GSK, Novartis plan deal, will trade parts of their businesses

A London jogger passes a sign for pharma giant GlaxoSmithKline. The British company has a number of facilities in the Phila. area.
A London jogger passes a sign for pharma giant GlaxoSmithKline. The British company has a number of facilities in the Phila. area. (LUKE MACGREGOR / Reuters)
Posted: April 24, 2014

In a multibillion-dollar deal, drugmakers GlaxoSmithKline and Novartis said Tuesday that they would trade parts of their companies and form a joint venture with a third part.

GSK, based in London and with several facilities in the Philadelphia region, will sell its current cancer drugs to Swiss-based Novartis for $16 billion.

Novartis will sell all but one of its vaccines to GSK for about $7.1 billion.

The companies formed a joint venture to sell over-the-counter medicine, with GSK taking a 63.5 percent stake.

Representatives of both companies said it was too early to know the local-employment impact of the deal, which will not close until 2015.

Novartis also announced it was selling its animal-health unit to Eli Lilly & Co. for $5.6 billion.

Tuesday's deal follows Monday's news that Canada-based Valeant Pharmaceuticals is trying to take over Botox-maker Allergan and a weekend report that Pfizer and AstraZeneca, both of which have operations in the Philadelphia region, had had talks about a merger.

Still, not all deals are alike, even with big companies sitting on a lot of cash. The Glaxo-Novartis transaction follows the recent trend of companies focusing on areas of strength and divesting divisions or products for which they cannot be leaders.

GSK chief executive officer Andrew Witty said the company would keep early cancer-research activities, with Novartis having an option to be a partner later. But Witty noted that Novartis is second in the world in cancer-drug sales, while GSK is 14th. Conversely, GSK is among the world leaders in vaccine sales. In much of the developing world, vaccine and consumer products are dispensed or sold together.

"We do not have to be distracted by all the other things that would come along in a typical big merger," Witty said, according to the transcript of a conference call with reporters. "These sorts of transactions allow you only to focus your energies on the things you care about."

GSK has about 3,200 employees involved in research and development in three Montgomery County locations, along with about 1,300 employees in other functions at the Navy Yard.

Novartis, based in Basel, Switzerland, has facilities or subsidiaries in two Pennsylvania towns and six in New Jersey.

Spokesman Eric Althoff said by phone from Basel that Novartis was seeking "value creation through growth, not value creation through cuts."


dsell@phillynews.com

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