Much As Expected, Novartis In Three Party Deal With GSK & Lilly; Not A Merck "Straight Swap"

UPDATED -- for a few thoughts, on what the Lilly part of it means to Merck. More -- including graphics -- in a bit. So, a straight swap with any one player of size was always going to be DOA, due to antitrust concerns -- just as I repeatedly said. But today's announcements add a little pressure, narrowing (if slightly) some of Whitehouse Station's options -- and amplifying the urgency -- under Merck's ongoing strategic business review.

More to the point, this series of deals makes Lilly No. 2 in Animal Health behind only Zoetis, the Pfizer spinoff. And including three parties makes the antitrust analysis/compliance plan a more manageable set of equations. From the London papers then -- a bit:

. . . .Basel-headquartered Novartis said separately that it will sell its animal health division to U.S. firm Eli Lilly for $5.4 billion.

Glaxo called the linked deals a "major 3-part transaction" while Novartis revealed that the multibillion-dollar deal may affect up to 15,000 of its employees globally. . . .

The two drugmakers [Novartis and GSK] also are creating a new consumer health care business through a joint venture. It combines Novartis' over-the-counter drug business with GSK's consumer business to create a new entity that would generate $10 billion a year in revenue. Novartis would own 36.5 percent of the new business, focusing on pain management, coughs and colds and dermatology. . . .

So this also affirms the notion that more modest (post-2008 meltdown) valuations I've been suggesting will be the norm -- for Merck -- as well. Told 'ya so. Now we see if Reckitts has bid enough to get Merck's Consumer Health businesses, or whether it will be spun-off to shareholders -- or kept. I do think this (on balance, albeit marginally) leaves Merck with fewer options related to its two units under review. New post in a second, on what the post Novartis/GSK/Lilly deal landscape may mean to Whitehouse Station -- assuming Novartis can get all of this closed pretty much intact, after European Competition Commission, and FTC/DoJ Antitrust Hart Scott reviews, and requests.