Novartis follows brand offloading trend, selling drugs in Japan to Sun

Novartis HQ

India's Sun Pharmaceutical is the beneficiary of one of Big Pharma's trends: companies offloading generally older brands to pick up some cash and keep sales folks focused on key treatment areas. In this case, it is Novartis ($NVS) that is shedding products, having sold more than a dozen prescription brands to Sun in Japan, a market where Novartis has had its troubles.

Sun Pharma Managing Director Dilip Shanghvi

Sun said on Tuesday that it will acquire 14 established prescription brands from Novartis for $293 million. The drugs, which span a number of therapeutic areas, had annual sales of about $160 million. Novartis will continue to distribute them until Sun arranges marketing authorizations and gets a local distributor.

"This acquisition marks Sun Pharma's foray into the Japanese prescription market and provides us an opportunity to build a larger product portfolio in the future," Sun Managing Director Dilip Shanghvi said in a statement.

For Novartis, it is following a path well-trod by Merck & Co. ($MRK), GlaxoSmithKline ($GSK), Abbott Laboratories ($ABT) and others, who have hived off older brands that no longer fit into more focused goals, picking up billions of dollars in the process. AstraZeneca ($AZN) CEO Pascal Soriot has made an art of selling marketing rights to one or two products in specific markets. With AstraZeneca desperate for cash while Soriot tries to work some turnaround magic at the U.K. pharma, the company has done a series of deals for its "non-core assets."

Most recently, AstraZeneca sold ProStrakan the rights to market a drug for opioid-induced constipation in Europe, Iceland, Norway, Switzerland and Liechtenstein. AstraZeneca gets $70 million and royalties in that deal. Last month, it pawned the rights to a couple of heart drugs to a Chinese company, raising $500 million while giving up what last year amounted to $246 million in revenue.

Up to now, Novartis Chairman Joerg Reinhardt has taken a more wholesale approach to unloading assets to narrow the Swiss drugmaker's focus. In 2014, Novartis worked a deal to trade assets with GSK and also sold off the company's animal health unit to Eli Lilly. The deals were valued at about $25 billion.

The Japan deal with Sun pales by comparison but comes at a time when the Novartis brand has been tarnished in that country by a couple of scandals. In 2014, Novartis' Japanese affiliate was indicted along with a former employee for allegedly manipulating data in clinical trials for a blockbuster heart drug. Then in February 2015, the government suspended Novartis operations for 15 days as punishment for failing to properly report drug side effects.

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