Novartis And GlaxoSmithKline In Multi-Billion Dollar Deals

By Mani
Updated on

Novartis AG (NYSE:NVS) (VTX:NOVN) will acquire GlaxoSmithKline plc (ADR) (NYSE:GSK) (LON:GSK)’s oncology unit for around $14.5 billion, while Glaxo will pay $5.25 billion for Novartis’ vaccines business.

The deal comes on the heels of Valeant Pharmaceuticals Intl Inc (NYSE:VRX) revealing plans to acquire the wrinkle treatment maker Allergan Inc.

Deal to enhance firms’ core focus

While unveiling its fourth quarter earnings in February, GlaxoSmithKline plc (ADR) (NYSE:GSK) (LON:GSK) said its Respiratory, Vaccines and HIV divisions were strengthened by new product launches. It disclosed expanding its respiratory portfolio even further with two major approvals, while reporting over 1,700 prescriptions for its HIV drug Tivicay.

The deals announced Tuesday would also transform GlaxoSmithKline plc (ADR) (NYSE:GSK) (LON:GSK) to focus 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.

As part of the deal, Basel-based Novartis AG (NYSE:NVS) (VTX:NOVN) will acquire GlaxoSmithKline plc (ADR) (NYSE:GSK) (LON:GSK)’s oncology unit for around $14.5 billion, adding strength to the company’s already-potent lineup of cancer products. Once the deal is consummated, Novartis AG (NYSE:NVS) (VTX:NOVN) will get roughly a fifth of its nearly $54 billion in expected revenue from cancer drugs. Novartis AG (NYSE:NVS) (VTX:NOVN) would also sell its animal-health unit to Eli Lilly & Co for $5.4 billion.

Flurry of deals

In February, Novartis AG (NYSE:NVS) (VTX:NOVN) said it would acquire Cambridge Massachusetts-based CoStim, a closely held biotechnology company for an undisclosed sum. A hot field of cancer treatment known as immunotherapy may reach $35 billion in annual sales. The Switzerland-based drug giant is one of a number of big pharmaceutical companies exploring immunotherapies, which treat disease by spurring, enhancing, or turning off the body’s immune response.

On Sunday it was reported pharma giant Pfizer Inc. had recently made a $101 billion bid for smaller rival AstraZeneca plc (ADR) (NYSE:AZN) (LON:AZN). Though senior investment bankers with knowledge of the offer indicated AztraZeneca management had rejected the offer.

The global pharmaceuticals sector has seen a flurry of deal-making recently as large companies seek to focus on a small number of leading businesses, while smaller specialty and generic producers seek greater scale.

Signup to ValueWalk!

Get the latest posts on what's happening in the hedge fund and investing world sent straight to your inbox! 
This is information you won't get anywhere else!