By Hester Plumridge
ZURICH-- Novartis AG unveiled Tuesday a sweeping overhaul of its
product portfolio, selling two units and buying another in a series
of transactions worth more than $25 billion.
Basel-based Novartis said it is acquiring the oncology unit of
Britain's GlaxoSmithKline PLC for around $14.5 billion. The Swiss
pharmaceutical giant is also selling its vaccines unit to Glaxo for
$5.25 billion. Both deals include provisions for milestone payments
that could raise the total values.
Novartis and Glaxo are also planning to combine their consumer
divisions, which sell medicines that don't require a
prescription.
The deals fundamentally reshape Novartis, which has been
conducting a review of its businesses since last year. The
transactions bring it higher-margin products, such as cancer drugs,
and remove the low-margin vaccine business, which depends on
scale.
The overhaul refocuses the diversified company on areas in which
it has scale to compete. The new structure marks a sea change from
the era of former Chairman Daniel Vasella, who built Novartis into
a sprawling health care conglomerate through acquisitions.
"The transactions mark a transformational moment for Novartis,"
Chief Executive Joe Jimenez said. The company said it expected
sales, core operating income growth rates and margins to improve
because of the deals.
The transactions also reshape GSK, focusing its business on
respiratory, HIV, vaccines and consumer health products. Those four
areas will account for roughly 70% of the British company's total
sales.
GSK will take charge of the combined consumer health operations,
which will be one of the world's largest over-the-counter drugs
business with annual revenues of around GBP6.5 billion ($10.9
billion). Glaxo will own 63.5% of the business, which will be run
by its current consumer health head, Emma Walmsley.
The deal will also widen Glaxo's lead as the world's largest
provider of vaccines, strengthening its position in the meningitis
vaccine market and the U.S. The new business will have more than 20
vaccines in development.
In a separate deal, Novartis also announced it is selling its
animal health division to Eli Lilly & Co. for around $5.4
billion.
Novartis also said it has started a separate sales process for
its flu business, which is excluded from the transaction with
Glaxo.
Write to Marta Falconi at marta.falconi@wsj.com and Hester
Plumridge at Hester.Plumridge@wsj.com
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