Novartis sells flu vaccine business to CSL for $275m

Novartis has found a buyer for its flu vaccines business, wrapping up the deal which sees it selling off all of its vaccines divisions.

However the company has disappointed some analysts with the low price for the start-of-the-art vaccines business – $275 million. This is below the estimated worth of the division in Novartis’ accounts, which means the company will have to pay a pre-tax impairment charge of $1.1 billion.  Novartis says this cost will be more than offset by a single non-cash operating income gain from the larger divestment deal it has done with GSK. 

Australian company CSL is to acquire the business, including development pipeline, for £275 million, a transaction that requires regulatory approval, but is expected to close in the second half of next year.

CSL says merging the Novartis unit with its existing operations will create the number two global player in the $4 billion global influenza vaccine industry. The company will have manufacturing sites in the US, UK, Germany and Australia, and it says its product portfolio will be diversified and have strong pre-pandemic and pandemic franchises in its major centres of operation.

It says the acquisition gives it a strong growth profile, and expects to achieve annual sales approaching $1 billion over the next 3 to 5 years.

The Novartis influenza vaccine business is one of the largest in the world, with net sales in 2013 of $527 million. It has delivered almost one billion doses of seasonal and pandemic flu vaccines globally over the last 30 years.

The deal with CSL follows the ‘asset swap’ deal that Novartis and GSK announced in April this year, in which Novartis acquired GSK’s oncology portfolio in return for the Swiss company’s non-influenza vaccines business.

The company was the first and only manufacturer with the flexibility of two production technologies – egg-based vaccines for seasonal, pandemic and pre-pandemic, and cell-culture-based vaccines for antibiotic-free production, which helps cut production time by around a month compared to the older production method. Novartis says this helps it respond quickly to pandemic threats, and say it also has access to a proprietary adjuvant platform and leadership in pandemic preparedness.

“In CSL, we have found not only an owner for the influenza business that shares our commitment to protecting public health, but also a strong growth platform for the business and our associates,” said Joseph Jimenez, chief executive of Novartis.

The Novartis and GSK deal will also see the companies create a joint venture, combining their consumer divisions to create one of the world’s biggest consumer healthcare businesses.

Novartis is also divesting its animal health division to Lilly, which the firm says will allow it to further focus its portfolio on innovative medicines, eye care and generics. The Lilly deal is expected to close in the first quarter of 2015 and the GSK transaction is expected to close in the first half of 2015.

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