GlaxoSmithKline has entered a major three-part transaction with Novartis involving its Consumer Healthcare, Vaccines, and Oncology businesses. The two companies will create a new Consumer Healthcare business, for which 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 and subsequent potential milestone payments of as much as $1.8 billion, as well as royalties on sales.
 
Finally, Novartis will acquire GSK’s marketed oncology portfolio, related R&D activities, and rights to its AKT inhibitor and future products, for approximately $16 billion in cash.
 
The proposed transactions would increase GSK’s annual revenues by £1.3 billion to £26.9 billion (on a 2013 pro forma basis), which would be split across Pharmaceuticals 62%, Consumer Healthcare 24% and Vaccines 14%.                
 
The transactions are expected to close during 1H15, subject to approvals.
 
Andrew Witty, chief executive officer, GSK said, “This proposed three-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 Novartis OTC portfolio is highly complementary to GSK’s and has many well-known, widely recommended brands such as Voltaren, Excedrin, Otrivin, andTheraflu. Together, we will create the world’s premier OTC business with clear opportunities to accelerate revenue growth,” said Witty. 
 
He added, “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.”
 
“The third part of this transaction would see divestment of our Oncology portfolio to Novartis. Over the last six years we have made excellent progress to develop a series of innovative medicines. This transaction provides us with a unique opportunity to crystallize an attractive value for this portfolio and allow these medicines to benefit from Novartis’ global scale in this area,” said Witty.