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May 6, 2021

Novartis buys GlaxoSmithKline’s oncology unit for USD 14.5 bn

On Tuesday, the drug giants Novartis and GlaxoSmithKline unveiled a series of transactions worth more than USD 20 billion that fundamentally transform both companies, focusing Novartis’s scope without significantly hitting its revenue and turning Glaxo into a vaccines-and-consumer-drugs powerhouse, according to Wall Street Journal.
Basel-based Novartis will acquire Glaxo’s oncology unit for around USD 14.5 billion, adding strength to the company’s already-potent lineup of cancer products. After the deal closes, Novartis will get roughly a fifth of its nearly USD 54 billion in expected revenue from cancer drugs. In return, London-based Glaxo will pay USD 5.25 billion for Novartis’s vaccines business, acquiring the company’s promising Bexsero meningitis B vaccine. In still another transaction, the two companies will merge their consumer health businesses under Glaxo’s management, combining franchises that own some of the world’s best-known brands, including Excedrin, Panadol and Aquafresh.
The Novartis-Glaxo deals come against a backdrop of increased mergers-and-acquisitions activity in the pharmaceutical space. Big pharmaceutical companies are looking for ways to reduce costs as health care services pressure them to keep prices level. Instead, pharmaceutical companies are buying each other, allowing them to cut research-and-development and other costs.
The action is likely to continue. Activist investor William Ackman and Valeant Pharmaceuticals International Inc. are seeking to buy Allergan Inc, which makes the Botox wrinkle treatment, according to a filing on Monday. Investors bid up shares of AstraZeneca on Tuesday after weekend reports that it had discussed merging with Pfizer.
The Novartis-Glaxo deals mark the long-awaited culmination of the Swiss pharmaceutical giant’s review of its businesses, which started last year. Since former chairman Daniel Vasella left the company last year, Chief Executive Joe Jimenez has repeatedly said he wanted to refocus Novartis on areas in which it has the scale to compete, rather than maintain small presences in a host of markets.
The deals with Glaxo, and a separate deal to sell its animal health business to Eli Lilly and Company for about USD 5.4 billion, accomplish that goal, focusing the company on pharmaceuticals, eye care and generics. Analysts at Sanford C. Bernstein & Co. estimate sales will fall a little more than 6.5 percent to USD 53.5 billion while operating margin will rise 2.5 percentage points to 27.2 percent.

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