There are big moves in the pharmaceutical sector this morning. Swiss drug giant Novartis (NVS), Britain's GlaxoSmithKline (GSK) and U.S.-based Eli Lilly (LLY) announced a series of deals and joint ventures. Novartis is selling Glaxo its oncology business for $14.5 billion and its vaccines business for $5 billion. The two companies will also form a joint venture to create a consumer drug giant. And Eli Lilly will buy Novartis' animal health unit for $5 billion.
Separately, Bill Ackman's Pershing Square and Valeant Pharmaceuticals (VRX) announced a bid for Botox maker, Allergan (AGN). The cash and stock deal could be worth about $45 billion dollars. Ackman’s Pershing Square Capital Management is Allergan’s largest shareholder, with 9.7% of the company’s stock.
Yahoo Finance Senior Columnist Michael Santoli said the deals appear to be a signal that many of the pharmaceutical companies are flush with cash and looking for the next phase of growth after two strong years of returns. “Basically, they all have very flush balance sheets; they all have growth challenges, but basically they’re all in good financial shape,” said Santoli. “It’s no longer about excuses not to do deals. Now, it’s about: why wouldn’t we go ahead and do a big, kind of a bold deal.”
Santoli said the initial market reaction was that these deals appear to be about catalyzing the next phase of growth in the industry and that was sending the stocks higher.