With GSK swap behind it, Novartis scouts for $2B-$5B buyouts

Novartis CEO Joe Jimenez

A little more than a month after completing its big asset swap with GlaxoSmithKline ($GSK), Novartis CEO Joe Jimenez says he's going back to the bargaining table to look for some bolt-on buyouts in the $2 billion to $5 billion range.

"We've put our M&A people back to work," Jimenez told reporters this morning, according to a report from Bloomberg. Novartis is looking past an expected approval for the heart drug LCZ696 as it scouts for new therapies that can remedy a painful loss of franchise cash to generic competition.

In its deal with GSK, Novartis ($NVS) handed over a portfolio of underperforming vaccine assets in exchange for Glaxo's less-than-compelling cancer drug portfolio. Each of the pharma giants expects to do better by concentrating their focus on core assets.

For Novartis, that's meant forming a new immuno-oncology division in Cambridge, MA, under former Dana Farber researcher Glenn Dranoff. Just weeks ago Novartis executed a $750 million tie-up with Aduro--a deal that Jimenez noted today "strengthens our presence in immuno-oncology." And Jimenez has been an eager advocate of a growing CAR-T research operation at the University of Pennsylvania, which is reengineering T cells into cancer cell killers.

The CEO's comments will do nothing to calm the frenzied expectations for more M&A in the coming months. Like just about everybody in Big Pharma, with the possible exception of Pfizer, Novartis is shunning big buyouts after a full slate of high-end mergers delivered little in the way of sustainable growth or appreciable pipeline value. The focus on new assets in the under-$10 billion category has helped swell valuations across the board in biotech. 

While the swap with GSK may be officially completed, there's still a significant amount of fallout expected among rank and file staffers. While largely applauded by Wall Street, a swap like this can trigger big layoffs, as GSK has demonstrated with plans to centralize its vaccine division in Rockville, MD, while uprooting organizations in Philadelphia and Boston with hundreds of employees. Novartis has yet to reveal how it plans to integrate its new oncology assets into the company, but pink slips are likely.

- here's the Bloomberg report

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