Novartis ($NVS), GlaxoSmithKline ($GSK) and Eli Lilly ($LLY) have hammered out a pact to swap, sell and partner on a group of four different divisions, realigning the corporate and marketing landscape for each of the big three pharma players. The bulk of these multibillion-dollar transactions center around marketed therapies, with Novartis going deeper into oncology, GlaxoSmithKline expanding on its substantial work in vaccines and Lilly grabbing an animal health business it's been avidly interested in for some time. But there are some big implications here for the two leading players' R&D divisions as well.
In a nutshell, here's what happened today: Leading the way, Novartis will acquire GlaxoSmithKline's cancer drug business for up to $16 billion--$14.5 billion upfront and $1.5 billion in milestones. GSK gets Novartis's struggling vaccines business--excluding flu, which is on the sales block--for up to $7.1 billion plus royalties. Novartis and Glaxo will create a joint consumer health division for over-the-counter drugs, and Eli Lilly will step in to buy Novartis's struggling animal health division for $5.4 billion.
As part of the deal, Glaxo is divesting R&D work related to its marketed cancer drugs along with rights to its AKT inhibitor afuresertib, which recently figured in GSK's plans to refill its late-stage pipeline after a slate of new drug approvals over the past 18 months. Novartis is also getting an opt-in on GSK's experimental cancer drugs as the U.K. pharma giant continues to pursue programs in immunotherapy, epigenetics, and tumor environment. And Novartis has put up to $1.5 billion on the line in milestones based on the outcome of GSK's COMBI-d trial, a Phase III study evaluating a combo therapy of Tafinlar (BRAF) and Mekinist (MEK) versus BRAF monotherapy.
That doesn't leave GlaxoSmithKline's cancer research group much to work with. A review of GSK's oncology pipeline shows only 6 novel Phase I studies underway for various oncology projects. GlaxoSmithKline's big shot at cancer immunotherapy was its late-stage program for the cancer vaccine MAGE-A3. But it's failed to hit a series of late-stage endpoints, with the latest word that only one endpoint remains: a search for a possible effect in subpopulations in one of the two Phase III studies that were mounted.
"On the oncology piece, we are very keen to stay in the early R&D space," GlaxoSmithKline CEO Andrew Witty told reporters Tuesday morning. "We haven't decided what we're going to do with those products but we have agreed with Novartis that they have a preferred status in terms of being able to talk to us if we take the view that we want to commercialize with someone else, but it doesn't rule us out commercializing it ourselves."
GlaxoSmithKline's decision to punt its cancer drugs and give Novartis an option on commercialization rights to the remaining cancer programs in the pipeline fits in with a strong trend in biopharma. Big Pharma outfits are increasingly narrowing their focus on a short list of diseases. And while GSK has made some inroads on the cancer market, it remains a fringe player, ranked 14th among a host of rivals. Today, the pharma giant essentially bowed out of the oncology field.
Bernstein's Tim Anderson called GSK's cancer drug business a "collection of smaller but growing assets, with no clear anchor product, and the price tag is on the higher end when looked at as a multiple of current sales. It is odd to us that GSK would give up this business as oncology is a 'hot' therapeutic area and the company has had some pipeline successes. This business slots into Novartis nicely who is already a big oncology player, and synergies should be achievable. Oncology will now account for ~20% of total Novartis sales."
For its part, GlaxoSmithKline is also gaining four experimental vaccines from Novartis, which was never really able to break into the ranks of the leading players in that field. And it will be left with the bulk of its business devoted to four key areas: respiratory, HIV (ViiV Healthcare), vaccines and consumer healthcare.