GSK, Novartis Complete Three-Part Deal
Novartis has completed a series of transactions with GlaxoSmithKline plc (GSK), including the acquisition of certain oncology products and pipeline compounds from GSK, the creation of a consumer healthcare business through a joint venture that combines the two companies’ consumer healthcare divisions, and the divestiture of the Novartis non-influenza vaccines business to GSK. The transactions were announced in April 2014.
Novartis acquired GSK’s oncology products, including two pipeline candidates, for an aggregate cash consideration of $16 billion. Up to $1.5 billion of this amount is contingent on certain development milestones.With the closing of the deal, Novartis’ oncology portfolio now includes 22 oncology and hematology medicines to treat more than 25 conditions. Some key products from GSK’s acquisition include: Tafinlar, a BRAF inhibitor, and Mekinist, a MEK inhibitor, both approved for the treatment of metastatic melanoma; Votrient, a VEGFR inhibitor for treating renal cell carcinoma; Promacta for treating thrombocytopenia; Tykerb for treating HER2+ metastatic breast cancer; and Arzerra for treating chronic lymphocytic leukemia. Novartis also has opt-in rights for GSK’s current and future oncology R&D pipeline (excluding oncology vaccines), which could be a source of new compounds and new targets. Sales of the acquired GSK oncology products in 2014 were approximately $2.0 billion.
In their new consumer healthcare joint venture, GSK Consumer Healthcare, Novartis holds a 36.5% share. GSK Consumer Healthcare is expected to have leading positions in four key over-the-counter categories: wellness, oral health, nutrition, and skin health. The joint venture has scale and commercial presence in the developed world as well as in key emerging markets. Novartis also has four of eleven seats on the joint venture’s board. Furthermore, Novartis has certain minority rights and exit rights, the latter of which would be executed using a pre-defined, market-based pricing mechanism.
Novartis divested its vaccines business (excluding its vaccines influenza business) to GSK for up to $7.1 billion plus royalties. The $7.1 billion consists of $5.25 billion paid upon completion and up to $1.8 billion in future milestone payments.
Since 2013, Novartis has executed other strategic transactions to transform the company’s portfolio. In January 2015, Novartis completed the sale of its animal health business to Eli Lilly and Company for approximately $5.4 billion. As a result of the transaction with Eli Lilly, Novartis will show in the first quarter of 2015 an exceptional pre-tax gain of approximately $4.7 billion.
In October 2014, Novartis agreed to divest its influenza vaccines business to CSL Limited for $275 million, a transaction that is expected to close at the end of 2015. In January 2014, Novartis completed the sale of its blood transfusion diagnostics unit to Grifols S.A. for $1.7 billion.
The net after tax proceeds of the transaction received by GSK are estimated to be $7.8 billion. This reflects the full consideration of $16 billion paid by Novartis for GSK's oncology portfolio and related assets. GSK plans to use the transaction proceeds to fund the full amount of the previously announced capital return of Â£4 billion ($6.2 billion) to shareholders.