Novartis India spurts after parent's deal with GSK, Eli Lilly

Novartis India spurts after parent's deal with GSK, Eli Lilly

Novartis India jumped 7.29% to Rs 501.65 at 12:58 IST on BSE after the company's Swiss parent Novartis AG agreed to fork out $16 billion to buy GlaxoSmithKline Plc's cancer drug business.

Meanwhile, the BSE Sensex was up 23.42 points, or 0.10%, to 22,788.25.

On BSE, so far 5.84 lakh shares were traded in the counter, compared with an average volume of 9,173 shares in the past one quarter.

The stock hit a high of Rs 561.05 and a low of Rs 465.15 so far during the day. The stock hit a 52-week high of Rs 594 on 2 May 2013. The stock hit a 52-week low of Rs 361 on 3 September 2013.

The stock had outperformed the market over the past one month till 21 April 2014, rising 11.81% compared with the Sensex's 4.65% rise. The scrip had, however, underperformed the market in past one quarter, rising 6.99% as against Sensex's 7.12% rise.

The small-cap company has an equity capital of Rs 15.98 crore. Face value per share is Rs 5.

Switzerland-based Novartis announced on Tuesday, 22 April 2014, that it has reached a definitive agreement with GlaxoSmithKline plc (GSK) to exchange certain assets, building global leadership in key segments and focusing the company's portfolio. Under the agreement, Novartis would strengthen the company's innovative pharmaceuticals business by acquiring GSK oncology products, and would divest Vaccines (excluding flu) to them. The two companies would also create a joint venture, combining their consumer divisions to create a world-leading consumer healthcare business. Separately, the company announced a definitive agreement with Eli Lilly and Company (Lilly) to divest the animal health division, further focusing its portfolio on the leading businesses of innovative pharmaceuticals, eye care and generics.

As per the deal, Novartis has agreed to acquire GSK oncology products for a $14.5 billion payment and up to $1.5 billion contingent on a development milestone. Under the terms of the transaction, Novartis would have opt-in rights to GSK's current and future oncology R&D pipeline.

Novartis said it has also agreed to divest its Vaccines business to GSK, currently excluding its flu business, for $7.1 billion plus royalties. The $7.1 billion consists of $5.25 billion upfront and up to $1.8 billion in milestones. As a part of a value-maximization strategy in the context of the portfolio review, Novartis has initiated a separate sales process for its flu business.

Novartis and GSK have agreed to create a world-leading consumer healthcare business through a joint venture between Novartis OTC and GSK Consumer Healthcare. Upon completion, Novartis will own a 36.5% share of the joint venture and will have four of eleven seats on the joint venture's Board. Furthermore, Novartis will have customary minority rights and exit rights at a pre-defined, market-based pricing mechanism, Novartis AG said in a statement.

In a separate transaction, Novartis has agreed to divest its Animal Health Division to Lilly for approximately $5.4 billion. This transaction is the result of a competitive process, which upon completion would create a leading animal health business under Lilly's ownership and would optimize the value of the asset in the interest of Novartis shareholders.

The overall financing for Novartis' obligations in the transactions is planned to be provided through a combination of excess liquidity at the time of closing, short-term financing instruments and limited new bond issues if needed, the company said.

Novartis said the acquisition of GSK oncology products is expected to further reinforce its leading Oncology business and improve the growth profile of the combined portfolio.

As on 31 December 2013, Novartis AG held 75% stake in Novartis India.

Novartis India's net profit fell 47.5% to Rs 15.23 crore on 4.3% fall in net sales to Rs 218.54 crore in Q3 December 2013 over Q3 December 2012.

Novartis India is engaged in manufacturing and marketing drugs, pharmaceutical products and formulations for consumer healthcare and animal healthcare.