GSK plc announces major three-part transaction with Novartis to drive sustainable sales growth, improve long-term earnings and deliver increasing returns to shareholders
Media Release: 22 April 2014, London UK
Editor’s Excerpt
GlaxoSmithKline plc today announces a major 3-part inter-conditional transaction with Novartis AG involving its Consumer Healthcare, Vaccines and Oncology… In summary:
:: GSK and Novartis will create a new world-leading Consumer Healthcare business with 2013 pro forma revenues of £6.5 billion. GSK will have majority control with an equity interest of 63.5%
:: GSK will acquire Novartis’ global Vaccines business (excluding influenza vaccines) for an initial cash consideration of $5.25 billion with subsequent potential milestone payments of up to $1.8 billion and ongoing royalties
:: GSK will divest its marketed Oncology portfolio, related R&D activities and rights to its AKT inhibitor and also grant of commercialisation partner rights for future oncology products to Novartis for an aggregate cash consideration of $16 billion (of which up to $1.5 billion depends on the results of the COMBI-d trial)
:: GSK shareholders to receive £4 billion capital return funded by net cash transaction proceeds and expected to be delivered via a B share scheme…
:: Transaction is expected to complete during the first half of 2015 subject to approvals

Sir Andrew Witty, Chief Executive Officer, GSK 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 shareholders…The acquisition of Novartis’ Vaccines business will significantly enhance the breadth of our vaccines portfolio and pipeline, notably in meningitis, with the addition of Bexsero, an exciting new vaccine for prevention of meningitis B. The acquisition will also strengthen our manufacturing network and reduce supply costs…

…Strengthening global leadership in Vaccines
The acquisition of Novartis’ global Vaccines business (excluding influenza vaccines) further improves GSK’s position as the world’s leading global vaccines supplier. Demand for vaccination remains significant with the global vaccine market projected to grow approximately 10% per annum over the next 10 years.

The transaction will strengthen the breadth of GSK’s portfolio, notably in meningitis, including the addition of Bexsero, a new vaccine for prevention of meningitis B and a further candidate vaccine in late-stage development, MenABCWY.

This portfolio expansion will be of benefit to GSK in all markets and notably in the USA, where Novartis has a strong track record of delivery. GSK’s significant presence in emerging and developing markets will also provide new opportunities for introduction and growth of Novartis’ vaccines.

GSK and Novartis’ Vaccines R&D organisations are highly complementary, bringing together respective expertise in virology, bacterial infection and different adjuvant platforms. The new business would have more than 20 different vaccines in development, including assets to prevent hospital and maternal infections and diseases prevalent in developing countries such as malaria and tuberculosis.

The acquisition is expected to strengthen GSK’s manufacturing network and increase overall capacity, notably with the addition of Novartis’ secondary packaging and supply facilities in Rosia, Italy and Marburg, Germany. GSK would also acquire new manufacturing sites in India and China. In addition, the integration of the supply of a number of key antigens, currently provided to GSK by Novartis, will provide immediate improvements and enhance the future flexibility of the business, particularly in paediatric vaccines…
Full Release: http://www.gsk.com/media/press-releases/2014/gsk-announces-major-three-part-transaction-with-novartis.html
:: Novartis announces portfolio transformation, focusing company on leading businesses with innovation power and global scale: Pharmaceuticals, Eye Care and Generics
Media Release: April 22, 2014
Editor’s Excerpt
:: Acquires GSK oncology products, strengthening Novartis’ leading Oncology business with novel therapies and becomes GSK’s preferred commercialization partner for its oncology pipeline
:: Combines Novartis OTC with GSK’s consumer business in a joint venture, creating a world-leading consumer healthcare business and maintaining Novartis’ presence in this sector
:: Divests Vaccines business (excluding flu) to GSK, creating a global leader in vaccines
:: In a separate transaction, divests Novartis Animal Health to Lilly

Basel, April 22, 2014 – Novartis announced today that it has reached a definitive agreement with GlaxoSmithKline plc (GSK) to exchange certain assets, building global leadership in key segments and focusing the company’s portfolio. Under the agreement, Novartis would strengthen the company’s innovative pharmaceuticals business by acquiring GSK oncology products, and would divest Vaccines (excluding flu) to them. The two companies would also create a joint venture, combining their consumer divisions to create a world-leading consumer healthcare business. Separately, the company announced a definitive agreement with Eli Lilly and Company (Lilly) to divest the Animal Health Division, further focusing its portfolio on the leading businesses of innovative pharmaceuticals, eye care and generics…

Joseph Jimenez, CEO of Novartis, said, “The transactions mark a transformational moment for Novartis. They focus 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. We have also created a world-leading consumer healthcare business in our joint venture with GSK. We believe the divestment of our smaller Vaccines and Animal Health Divisions will enable us to realize immediate value from these businesses for our shareholders, and those divisions will benefit from being part of large, global businesses that are also leaders in their segments. Patients will benefit from even higher levels of innovation that this focus may afford. Looking ahead, this positions Novartis well for future healthcare industry dynamics.”…

…Divestment of Vaccines to GSK
Novartis has agreed to divest its Vaccines business to GSK, currently excluding its flu business, for USD 7.1 billion plus royalties. The USD 7.1 billion consists of USD 5.25 billion upfront and up to USD 1.8 billion in milestones. As a part of a value-maximization strategy in the context of the portfolio review, Novartis has initiated a separate sales process for its flu business…

…Novartis Vaccines would become part of a world leader in the vaccines segment, under GSK’s ownership. The combined business is expected to have a compelling position in pediatric and meningitis franchises. GSK’s position in the market is further likely to strengthen the commercial launch power behind Bexsero. In addition, GSK has the capacity to fully fund the vaccines pipeline to potentially expand the R&D efforts of the rich vaccines pipeline portfolio…
Full release: http://www.novartis.com/newsroom/media-releases/en/2014/1778515.shtml