GlaxoSmithKline, Novartis, Eli Lilly Trade Assets in Industry Shakeup

Tuesday, 22 Apr 2014 01:52 PM

By Nick Sanchez

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Swiss pharmaceutical giant Novartis announced a major overhaul of its portfolio Tuesday, including asset swaps with Britain's GlaxoSmithKline and the U.S.'s Eli Lilly and Co.

The deals are worth a total of approximately $25 billion.

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"The transactions mark a transformational moment for Novartis," Novartis CEO Joseph Jimenez said in a statement, according to Fox Business. "Looking ahead, this positions Novartis well for future healthcare industry dynamics."

The drug giants stand to benefit from the deals that aim to help each exit sectors in which they're less efficient and enter sectors where they are. Competition from generic drugs as well as healthcare spending cuts are likely the primary driving factors behind the deals.

"Novartis has agreed an elegant set of transactions that either removes or strengthens its underperforming assets, whilst boosting its oncology portfolio," one Jefferies analyst said, according to Reuters.

Specifically, Novartis will buy GSK's oncology products for $14.5 billion plus $1.5 billion pending the outcome of a melanoma trial.

It will sell GSK its vaccines business for $7.1 billion, including royalties. Currently, GSK supplies more than 2 million shots a day. The flu vaccine was not part of the package, and Novartis said it will create a new offer for that business separately.

Lastly, it's selling its animal health business to Eli Lilly for $5.4 billion.

Steve Brozak, president of WBB Securities, told The Associated Press that all the deals will close simultaneously.

"We’re seeing the logical extension of behavior that has taken place not over just the last few years, but in the past decade," he said. 

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