Novartis and GSK to join forces in consumer healthcare

Pharmaceutical shares are soaring after Novartis and GlaxoSmithKline agreed a multibillion deal which involves swapping assets and combining their consumer health units.
Novartis will pick up Glaxo’s cancer pharmaceuticals business for $16bn (£9.5bn) and pass on its vaccines division – minus the flu unit – to GSK for $7.1bn.
Joseph Jimenez, chief executive of Novartis, said in a statement that the transaction between two of the world’s top drugmakers would help reshape their business.
“The transactions mark a transformational moment for Novartis,” remarked Mr Jimenez. “They also improve our financial strength, and are expected to add to our growth rates and margins immediately.”
Brands including Aquafresh, Beechams and Tixylix will be combined as part of the deal. Shares in GSK jumped over 5% to £16.45 and Novartis’ rose 2% to 76.25 Swiss francs.
Andrew Witty, chief executive of GSK, said the deal had taken months to agree. “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,” Mr Witty commented.
The transaction, he added, bolstered GSK’s leadership in the vaccines market and its grip on the consumer health products with immediate sales and earnings benefits to come once completed in early 2015.
The agreement comes amid frenzied takeover speculation in other parts of the drugs sector with reports suggesting Pfizer is considering a $100bn (£59bn) bid for AstraZeneca and Valeant Pharmaceuticals looking at Botox-maker Allergan in a $40bn move.
In a separate deal, Novartis is set to sell its animal health division to US pharmaceutical company Eli Lilly for $5.4bn.

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