Date: 2014-04-23
Type of information: Pipeline acquisition
Acquired company: GSK oncology assets (UK)
Acquiring company: Novartis (Switzerland)
Amount: $ 14.5 billion payment and up to $ 1.5 billion contingent on a development milestone
Terms:
- • On November 26, 2014, GSK provided an update to its announcement of 22 April 2014 relating to the major three-part transaction with Novartis. The US Federal Trade Commission (FTC) has voted to approve GSK’s proposed acquisition of Novartis’s vaccines business (excluding influenza vaccines) and the proposed creation of a consumer healthcare joint venture between GSK and Novartis. The vote in support of the consumer healthcare transaction follows Novartis’s agreement to divest Habitrol, its private label nicotine replacement therapy (NRT) transdermal patch business in the US as a condition to obtaining FTC approval. This business was already to be excluded from the proposed joint venture and it has been announced previously that an agreement has been reached to divest the business to Dr Reddy’s Laboratories SA. The closing of the three-part transaction with Novartis remains subject to certain other conditions described in the Original Announcement, including remaining antitrust clearances and GSK shareholder approval. Subject to these conditions, the Transaction is expected to complete during the first half of 2015.
- • On April 22, 2014, Novartis has announced that it has reached a definitive agreement with 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.
- Acquisition of GSK oncology products: Novartis has agreed to acquire GSK oncology products for a $ 14.5 billion payment and up to $ 1.5 billion contingent on a development milestone. Under the terms of the transaction, Novartis would have opt-in rights to GSK's current and future oncology R&D pipeline. 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. Up to $1.5 billion of this amount depends on the results of the COMBI-d trial, a Phase III study evaluating the safety and efficacy of the combination of Tafinlar (BRAF) and Mekinist (MEK) versus BRAF monotherapy. GSK’s R&D in oncology will continue with programmes to investigate potential new treatments in areas of cancer immunotherapy, epigenetics, and tumour environment.
- Divestment of Vaccines to GSK: Novartis has agreed to divest its Vaccines business to GSK, currently excluding its flu business, for $ 7.1 billion plus royalties. The $ 7.1 billion consists of $ 5.25 billion upfront and up to $ 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.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
- Combination of Novartis OTC with GSK Consumer Healthcare in a joint venture: Novartis and GSK have agreed to create a world-leading consumer healthcare business through a joint venture between Novartis OTC and GSK Consumer Healthcare. Upon completion, GSK will have majority control with an equity interest of 63.5% and Novartis will own a 36.5% share of the joint venture. Novartis will have four of eleven seats on the joint venture\'s Board. Furthermore, Novartis will have customary minority rights and exit rights at a pre-defined, market-based pricing mechanism. This new world-leading Consumer Healthcare business has 2013 pro forma revenues of £6.5 billion.
- The elements of the transaction with GSK are inter-conditional and subject to approval by GSK shareholders. All transactions are subject to closing conditions, including anti-trust approvals. The transaction with GSK is expected to close during the first half of 2015. The proposed Transaction would increase GSK’s annual revenues by £1.3 billion to £26.9 billion (on a 2013 pro forma basis) and fundamentally re-shape GSK’s revenue base. These revenues would be split across Pharmaceuticals 62%, Consumer Healthcare 24% and Vaccines 14%. Following completion, around 70% of GSK’s revenues would be focussed around four key franchises: Respiratory, HIV (ViiV Healthcare), Vaccines and Consumer Healthcare. All of these franchises operate in growing markets with new and market-leading brands and products manufactured in protected technologies. Of the remaining revenue base, approximately 14% of sales would reside in GSK’s Established Products Portfolio (EPP). GSK is currently reviewing this portfolio to ensure the Group evaluates all options to maximise its value.
Details: Novartis' acquisition of GSK oncology products is expected to further reinforce its leading Oncology business and improve the growth profile of the combined portfolio. Novartis has one of the industry's largest and most robust oncology pipelines, with more than 25 new molecular entities targeting key oncogenic pathways and 24 pivotal trials underway exploring 16 new products and indications.The addition of the GSK products is expected to expand Novartis' position in targeted therapies and small molecules. Based on the depth and breadth of Novartis' R&D capabilities, it is anticipated that Novartis will be able to optimize these compounds. In particular, Novartis' scale in oncology development and commercial capabilities would additionally create the potential to optimize the launch of these two recently approved products for metastatic melanoma, Tafinlar®, a B-RAF inhibitor, and Mekinist®, a MEK inhibitor, positioning Novartis as the leader in treating melanoma. Votrient®, a VEGFR inhibitor for renal cell carcinoma, is also expected to reach more patients in Novartis hands. Votrient has shown significant efficacy as first-line treatment for renal cancer, and also has potential for the adjuvant setting. Additional products included in the transaction include Tykerb® for HER2+ metastatic breast cancer, Arzerra® in chronic lymphocytic leukemia, and Promacta® for thrombocytopenia. Novartis will have opt-in rights for GSK's current and future oncology R&D pipeline, which could be a source of new compounds and new targets. Sales of the acquired GSK oncology products in 2013 were approximately $ 1.6 billion.
The joint venture of Novartis OTC and GSK Consumer Healthcare would establish a global consumer healthcare leader with approximately $ 10 billion in annual sales, and leading positions in four key OTC categories - Wellness, Oral Health, Nutrition and Skin Health. The joint venture would have several strong brands with almost half of the sales derived from brands larger than $ 300 million in annual revenue. The geographic footprint would span all regions, with scale and commercial presence in the developed world as well as in key emerging markets, such as Brazil, China, Mexico and Russia.
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.
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%
Related: Cancer - Oncology
Infectious diseases
OTC
Is general: Yes
