Mar 02, 2015
  • Completes transactions with GSK including: acquisition of GSK oncology portfolio, creation of Consumer Healthcare joint venture, and sale of non-influenza Vaccines business
  • Sharpens company focus on growing segments of innovative pharmaceuticals, eye care and generics
  • Addition of GSK oncology products and two pipeline compounds is expected to expand Novartis position in targeted therapies and small molecules, positioning Novartis as a preferred partner for combination agents
  • Transactions expected to immediately lift core margins and further support overall financial strength

Basel, March 2, 2015 - Novartis announced today that it has completed a series of transactions with GlaxoSmithKline plc (GSK), including the acquisition of certain oncology products and pipeline compounds from GSK, the creation of a world-leading consumer healthcare business through a joint venture that combines the two companies' consumer divisions, and the divestiture of the Novartis non-influenza Vaccines business to GSK. The transactions were announced in April 2014 as part of the Novartis global portfolio transformation.

"The completion of the GSK transactions focuses Novartis, and further establishes our leading positions in key growing business segments," said Joseph Jimenez, CEO of Novartis. "We expect this evolution of our strategy to improve margin performance and position us well to meet future changes in the healthcare industry."

Since the end of 2013, Novartis has engaged in a series of transactions to sharpen the company's focus on three core business segments with global scale: innovative pharmaceuticals, eye care and generics.

As a result of today's announcement:

  • Novartis Oncology now manages a portfolio of 22 oncology and hematology medicines to treat more than 25 conditions worldwide. Newly-acquired therapies in melanoma, renal cell carcinoma and hematology complement Novartis Oncology's existing group of practice-changing medicines to create a large portfolio of drugs in oncology and hematology targeting important biological disease pathways.
  • Based on the depth and breadth of the Novartis Oncology R&D and commercial capabilities, it is anticipated that Novartis will be able to optimize the therapies acquired from GSK. These include:
    • Tafinlar®, a BRAF inhibitor, and Mekinist(TM), a MEK inhibitor, both approved for the treatment of metastatic melanoma. On February 6, 2015, GSK announced overall survival results from the COMBI-d trial which demonstrate a statistically significant reduction in the risk of death (Hazard Ratio [HR] 0.71 [95% Confidence Interval (CI): 0.55, 0.92], p=0.011) for the combination of Tafinlar and Mekinist compared to Tafinlar monotherapy in patients with BRAF V600E/K mutation-positive metastatic melanoma.
    • Votrient®, a VEGFR inhibitor for renal cell carcinoma, which has shown significant efficacy as first-line treatment for renal cancer.
    • Promacta® for thrombocytopenia, Tykerb® for HER2+ metastatic breast cancer and Arzerra® in chronic lymphocytic leukemia are also included in the transaction.
  • Novartis also has opt-in rights for GSK's current and future oncology R&D pipeline (excluding oncology vaccines), which could be a source of new compounds and new targets. Sales of the acquired GSK oncology products in 2014 were approximately USD 2.0 billion and grew approximately 32% in local currency against 2013.*
  • Novartis OTC and GSK Consumer Healthcare jointly form a global consumer healthcare leader ("GSK Consumer Healthcare") in which Novartis maintains significant interest through the ownership of a 36.5% share. GSK Consumer Healthcare is expected to have leading positions in four key OTC categories - Wellness, Oral Health, Nutrition and Skin Health. The joint venture has scale and commercial presence in the developed world as well as in key emerging markets.
  • The Novartis non -influenza Vaccines business has been divested to GSK.

Since 2013, Novartis has executed other strategic transactions to transform the Company's portfolio. In January 2015, the Company completed the sale of its Animal Health business to Eli Lilly and Company for approximately USD 5.4 billion. As a result of the transaction with Eli Lilly, Novartis will show in the first quarter of 2015 an exceptional pre-tax gain of approximately USD 4.7 billion.

In October 2014, the company announced an agreement to divest its influenza vaccines business to CSL Limited for USD 275 million, a transaction that is expected to close at the end of 2015. In January 2014, Novartis completed the sale of its blood transfusion diagnostics unit to Grifols S.A. for USD 1.7 billion.

Deal terms and financial impact
As a result of the divestment of the non-influenza Vaccines business to GSK and the creation of the Novartis OTC and GSK Consumer Healthcare joint venture, Novartis will record a substantial exceptional gain, which will be reported with the release of the Company's 2015 first quarter results.

GSK oncology products
Novartis has acquired GSK's oncology products, including two pipeline candidates, for an aggregate cash consideration of USD 16 billion. Up to USD 1.5 billion of this amount is contingent on certain development milestones.

Novartis OTC and GSK Consumer Healthcare joint venture
Novartis now owns a 36.5% share of the joint venture between Novartis OTC and GSK Consumer Healthcare. The investment will be accounted for using the equity method of accounting and will be reported as income from associated companies. Novartis also has four of eleven seats on the joint venture's Board. Furthermore, Novartis has certain minority rights and exit rights, the latter of which would be executed using a pre-defined, market-based pricing mechanism.

Divestment of non-influenza Vaccines to GSK
Novartis has divested its Vaccines business (excluding its vaccines influenza business) to GSK for up to USD 7.1 billion plus royalties. The USD 7.1 billion consists of USD 5.25 billion paid upon completion and up to USD 1.8 billion in future milestone payments.

Disclaimer
The foregoing release contains forward-looking statements that can be identified by words such as "growing," "pipeline," "expected," "positioning," "expect," "strategy," "to improve," "position," "future," "to create," "anticipated," "will," "opt-in rights," "could," "strategic," "to divest," "contingent," "milestones," "would," or similar terms, or by express or implied discussions regarding potential future sales or earnings of Novartis, or of any of the businesses involved in the announced transactions, regarding potential future milestone payments, regarding the potential completion of the announced transaction with CSL Limited, or regarding any potential strategic benefits, synergies or opportunities as a result of any or all of the transactions discussed in this release. You should not place undue reliance on these statements. Such forward-looking statements are based on the current beliefs and expectations of management regarding future events, and are subject to significant known and unknown risks and uncertainties. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those set forth in the forward-looking statements. There can be no guarantee that Novartis will be able to realize any of the potential strategic benefits, synergies or opportunities as a result of the announced transactions. Nor can there be any guarantee that the remaining transaction with CSL Limited will be completed in the expected form or within the expected time frame or at all. Neither can there be any guarantee that Novartis or any of the businesses involved in the portfolio transformation transactions will achieve any particular financial results in the future, or that any of the outstanding milestones referred to in this release will be met. In particular, management's expectations could be affected by, among other things, the potential that the strategic benefits, synergies or opportunities expected from the transactions may not be fully realized or may take longer to realize than expected; uncertainty that GSK's oncology business will be integrated successfully into Novartis Oncology and that key personnel will be retained; disruption from the transaction making it more difficult to maintain relationships with customers, employees or suppliers; unexpected regulatory actions or delays or government regulation generally, including an unexpected failure to obtain necessary government approvals for the remaining transaction, or unexpected delays in obtaining such approvals; the potential that any closing conditions for the remaining transaction might not be met; the uncertainties inherent in research and development, including unexpected clinical trial results and additional analysis of existing clinical data; the Company's ability to obtain or maintain proprietary intellectual property protection; global trends toward health care cost containment, including ongoing pricing pressures; general economic and industry conditions, and other risks and factors referred to in Novartis AG's current Form 20-F on file with the US Securities and Exchange Commission. Novartis is providing the information in this press release as of this date and does not undertake any obligation to update any forward-looking statements contained in this press release as a result of new information, future events or otherwise.

About Novartis
Novartis provides innovative healthcare solutions that address the evolving needs of patients and societies. Headquartered in Basel, Switzerland, Novartis offers a diversified portfolio to best meet these needs: innovative medicines, eye care and cost-saving generic pharmaceuticals. Novartis is the only global company with leading positions in these areas. In 2014, the Group achieved net sales of USD 58 billion, while R&D throughout the Group amounted to approximately USD 9.9 billion (USD 9.6 billion excluding impairment and amortization charges). As of December 31, 2014 Novartis Group companies employed approximately 133,000 full-time-equivalent associates. Novartis products are available in more than 180 countries around the world. For more information, please visit http://www.novartis.com.

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* US dollar amounts shown above are a convenience translation of the UK pound sterling amounts reported by GSK.

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