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Novartis reshapes business with GSK, Lilly deals

Published on NewsOK Modified: April 22, 2014 at 11:02 am •  Published: April 22, 2014
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GENEVA (AP) — Swiss pharmaceutical firm Novartis AG launched a major overhaul of its business Tuesday, unveiling a series of multibillion-dollar deals with Britain's GlaxoSmithKline PLC and the U.S.'s Eli Lilly & Co. that heralds more restructuring in the fast-changing industry.

Joseph Jimenez, the CEO of Basel, Switzerland-based Novartis, said the deals with GSK and Eli Lilly reflect "a very dynamic health care environment" and would reduce overall sales at Novartis but boost its profit margins. He told reporters some 15,000 of its employees globally will be affected by the changes but that no one will be fired by Novartis— all employees whose units are being sold off will be transferred to the new owners.

"The transactions mark a transformational moment for Novartis," Jimenez said. "They also improve our financial strength, and are expected to add to our growth rates and margins immediately."

The deals unveiled Tuesday are the latest in a string of mergers and acquisitions that have engulfed the industry of late and which, analysts said, could trigger some further activity in the months ahead.

All of Novartis' deals with GSK were timed to close simultaneously. Novartis has agreed to buy GSK's cancer-drug business for $14.5 billion, plus up to $1.5 billion more if certain milestones are met. And the Swiss company has agreed to sell most of its vaccines business to GSK for $7.1 billion, plus royalties, giving GSK better market position with Bexsero, a meningitis B vaccine.

Two GSK cancer drugs, Tafinlar and Mekinist, would give Novartis a strong position for melanoma treatments. Tykerb, for metastatic breast cancer, and Arzerra, for chronic lymphocytic leukemia for thrombocytopenia, are two other drugs included in the deal.

The two firms are also creating a new consumer health care business through a joint venture that combines Novartis' over-the-counter drug business with GSK's consumer business. Novartis would own 36.5 percent of the venture, which is expected to generate revenue of $10 billion a year emphasizing wellness, oral health, nutrition and skin health.

Separately, Novartis said it will sell off its animal health division to Eli Lilly for about $5.4 billion. Indianapolis-based Lilly has been hit hard by the expiration of patents protecting key products in the past few years and has staked its recovery in part on new drugs it develops and its animal health business.

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