UK Stocks in Novartis, AstraZeneca and GlaxoSmithKline rose for a third day yesterday, amid Glaxo’s transaction with Novartis and rumors of a takeover of AstraZeneca by Pfizer. It seems that investors are focusing on the pharmaceuticals M&A industry to shore up global stock markets.
As reported in The Guardian the drugs industry was gripped by ‘merger and acquisition fever’ yesterday, with activity that blew away the Easter cobwebs. The deal between Switzerland’s Novartis and UK’s GlaxoSmithKline is based on an asset swap, with Novartis paying approximately $16 billion for Glaxo’s oncology business and in return, Novartis is selling its vaccine business for around $7.1 billion to GSK. Novartis and GSK will also create a new Consumer Healthcare business together, making this a major three-part inter-conditional transaction.
It has been suggested that this move is to give Novartis a stronger position in the consumer healthcare sector, whilst GSK takes a lead in the vaccines business, cementing both companies positions in their respective sectors. Novartis further announced deals with US giant Eli Lily, offloading its animal health care unit. Streamlining its company once again, to focus on its industry position.
The flurry of deals that have taken place in the sector has fueled speculation that there will be more deals in the pipeline. It has also highlighted the thinking behind M&A activity, with Sir Andrew Witty, head of GSK stating that “with this transaction we will substantially strengthen two of our core businesses and create significant new options to increase value for shareholders.” This ethos has been apparent in the industry for a while and suggests that companies are focusing on deals which will enable them to grow their business in one specific sector, rather than outwards. The pharma mantra for deals seems to be moving more and more towards ‘specialisation and consolidation’.
If you would like to know more about the Pharma M&A market, trends and forecasts why not download the brochure for the inaugural Pharma M&A Briefing on 10th June in London. Click here to find out more.