Novartis today said it delivered on CEO Joe Jimenez’ promise to restructure the company through a quartet of deals, totaling $28.5 billion, in which it bought the cancer business of GlaxoSmithKline (GSK), sold off most vaccine operations except flu vaccines to GSK, formed a consumer health joint venture with GSK, and sold its animal health division to Eli Lilly.
The deals leave Novartis with its stronger operations in pharmaceuticals, generic drugs, and eye care.
"The transactions mark a transformational moment for Novartis. They focus the company on leading businesses with innovation power and global scale. They also improve our financial strength, and are expected to add to our growth rates and margins immediately," Jimenez declared in a statement.
Novartis said the whirlwind of deals will refocus the pharma giant on leading businesses with global scale and what it called innovation power. More than half of the value of the deals reflected a single transaction—Novartis’ up-to-$16 billion acquisition of GSK oncology products. Novartis agreed to pay GSK $14.5 billion, plus up to $1.5 billion tied to two recently approved GSK-developed compounds, the BRAF inhibitor Tafinlar® (dabrafenib or GSK2118436) and the MEK inhibitor Mekinist™ (trametinib or GSK1120212) succeeding in the COMBI-D (Combination of MEK and BRAF Inhibitors versus dabrafenib) trial, which entered Phase III in 2012.
Yet Novartis included Tafinlar and Mekinist among the oncology assets it acquired from GSK—assets that Novartis said would make it the market leader in treating metastatic melanoma.
The cancer drug deal also gives Novartis opt-in rights to products in GSK's current and future oncology R&D pipeline, which Novartis said “could be a source of new compounds and new targets.”
Novartis also agreed to buy Votrient®, a VEGFR inhibitor for renal cell carcinoma that it said “has potential for the adjuvant setting” as well as its indicated first-line treatment indication. Votrient was GSK’s best-selling cancer drug last year with £331 million ($557.2 million) in sales. Also sold by GSK to Novartis were cancer drugs Tykerb® for HER2+ metastatic breast cancer (£207 million or $348.5 million), Promacta® for thrombocytopenia (£186 million or $313.1 million), and Arzerra® for chronic lymphocytic leukemia (£75 million or $126.2 million).
In all, the oncology products sold by GSK generated a combined $1.6 billion in sales last year—less than 4% of GSK’s total £26.5 billion ($44.6 billion) in 2013 sales—and will add to a cancer portfolio that already had more than 25 new molecular entities and 24 pivotal trials underway exploring 16 new products and indications.
"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 told investors in a note cited by Reuters and The Wall Street Journal.
Analysts at Swiss broker Notenstein were also upbeat, saying the new cancer drugs would help Novartis to navigate patent expiries on top-selling medicines more easily.
However, analysts at Barclays described the price tag for the oncology assets, which could rise as high as $16 billion if certain milestones are reached, as "rather hefty."