Novartis AG made an official statement today, saying that it reached an agreement over the acquisition of the cancer-drug unit of GlaxoSmithKline Plc in a 16-billion-dollar deal. The two companies will also form a joint venture by combining their consumer-health divisions, which sell medicines that dont require a prescription.
According to the companys statement, Novartis plans to sell its animal-health division to Eli Lilly & Co. in a deal estimated to 5.4 billion dollars. It also said that its vaccines unit, excluding the flu operations, will be acquired by GlaxoSmithKline at the price of 7.1 billion dollars.
These deals are part of the plan for reorganization of the company, which has been started in 2013 and is a part of a long-term strategy to bet on higher-margin products, while getting rid of lower-margin units.
As reported by the Wall Street Journal, Mr. Joe Jimenez, the current Chief Executive Officer of Novartis AG, said: “The transactions mark a transformational moment for Novartis.” Part of Mr. Jimenez statement was also cited by Bloomberg: “You have to be No. 1, No. 2 or No. 3 in your segment. This was so critical we talked with virtually everyone.”
According to the information provided by the company, the joint venture that is to be formed by Novartis and GlaxoSmithKline is expected to generate a revenue that amounts to about 6.5 billion pounds (10.9 billion dollars). The major equity stake will be held by Glaxo. As reported by Bloomberg, the Glaxos CEO – Andrew Witty commented on this step: “Opportunities to build greater scale and combine high-quality assets in vaccines and consumer health care are scarce. With this transaction, we will substantially strengthen two of our core businesses and create significant new options to increase value for shareholders.”
Novartis AG currently focuses on four specific segments that are expected to generate about 70% of its total sales. It is to bet on the units that are responsible for respiratory, HIV, consumer health products and vaccines. The companys idea is to expand its reach in vaccines, by consolidating its positions and making larger investments in the development of about 20 new vaccines.
Novartis AG was 2.34% up to trade at 76.45 Swiss francs by 10:20 GMT, marking a one-year change of +13.6%.
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