmsley.
The deal will also widen Glaxo΄s lead as the world΄s largest provider of vaccines, strengthening its position in the meningitis vaccine market and the U.S. The new business will have more than 20 vaccines in development.
In a separate deal, Novartis also announced it is selling its animal health division to Eli Lilly & Co. for around $5.4 billion.
Novartis also said it has started a separate sales process for its flu business, which is excluded from the transaction with Glaxo.