Novartis to sell first piece of vaccine unit in $1.7B deal

Expectations that Novartis ($NVS) will sell off its vaccine and diagnostic unit have ratcheted up in recent months, with management becoming receptive to the idea after seeing the business post operating losses in each of the past three years. Now, the long-anticipated breakup of the business has begun.

Novartis CEO Joseph Jimenez

Novartis has agreed to sell its blood-transfusion diagnostics unit to Spain-based Grifols for $1.68 billion. The Swiss drugmaker acquired the blood business in the 2006 takeover of Chiron that created its vaccine and diagnostic division, and its sale is being interpreted as a sign that Novartis will eventually divest the rest of the unit. Vaccines, animal health and consumer products are all reportedly on the block, with CEO Joe Jimenez keen to sell off businesses that lack the clout to compete in the top tier of their sectors. 

The blood-transfusion diagnostics unit fell into this category. "This is a good deal for Novartis. It allows us to focus on our strategic businesses. It also provides good value for us on what is a good business but not a business we had decided to grow aggressively," Jimenez told Bloomberg. A spokesperson declined to comment to the publication about whether Novartis is seeking a buyer for the vaccine division, but some analysts who have spoken to company executives are convinced a sale is a distinct possibility. 

After divesting the $1.68 billion blood business, analysts think Novartis could get $6 billion for the rest of the vaccine and diagnostic unit. And, while takeovers on this scale have a patchy record of success, there is a belief that the deal represents a straightforward proposition. "An established player in vaccines that already has critical mass should be able to relatively easily integrate this operation into its own business, creating significant synergies in the process," a Jefferies analyst wrote in an investor note seen by AFP.

- here's the Bloomberg article
- read AFP's post
- check out Novartis' release
- view FiercePharma's take