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All change again...

Posted 23/04/2014 by cgodfrey

Just when you thought there were no more Big Pharma deals to be done, in the UK newspaper The Sunday Times over the Easter weekend, in an unconfirmed news story, Pfizer was reported to be bidding to acquire AstraZeneca. And then GSK and Novartis pull their own rabbit out of the hat! But not only that, Eli Lilly gets in on the act as well!

Not unexpectedly, in a separate transaction, Novartis is handing over its animal health business to Lilly for $5,.4bn – a divestment that has been on the radar screens of pharma watchers for a number of months.

But as for the rest of the changes, pharma watchers have been taken a little unawares despite all the restructuring that has been announced by Novartis in recent months by a series of swap, sell and partnership deals with GSK.

Firstly, Novartis OTC and GSK Consumer Healthcare are pooling their businesses to create a joint venture consumer healthcare business, with revenues of £6.5bn.  GSK will be the controlling partner, with Novartis owning a 36.5% share, with four out of eleven board places and minority rights and exit rights at a pre-defined, market-based pricing mechanism.

Novartis is also divesting its vaccines business, excluding its flu vaccine activities that are to be sold separately, to GSK for $7.1bn, while GSK is divesting its currently marketed oncology products, R&D activities and rights to its AKT inhibitor, together with commercialisation partner rights for future products, to Novartis for $16bn. GSK will, however, continue oncology R&D into new treatments in cancer immunotherapy, epigenetics and tumour environment.

Novartis ceo, Joseph Jimenez, described the transactions as marking ‘a transformational moment’, focusing the company on ‘leading businesses with innovation power and global scale. They also improve our financial strength, and are expected to add to our growth rates and margins immediately.’

GSK’s ceo Andrew Whitty said: ‘This proposed 3-part transaction accelerates our strategy to generate sustainable, broadly sourced sales growth and improve long-term earnings. 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 our shareholders.’

So we have seen US Big Pharma go through this process, and now Europe has joined in, but while there are obvious advantages in terms of scale, does this change the overall situation that Big Pharma finds itself in with gaps in pipelines and the need to rely on small entrepreneurial biotech and other research based companies?

It remains to be seen what happens next!

Neil Eisberg – Editor

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