What’s the best way for a pharma company to make sure it has the resources to keep new medicines coming? If the current industry trend is any indication, the answer is simple: Sell off as many of the old ones as possible.
The latest Big Pharma to join the asset-sale party is Novartis, which is in talks to offload some of its older central nervous system (CNS) drugs, including Ritalin for attention deficit disorder and Exelon patch for Alzheimer’s, sources told Reuters. The portfolio could bring in as much as $496 million, they said, and potential buyers include Endo, Mallinckrodt and generic drugmakers.
Novartis isn’t getting out of neuroscience with these sales; far from it. CEO Joe Jimenez has deemed it a priority, and Novartis has multiple CNS projects in the pipeline, including an migraine treatment it's working on with Amgen, two multiple sclerosis drugs, and a remedy for neuropathic pain that it picked up when it acquired Spiniflex last year.
Indeed, getting rid of the older assets would free up Novartis’ R&D, manufacturing and marketing resources to concentrate on those potentially lucrative projects, according to Reuters.
Novartis is far from the only company thinking along those lines. AstraZeneca, in fact, has turned asset selling into a cottage industry, casting off the international rights to two heart-disease drugs for $500 million earlier this year, and before that raising nearly $1 billion in a string of out-licensing deals.
Over the summer, AstraZeneca sold off an anesthetics portfolio to South Africa-based Aspen Pharmacare for $770 million. And in September, GlaxoSmithKline sold its anesthetics medications to Aspen for $370 million, then turned around and offloaded 28 million shares of the South African company. GSK said it would use the proceeds for “general corporate purposes.”
Sanofi has also been looking to slim down its portfolio of aging drugs, announcing in November that it will sell off its generics business in Europe.
For some companies, the urge to sell is driven by desperate turnaround attempts. Debt-laden Valeant said in September that it’s looking to sell off non-core assets, which could include Egypt-based unit Amoun Pharmaceuticals and aesthetic devices maker Solta Medical, analysts predict. CEO Joseph Papa estimates the sales could bring in as much as $8 billion. Some say the company could even sell off its Bausch & Lomb eye unit as a last-resort strategy. And troubled Endo, beset by stagnating sales and deepening dept, is reportedly in talks with private equity firms about divesting some assets.
As for Novartis, it could look for even more divestitures as it seeks to exit some fields and expand into more lucrative ones. In an interview with SonntagsZeitung in November, chairman Joerg Reinhardt admitted that Novartis’ eye unit Alcon has stalled, and he did not rule out trying to find a new owner for it. Rumors have also emerged that Novartis could sell off its 33% stake in Roche for as much as $14 billion.
All of those moves could free up capital for Novartis to make bolt-on acquisitions that strengthen its core pursuits. Novartis is reportedly weighing a potential $8 billion purchase of generics maker Amneal Pharmaceuticals, for example, which would greatly expand its Sandoz unit.
Whether Novartis is on the selling side of any potential deal, or the buying side, the company’s main goal is to improve its growth trajectory, Jimenez told analysts after its third-quarter earnings release. “In terms of other businesses that we may add or subtract, I wouldn't want to speculate,” he said in a conference call, “but I would say that this is a dynamic process.”