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Novartis, GSK, Eli Lilly trade assets as global pharma industry reshapes

Overhaul is part of realignment in a sector that is coping with steep govt spending cuts.

By: Reuters | Zurich/london | Published: April 23, 2014 12:05:22 am

Swiss drugmaker Novartis has announced a multi-billion dollar revamp on Tuesday, swapping assets with GlaxoSmithKline and selling its animal health arm in a bid to simplify its business and increase its focus on high-margin cancer medicines.

The overhaul is part of a major realignment in the global pharmaceuticals industry as it strives to cope with a clampdown in health spending by cash-strapped governments. “The transactions mark a transformative process for us,” said Novartis chief executive Joe Jimenez, who has been undertaking a strategic review of the once-sprawling business.

“They also improve our financial strength, and are expected to add to our growth rates and margins immediately.” Novartis said it had agreed to buy GlaxoSmithKline’s oncology products for $14.5 billion, while selling to GSK its vaccines, excluding flu, for $7.1 billion plus royalties and creating a joint venture with GSK in consumer healthcare. Novartis also said it had agreed to sell its animal health arm to Eli Lilly for approximately $5.4 billion.

The global pharmaceuticals sector has seen a flurry of deal-making recently as large companies seek to focus on a small number of leading businesses, while smaller speciality and generic producers seek greater scale. Cancer is a particular focus for some drugmakers, thanks to novel medicines that show promise by boosting the body’s immune system. Tuesday’s deal will see Novartis strengthen its world No. 2 position in cancer behind cross-town rival Roche.

“We reckon the real value of the deal should be searched for in the pipeline and the newly launched products, strengthening Novartis’ position in melanoma and haematology,” Vontobel analyst Andrew Weiss said of the cancer deal with GSK. Novartis’s Jimenez said the deals would result in slightly lower overall sales for the Swiss group, but higher profit as it swaps lower-margin vaccines business for higher-margin oncology drugs.

Eli Lilly will have the world’s No. 2 animal health business by revenue in the wake of its deal with Novartis. It said it would fund the transaction with $3.4 billion of cash and $2 billion of loans.

Deal not to impact India biz: GSKCH

New Delhi: GlaxoSmithKline Consumer Healthcare said on Tuesday that the global deal between parent GlaxoSmithKline Plc and Swiss drug major Novartis, under which a consumer healthcare joint venture is to be formed, will exclude GlaxoSmithKline Consumer Healthcare Ltd India.

“This consumer healthcare joint venture will exclude GlaxoSmithKline Consumer Healthcare Ltd India, where GSK plc will continue to hold directly its interests in the listed entity,” GlaxoSmithKline Consumer Healthcare said in a filing to the BSE.

Earlier this year, GSK increased its stake in the Indian arm, GlaxoSmithKline Consumer Healthcare, to 75 per cent following the completion of a Rs 6,400 crore open offer. ENS

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