Novartis has agreed to acquire GlaxoSmithKline’s oncology pipeline for as much as $16bn, while GSK will acquire Novartis’ vaccine business, excluding the flu vaccines, for as much as $7bn.
The deal comes on the heels of significant movements in the large pharma space. Pfizer recently showed interest in AstraZeneca for as much as $100B, while Pershing Square Capital Management and the health care company Valeant are teaming up on a bid to buy Botox maker Allergan for about $46B.
Analysts seemed positive on both ends of the Novartis-GSK deal, though some seemed surprised at the price of GSK’s cancer pipeline, which earned the company revenue of about $1.6B in 2013. Investors also seemed to think GSK got the better end of the deal, with GSK stock rising more than 4% while Novartis stock rose about 1.5% on Tuesday.
GSK noted that the transaction pushes the company from being the top drugmaker in 14 markets, to now the top drugmaker in 36 markets worldwide.
By acquiring Glaxo’s oncology business, Novartis would expand its cancer drug offerings, including adding Tafinlar and Mekinist, two recently approved drugs used to treat skin cancer.
That deal also offers Novartis rights to GSK’s AKT inhibitor and commercialisation partner rights for future oncology products. Up to $1.5B in that deal depends on the results of one developing oncology trial.
GSK is looking to ensure the proposed deals provide greater scale in two of its core businesses – vaccines and over-the-counter products. The transactions are expected to increase its annual revenue by about $2.2B (£1.3B).
“The acquisition of Novartis’ Vaccines business will significantly enhance the breadth of our vaccines portfolio and pipeline, notably in meningitis, with the addition of Bexsero, an exciting new vaccine for prevention of meningitis B,” GSK CEO Andrew Witty said. “The acquisition will also strengthen our manufacturing network and reduce supply costs.”
As part of the acquisition of the vaccines business GSK will also receive the manufacturing sites, except those dedicated to flu vaccine production such as Holly Springs and Liverpool, Novartis spokesman Eric Althoff told us. “A separate bidding process has been initiated for the flu vaccine business,” he said.
The two companies also agreed to combine their consumer health businesses and OTC businesses to create a new world-leading OTC business with 2013 pro forma revenues of about $11B (£6.5B). GSK will have majority control with an equity interest of 63.5%.
In a separate transaction, Novartis also agreed to divest its Animal Health Division to Eli Lilly for approximately $5.4B after a competitive bidding process. Eli Lilly will fold Novartis' animal-health unit into its Elanco business, creating the second-largest company in the sector in terms of global revenue.
The transactions are expected to be completed by the first half of 2015 and are subject to standard regulatory and shareholder approvals.