Novartis and GlaxoSmithKline Swap Assets: A Transformation of the Pharma Industry

Novartis and GlaxoSmithKline Swap Assets: A Transformation of the Pharma Industry

Drug makers GlaxoSmithKline and Novartis AG have set forth a 3 part transaction which is going to transform the pharmaceuticals industry. The two pharma giants have inked a deal to make transitions to their operations. As part of the deal, GlaxoSmithKline’s cancer drug segments will move to Novartis for about $16 billion. In exchange, vaccines from Novartis will now come into the fold of GlaxoSmithKline for a sum of $7 billion.

This deal looks to capitalize on the strengths and advantages of each of the MNCs. As Novartis eyes innovative pharma and wants to expand in the field of eye care and generics, GlaxoSmithKline wants its vaccines portfolio to spread to the meningitis franchises of Novartis. With an aim of using each other’s strengths to their advantage, the two pharmaceutical majors have come up with an amazing deal that can unleash their true potential in ways that are mutually beneficial.

The agreement will be sealed by the middle of next year modified by approvals. A big advantage of this deal is that the realigned portfolio will add to the kitty of each company. GlaxoSmithKline’s drug Tykerb for breast cancer and another oncology medicine, Glivec will find its way to the portfolio of Novartis as part of the deal. Glivec is well known for the patent case in India recently.

GlaxoSmithKline also stands to gain a lot from the agreement. The vaccine portfolio of Novartis has the capacity to transform the infant and adult vaccines pipeline for GlaxoSmithKline. This could also be a good way to bypass the price controls initiated currently. As both MNCs are looking to capture a major chunk of the Indian healthcare and pharmaceuticals industry, it certainly seems the deal between the two will work in favour of this goal.

Another lucrative proposition in the deal is the consumer healthcare business which will be created by both companies which will have revenue to the tune of £6.5 billion. The major control of this corporate entity will be in the hands of GlaxoSmithKline and the aim will be to centre on wellness, nutrition, skin care and oral health. The most well known product of Novartis which is also involved in this new joint venture is Otrivin. This medicine is a well known cure for nasal blockages due to cold. Apart from this, other medicines manufactured by Novartis which will become part of this deal include Excedrin and Voltarin.

Novartis also has an animal healthcare business which will now come under the banner of Eli Lilly for $5.4 billion. Experts opine that this deal has more advantages for GlaxoSmithKline. Novartis has to let fo of its vaccines and animal health business. Its OTC( over the counter) business which is being absorbed by the joint venture is worth nearly 110 crores. GlaxoSmithKline has majority ownership and it is clearly emerging as the winner in this deal so far.

While Novartis’s vaccine business is worth 109 crore in India for the year 2014 ending March, the oncology business of GlaxoSmithKline is worth 5.4 crore, according to market intelligence agencies such as IMS. GlaxoSmithKline is aiming to consolidate its position as a leader in the vaccine business in the country. It will seek to garner nearly 30% of the share in this segment following the agreement. Novartis is also going to gain some benefits from the deal. It will have a firm foothold in the oncology segment through the GlaxoSmithKline’s new launch XVEGA as well as products such as Hycamtin.

Novel therapies are another area where Novartis will stand to gain following this asset transfer deal. This will give it an edge in the treatment of melanoma and advanced renal cell cancer. The aim is to maximize profits based on the strengths of each other. Both pharmaceutical MNCs are also combining to battle the limitations. This deal has the capacity to change the functioning of pharma businesses in India. GlaxoSmithKline and Novartis have demonstrated how each company can gain advantages from the other in partnerships that can channelize profits and help them to achieve their true potential.