Created on Tuesday, 22 April 2014 Written by JOHN HEILPRIN, Associated Press
GENEVA (AP) — Swiss pharmaceutical giant Novartis AG announced a series of multibillion-dollar deals Tuesday with other major pharmaceutical companies that it said would reduce sales but boost profitability, while affecting some 15,000 of its employees globally.
The Basel, Switzerland-based company said it has agreed to buy GlaxoSmithKline plc's cancer-drug business for $14.5 billion, plus up to $1.5 billion more if certain milestones are met, and to divest most of its vaccines business to GSK for $7.1 billion, plus royalties.
The two drugmakers also are creating a new consumer health care business through a joint venture. It combines Novartis' over-the-counter drug business with GSK's consumer business to create a new entity that would generate $10 billion a year in revenue. Novartis would own 36.5 percent of the new business, focusing on pain management, coughs and colds and dermatology.
All the deals between Novartis and GSK are timed to close simultaneously.
Separately, Novartis said it will sell off its animal health division to U.S.-based Eli Lilly & Co. for about $5.4 billion.
In a statement, Novartis CEO Joseph Jimenez said the deals mark "a transformational moment" for the company by refocusing its business around three core strengths: innovative drugs, eye care and generics.
"They also improve our financial strength, and are expected to add to our growth rates and margins immediately," he said.
The oncology business that Novartis is picking up from GSK had revenue of $1.6 billion and a 20 percent growth rate last year, Jimenez told reporters in a conference call.
And the Swiss company said its flu business, which is not part of the sale to U.K.-based GSK, would be divested in another pending deal, but it did not provide more specifics.
Taken together, the deals will reduce Novartis' sales by about $4 billion, from $60 billion down to $56 billion, Jimenez said, but the company's "absolute profit goes up and that's partly because we're acquiring the oncology products and we are divesting products that have lower profit."
The transactions affect some 15,000 of the company's 135,000 employees globally, he said, and "they will move with the divestitures or into that joint venture."
Jimenez, however, said Novartis won't fire anyone. All Novartis employees whose units are being sold off "will be fully transferred to the new owners," he said.