Novartis And GSK Exchange Assets, Form New HealthCare Business

Novartis International AG and GlaxoSmithKline announced that the companies have reached a definitive agreement to exchange certain assets. Under the agreement, GSK will acquire Novartis’ global vaccines business while Novartis will acquire GSK oncology products.

With the exception of influenza vaccines, GSK will acquire Novartis’ global vaccine business for an initial cash consideration of $5.25 billion. This will be followed with subsequent potential milestone payments of up to $1.8 billion with ongoing royalties.

In turn, Novartis will acquire GSK’s marketed Oncology portfolio, related R&D activities, and rights to its AKT inhibitor, and gain commercialization partner rights for future oncology products. The transaction is worth an aggregate cash consideration of $16 billion, of which up to $1.5 billion will be based on results of the COMBI-D trial.

In addition, Novartis and GSK will collaborate to form a new Consumer Healthcare business with 2013 pro forma revenues of £6.5 billion. GSK will hold a major equity interest of 63.5 percent while Novartis will gain customary minority rights and exit rights according to a pre-defined, market based pricing mechanism.

Sir Andrew Witty, CEO of GSK said, “Opportunities to build greater scale and combine high quality assets in Vaccines and Consumer Healthcare are scarce. With this transaction we will substantially strengthen two of our core businesses and create significant new options to increase value for shareholders. The Novartis OTC portfolio is highly complementary to GSK’s and has many well-known, widely recommended brands such as Voltaren, Excedrin, Otrivin, and Theraflu. Together, we will create the world’s premier OTC business with clear opportunities to accelerate revenue growth… We will expand our portfolio to both help treat illness and prevent disease, and we will broaden our scope to improve human health with the acquired R&D and innovation expertise.”

The transaction and exchange of assets between GSK and Novartis is expected to close during the first half of 2015, subject to approvals.