Most pharma/biotech companies collaborate for the development and commercialization of their products thereby bringing together their expertise, technical knowhow and resources.
Novartis AG NVS recently announced that it has completed a series of previously announced transactions with GlaxoSmithKline plc GSK. The transactions were announced in Apr 2014.
Novartis acquired certain oncology products and pipeline compounds from Glaxo for $16 billion. These include Tafinlar, Mekinist, (for the treatment of metastatic melanoma); Votrient for renal cell carcinoma; Promacta for thrombocytopenia; Tykerb for HER2+ metastatic breast cancer; and Arzerra for chronic lymphocytic leukemia.
For Glaxo, sales of the acquired drugs came in at $2.0 billion in 2014, up 32% in local currency from 2013.
Consequently, Novartis’ portfolio now has 22 oncology and hematology medicines along with the newly-acquired therapies for melanoma, renal cell carcinoma and hematology.
Novartis has also acquired opt-in rights for Glaxo’s current and future oncology R&D pipeline (excluding oncology vaccines).
In exchange, Novartis has sold its non-influenza Vaccines business to Glaxo for $7.1 billion. The companies have also entered a joint venture to combine their consumer healthcare divisions with Novartis holding a 36.5% stake.
We remind investors that Novartis had undertaken a series of actions to reorganize its portfolio in 2014 in order to focus on its core businesses of pharmaceuticals, eye care and generics.
In Jan 2015, Novartis completed the divestment of its Animal Health Division to Eli Lilly and Company LLY for approximately $5.4 billion.
In Oct 2014, Novartis announced that it will divest its influenza vaccines business to CSL Limited for $275 million. The transaction will close by the end of 2015. In Jan 2014, Novartis had completed the sale of its blood transfusion diagnostics unit to Grifols S.A. for $1.7 billion.
We view the reorganization steps as a major positive for the company as they will streamline Novartis’ portfolio and to focus on its core capabilities, besides contributing immensely to the top line. Margins are also expected to get a significant boost.
Meanwhile, Novartis is expected to face challenging conditions in 2015. We remind investors that Diovan Mono is one of the company's key drugs and generic entry will hit sales in 2015. Exforge and Gleevec are also facing generic competition. Sales from the eye care division Alcon is also expected to be challenged by the entry of generics. Moreover, currency headwinds will continue to impact sales negatively in 2015.
Investors interested in the healthcare sector may consider Sucampo Pharmaceuticals SCMP.
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