Novartis to divest blood transfusion diagnostics unit for $1.7 billion as business review continues

Novartis announced Monday a definitive agreement to divest its blood transfusion diagnostics unit to Grifols for $1.7 billion, with the transaction set to be completed in the first half of 2014. Novartis CEO Joseph Jimenez said "the sale...enables us to focus more sharply on our strategic businesses" of pharmaceuticals, ophthalmology and generics, adding that the company might also consider divesting its non-strategic animal health and over-the-counter (OTC) units.

In August, Novartis chairman Joerg Reinhardt said the company would undertake a review of its businesses. Jimenez noted Monday that the company may sell the animal health and OTC divisions if it cannot turn them into businesses of global scale. Jimenez remarked that along with the vaccines and diagnostics units, "these are good businesses, but we have to find a way to give them global scale." He said "I wouldn't want to speculate on the outcome" of whether the OTC or animal health unit might be sold, adding "if it is possible, we would want to build them into businesses of global scale."

Novartis' blood transfusion diagnostics unit forms part of the company's vaccines and diagnostics segment and generated net sales of around $565 million in 2012. Novartis indicated that the deal with Grifols does not include the companion diagnostics unit or the Genoptix business, which the drugmaker noted "are closely linked to the pharmaceuticals pipeline."

Analysts at Jefferies said the transaction with Grifols marked the first move in a long-awaited restructuring. "With the vaccines and diagnostics division also failing to make any reasonable profits in recent times, falling into loss in 2012, it seemed likely that this division would be the first to be focused on," commented Jefferies analyst Jeffrey Holford. The disposal of the diagnostics portion of the unit may be a sign that the rest of the business will eventually be sold, Holford said, estimating a price of more than $6 billion. Novartis spokesman Eric Althoff declined to comment on whether the vaccine unit is for sale.

Jimenez added that Novartis would continue to look for bolt-on acquisitions, although he cautioned "we're very disciplined from a financial standpoint and prices have increased in biotech and overall healthcare in the last few months." Jimenez indicated that the company would provide a general overview of its strategy, as well as an in-depth look at the pharmaceutical business, at an investor day on November 22.

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