Novartis ($NVS) is reportedly in talks with Merck & Co. ($MRK) to trade its vaccines and animal health businesses for Merck & Co.'s consumer health operations. If that happens, Merck would pick up Novartis modern vaccines plant in Holly Springs, NC, to complement its own extensive vaccine manufacturing in North Carolina, while Novartis would get help for a business that has been plagued by manufacturing problems.
The two companies are considering an asset trade valued at about $5 billion that some see as strengthening both companies, Bloomberg reports citing unnamed sources.
Novartis created its vaccine unit out of its buyout of Chiron in 2006, but the Swiss drugmaker just hasn't been able to gain much traction with it. What the unit does have is the vaccine plant in Holly Springs. Novartis has received about $500 million in support from the U.S. government for the Holly Springs plant as part of a program that gives the government say over production in the event of a pandemic. The facility in 2012 was approved by the FDA for a new process to manufacture its seasonal flu vaccine based on animal cell cultures that it says cuts weeks off production times. Novartis says the joint investment in the technology and plant is about $1 billion.
Merck is a leader in vaccines and has a vaccine plant in Durham, NC, where 1,100 people work. In the last decade, the Whitehouse Station, NJ-based company has spent about $1 billion doing an extensive overhaul of its vaccine manufacturing that includes operations in West Point, PA, and Elkton, VA, as well as Durham. It also built a $295 million vaccine-production plant in Carlow, Ireland, which it expects to be licensed this year.
Merck would also get Novartis' animal health products which includes the popular parasite-fighters Interceptor and Sentinel. Those products have been manufactured at Novartis' consumer health plant in Lincoln, NE, that the FDA in 2011 cited for a long list of manufacturing deficiencies. Novartis has been working to rebuild that unit after remediation at the plant resulted in delays in getting products to the market. But it is a unit that Novartis sees potential in.
Novartis CEO Joseph Jimenez, frustrated by ongoing problems at the Lincoln plant, last year decided to "simplify the operation, restricting it to two product forms--solid and powder. The move resulted in 300 workers losing their jobs. The company then decided to invest heavily in an OTC plant in Prangins, Switzerland.
Of course and exchange of manufacturing assets is all predecated on a deal actually being negotiated and finalized and about that, Bloomberg reports, the companies have nothing to say.
- read the Bloomberg story
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