Novartis and GsK swap assets in deals exceeding USD 25 billion

Swiss drugmaker Novartis and British medicine producer GlaxoSmithKline have agreed on a multiple deal of swapping assets in a series of transactions estimated to exceed USD 25 billion. This will reshape two of the world biggest drugmakers.

2014-04-23 15:40:30

According to the official announcement, Novartis announced that it has reached a definitive agreement with GlaxoSmithKline plc (GSK) to exchange certain assets, building global leadership in key segments and focusing the company portfolio. Under the agreement, Novartis would strengthen the company innovative pharmaceuticals business by acquiring GSK oncology products, and would divest Vaccines (excluding flu) to them. The two companies would also create a joint venture, combining their consumer divisions to create a world-leading consumer healthcare business. Separately, the company announced a definitive agreement with Eli Lilly and Company (Lilly) to divest the Animal Health Division, further focusing its portfolio on the leading businesses of innovative pharmaceuticals, eye care and generics.

"The transactions mark a transformational moment for Novartis. 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," said Joseph Jimenez, CEO of Novartis. "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 has agreed to acquire GSK oncology products for a USD 14.5 billion payment and up to USD 1.5 billion contingent on a development milestone. Under the terms of the transaction, Novartis would have opt-in rights to GSK current and future oncology R&D pipeline.

Also, Novartis has agreed to divest its Vaccines business to GSK, currently excluding its flu business, for USD 7.1 billion plus royalties. The USD 7.1 billion consists of USD 5.25 billion upfront and up to USD 1.8 billion in milestones. As a part of a value-maximization strategy in the context of the portfolio review, Novartis has initiated a separate sales process for its flu business.

Novartis and GSK have agreed to create a world-leading consumer healthcare business through a joint venture between Novartis OTC and GSK Consumer Healthcare. Upon completion, Novartis will own a 36.5 percent share of the joint venture and will have four of eleven seats on the joint venture Board. Furthermore, Novartis will have customary minority rights and exit rights at a pre-defined, market-based pricing mechanism.

In a separate transaction, Novartis has agreed to divest its Animal Health Division to Lilly for approximately USD 5.4 billion. This transaction is the result of a competitive process, which upon completion would create a leading animal health business under Lilly ownership and would optimize the value of the asset in the interest of Novartis shareholders.