Deals

Reshaping Novartis into a more aggressive pharma giant, Vas Narasimhan bags a $13B consumer sale ahead of bolt-on deals

Vas Narasimhan has begun to reshape the giant Novartis into the drugs and data sciences behemoth he has in mind, striking a deal to sell the company’s share in a consumer healthcare division to his partners at GSK for $13 billion while openly signaling his interest in wheeling and dealing ahead with some bolt-on buyouts.

While just a small part of the Novartis operations focused on toothpaste and pain pills, the deal gives GSK’s Emma Walmsley full control of the consumer JV, following up on an interest that disturbed investors when she was dickering for Pfizer’s consumer division a few days ago. Walmsley also arrived at the helm of GSK recently with an interest in reshaping the company, and told investors this morning that with consumer squared away, she can concentrate more on pharma R&D as well.

Narasimhan, who stepped up to the CEO suite at the beginning of February, is acknowledging that the careful Swiss pharma has to operate in a cash constrained manner, raising money before it spends more — and that will certainly spur plenty of renewed speculation that he’ll seek a buyer for the company’s $14 billion stake in crosstown rival Roche.

“While our consumer healthcare joint venture with GSK is progressing well, the time is right for Novartis to divest a non-core asset at an attractive price,” the 41-year-old Novartis CEO said in a statement. “This will strengthen our ability to allocate capital to grow our core businesses, drive shareholder returns, and execute value creating bolt-on acquisitions as we continue to build the leading medicines company, powered by digital and data.”

Bolt-ons have become all the rage at big outfits like Novartis, centering on $2 billion to $5 billion affairs that are easy when it comes to adding new operations and drugs to its pipeline. These deals can take the shape of Novartis’ $4 billion deal late last year to acquire Advanced Accelerator Applications and its late-stage drug Lutathera, which uses radioisotopes to target certain neuroendocrine tumors, fitting well into their oncology portfolio.

Novartis and GSK formed the consumer JV in 2015, when the UK company swapped its late-stage and commercial oncology pipeline in exchange for Novartis’ vaccines. Walmsley had signaled an interest in moving to reinvigorate R&D, but took the opposite stance in striking her first major deal since recruiting Hal Barron to run the pharma research operations.

Narasimhan will now be ready to do some more pipeline deals, pursuing an aggressive promise to launch a dozen major new drugs by 2020, which won’t be easy.

“We really think we want to focus our M&A efforts on bolt on acquisitions that have either new technologies or products that fit into our core therapeutic areas,” he told CNBC recently. And now he has more cash to work with.

Narasimhan also told Bloomberg in an interview that Novartis plans to accelerate plans for new drug OKs in China, looking to double sales in the booming Asian market over the next 5 years. China has been opening up to new drug breakthroughs as it spurs its own growing biopharma industry to play a more direct role in drug development.

 


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