Yahoo – AFP,
Nina LARSON, 22 April 2014
The
Novartis headquarters headquarters in Basel, pictured on January 28, 2009
(AFP Photo/Sebastien Bozon)
|
Geneva
(AFP) - Drugmakers Novartis and GlaxoSmithKline announced an extreme makeover
Tuesday, revealing multi-billion-dollar deals also involving US group Eli Lilly
in a major shakeup of the pharmaceutical sector.
The string
of takeovers and ventures involving the three giant healthcare groups will see
Novartis sharpen its focus on the high-grossing cancer sector and GSK seizing
the chance to boost its share in vaccines.
"These
transactions mark a transformational moment for Novartis," chief executive
Joseph Jimenez said in the statement, adding that the deals would help give the
Swiss company a sharper focus.
"Patients
will benefit from even higher levels of innovation that this focus may
afford," he said, noting
Joseph
Jimenez, chief executive of Swiss
pharmaceutical company Novartis, seen
at the
World Economic Forum in Davos on
January 25, 2014 (AFP Photo/Eric Piermont)
|
Market
observers also hailed the deals, which mark one of the biggest shake-ups at
Novartis since its creation in a 1996 merger nearly two decades ago and which
comes as the global pharmaceutical industry struggles to deal with cuts in
government healthcare spending around the world.
'Long-awaited simplification'
Analyts at
Vontobel Bank described it as a "long-awaited simplification of
(Novartis's) corporate footprint," while the Notenstein private bank said
the Swiss group had managed to find a solution for virtually all of its weaker
units in one fell swoop.
For
starters, the Swiss company plans to buy GSK's oncology (cancer treatment)
business for $16 billion (11.5 billion euros) in cash, although $1.5 billion of
that would depend on future performance.
Novartis
said the acquisition would give it ownership over a range of top-line cancer
drugs, in a move that should strengthen its position as the world's
second-largest cancer treatment provider, hot on the heals of compatriot Roche.
Two
recently approved drugs for treating skin cancer -- Tafinlar and Mekinist --
are among the medication that Novartis would own following the takeover.
In return
for GSK's oncology business, which last year raked in sales of about $1.6
billion, Novartis said it would sell its vaccines division, excluding flu
vaccines, to the British company for up to $7.1 billion, also in cash.
The two
companies further announced a joint venture to create "a world-leading
consumer healthcare business," focused on wellness, oral health, nutrition
and skin health and expected to book around $10 billion in annual sales.
Non-prescription
drugs like Novartis's Nicotinell products aimed at helping people stop smoking
and its Voltaran Dolo back pain relief medication, and GSK's Panadol
pain-relief tablets will fall under the joint venture.
"The
geographic footprint would span all regions, with scale and commercial presence
in the developed world as well as in key emerging markets, such as Brazil,
China, Mexico and Russia," Novartis said.
GSK, which
will hold 63.5 percent of the newly-created business, said it would use
proceeds from the deals to return £4.0 billion ($6.7 billion, 4.9 billion
euros) to its shareholders.
But the
shake-up did not end there. Novartis also said it had agreed to sell its animal
health division to US pharmaceutical giant Eli Lilly for $5.4 billion.
Focus on
cancer, eye-care, generics
The Swiss
company said its divestment from its animal health division was "the
result of a competitive process," stressing the move would give Lilly the
leading position in the field while allowing Novartis to better focus on
innovative pharmaceuticals, eye-care and generics.
Novartis
Animal Health is present in about 40 countries and posted 2013 revenue of
approximately $1.1 billion.
"We
believe the divestment of our smaller vaccines and animal health divisions will
enable us to realise 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," Jimenez said.
Vontobel
analysts welcomed the high price Novartis had secured for its animal health
division, saying the deal, which is expected to conclude during the first
quarter of 2015, was "great for Novartis shareholders."
The deals
with GSK, which require approval from the British firm's shareholders, are
expected to be completed by the middle of next year.
Investors
lapped up the takeovers, which come amid signs Europe's mergers and acquisition
market is finally rebounding after years of doldrums.
Shares in
Novartis soared 2.34 percent to 76.45 Swiss francs in early afternoon trading
on a Swiss stock exchange, outperforming the main SMI index which was up 0.87
percent.
In London,
shares in GSK rose by 4.97 percent to 1,636.50 pence.
GSK chief
executive Andrew Witty said the deals accelerate the British firm's
"strategy to generate sustainable, broadly sourced sales growth and
improve long-term earnings".
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