An Announcement regarding the completion of a range of asset swaps was made concerning two significant companies, GlaxoSmithKline plc (ADR) (NYSE:GSK) and Novartis AG (ADR) (NYSE:NVS). These asset swaps tended to be a bit complex and were worth a hefty amount of approximately $20 billion. This effort of completion was made in accordance with a particular goal, which was to turn up asset portfolios in a better condition so that businesses with a better performance are further fortified, while those which haven’t shown very profitable results are left behind.
This decision of undergoing an exchange of assets between the two companies was culminated in April, 2014. There is a mutual alliance between the two companies which is reflected in GlaxoSmithKline plc (ADR) (NYSE:GSK) decision of taking up vaccine business of Novartis AG (ADR) (NYSE:NVS) and giving off its oncology business in return.
The company has various expectations of profits which it hopes to yield from this three-way deal. One of its plans is to make sure that an income of worth $6.16 billion is returned to its shareholders. More light on this matter shall be shed after the investor meeting which is planned to be held on 6 May.
Between the two companies, GlaxoSmithKline plc (ADR) (NYSE:GSK) is the one which is going to benefit the most from this deal, because it amounts to almost half of Novartis. This deal would serve GlaxoSmithKline plc (ADR) (NYSE:GSK) in various beneficial ways; the most important of which is getting rid of its oncology portfolio, as this division has undergone a decrease in its generated income. The Chief Executive Officer of GlaxoSmithKline plc (ADR) (NYSE:GSK), Andrew Witty, made a point of mentioning that the company’s oncology section has been occupying the 14th position in the international market of cancer drugs. Not only was the ranking low, but the prospects concerning the establishment of the oncology portfolio as a leading power in cancer drug arena weren’t so bright either. Therefore, the company had to make this deal as a last resort to save the company’s division.
On the contrary, the company’s vaccine business has seen a continuous progression, since its contribution in the total revenue of the company increased from 9% to 14% in the year 2014. Therefore, in light of this context, GlaxoSmithKline plc (ADR) (NYSE:GSK) decision of taking up Novartis’s AG (ADR) (NYSE:NVS) vaccine business can be considered a rational and a wise one.
The company being benefited from this deal isn’t GlaxoSmithKline alone, rather the decision of taking up it oncology portfolio by Novartis AG ADR (NYSE:NVS) also has a profitable ring to it. At present, Novartis AG (NYSE:NVS) has access to oncology as well as hematology medicines. However, the deal would increase the company’s access points; and bring various therapies at its disposal, such as those related to kidney, melanoma and other drugs of the same kind.
The deal states that Novartis AG (NYSE:NVS) would have to make a payment of $16 billion to GlaxoSmithKline plc (NYSE:GSK) for its oncology division, however the company is authorized to ask for a refund of $1.5 billion, in case melanoma drugs fails to cope up with the required standard. In a nutshell, these asset swaps are a positive way forward for both the companies and has the promise of a better, profitable future.
