Shire, Novartis Deals: Pharmaceutical Shakeups Continue

November 11, 2013 by Trey Thoelcke

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The wave of mergers and acquisitions in health care continues with two big announcements Monday. Drug maker Shire PLC (NASDAQ: SHPG) will acquire the rare disease biopharmaceutical company ViroPharma (NASDAQ: VPHM) in a deal worth $4.2 billion. And Swiss drug company Novartis A.G. (NYSE: NVS) has agreed to sell its blood transfusion testing unit to Madrid-based Grifols S.A. (NASDAQ: GRFS), the world’s third-largest blood products maker, for $1.68 billion.

Dublin-based Shire reportedly beat out several other companies interested in ViroPharma, including France’s Sanofi (NYSE: SNY). Shire is set to pay $50 a share, which would be a 27% premium on the closing price last week. Shire’s CEO, Dr. Flemming Ornskov, indicated that the ViroPharma acquisition is consistent with the company’s¬†objective of strengthening its rare disease portfolio.

The Novartis sale comes as part of a broad review of operations following the departure of veteran chairman and former CEO Daniel Vasella. The company is looking to curb some of the $2.4 billion in R&D expenses is posted in the third quarter. That was a 10% year-over-year increase in R&D expenses in a disappointing quarter.

Novartis also announced last week it would cut 500 jobs in its international research centers, on the same day that Bristol-Myers Squibb Co. (NYSE: BMY) and Ariad Pharmaceuticals Inc. (NASDAQ: ARIA) also announced layoffs. The CEO of Novartis, Joe Jimenez, said Monday that the company also would consider selling off its non-strategic animal health and over-the-counter (OTC) businesses if it cannot turn them into businesses on a global scale.

“We looked very hard at the market growth rates and at Novartis’s capabilities. These are good businesses, but we have to find a way to give them global scale,” Jimenez said.

As the health care industry continues to search for its new normal, many large drugmakers are shedding non-core activities while trying to bolster their new drug pipelines by snapping up smaller firms.