Novartis, Glaxo in deal to transform firms, industry - Livemint

Novartis also will sell its vaccines business, excluding the flu operations, to GSK for $7.1 billion.

London/Mumbai: Novartis AG agreed to buy GlaxoSmithKline Plc's (GSK's) cancer-drug business for as much as $16 billion, form a consumer-health venture with GSK and sell its animal-health operation to Eli Lilly and Co. for $5.4 billion in an overhaul of the Swiss drug maker.

Novartis also will sell its vaccines business, excluding the flu operations, to GSK for $7.1 billion, the Basel, Switzerland-based company said in a statement on Tuesday. That includes royalties and as much as $1.8 billion payments based on the achievement of certain business goals.

The transactions culminate a process that began last year when Novartis chief executive officer Joe Jimenez began reviewing the company's smaller businesses for possible sale.

GSK and Novartis's consumer-health venture will have about £6.5 billion ($10.9 billion) in revenue, GSK said. GSK will have majority control, with an equity interest of 63.5%.

The venture brings together brands including Novartis's Excedrin painkiller and GSK's Sensodyne toothpaste. GSK's vaccines purchase will add Bexsero for meningitis to its Cervarix for human papillomavirus.

"Opportunities to build greater scale and combine high quality assets in vaccines and consumer health care are scarce," GSK CEO Andrew Witty said in a statement. "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 transaction will probably be completed during the first half of 2015 subject to approvals.

Lilly said its purchase creates the world's second-largest animal-health company as it absorbs the Novartis business, which had 2013 sales of about $1.1 billion. The Indianapolis-based drug maker said it'll take on about $2 billion of debt and pay the rest with cash on hand. Lilly said it expects annual cost savings of about $200 million within the third year after the deal is completed.

Indian effect

GlaxoSmithKline Pharmaceuticals Ltd (GSK Pharma), the local unit of GlaxoSmithKline, will lose its newly added oncology portfolio in the Indian market once the global cancer business is divested to Novartis.

The oncology portfolio in India currently has three products and the two large brands that it has launched in the market are the breast cancer drug Tykerb and Hycamtin to treat ovarian cancer. The other product is Votrient to treat renal cell cancer.

"GSK Pharma will get all the vaccines, excluding the influenza range, that Novartis sells in the Indian market with the deal and it will have to transfer all its oncology portfolio to Novartis. So the absolute revenue impact of the deal may not be that significant for GSK India," said a GSK Pharma spokesperson after a global management conference call held by the parent on Tuesday.

The consumer health business of GSK is a separate company in India. Hence, the changes in that business will not have any direct effect on the pharma company in India, the spokesperson said.

Novartis India gained 6.34% to Rs.497.20 on BSE while the benchmark Sensex ended flat at 22,758.37 points. GSK Pharma shares declined 0.29% to Rs.2,486.80.

Bank of America Merrill Lynch advised Lilly, while Goldman Sachs Group Inc. advised Novartis on the animal-health deal. GSK said Lazard and Zaoui and Co. were acting as joint financial advisers. The UK company has also received financial advice from Citigroup Inc. and Arkle Associates. Lazard and Citigroup are acting as joint sponsors for the transaction, GSK said. Bloomberg

Mint's C.H. Unnikrishnan and P.R. Sanjai contributed to this story.

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