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27-10-2014, 10:37 PM
CSL buys Novartis’s global influenza vaccine business
THE AUSTRALIAN OCTOBER 28, 2014 12:00AM
Damon Kitney
Victorian Business Editor
Melbourne
Vaccine expansion.
Vaccine expansion. Source: TheAustralian
CSL is set to become the No 2 player in the $US4 billion ($4.54bn) global influenza vaccine industry following its acquisition of Novartis’s influenza vaccine business, which has a number of new products close to commercialisation.
CSL said yesterday it expected the Novartis global influenza vaccine business to be profitable “within two to three years” after agreeing to pay $US275 million ($312.2m) for the asset with a view to combining it with its subsidiary bioCSL.
It said the combined business would have a strong growth profile and was expected to achieve sales approaching $US1bn a year over the next three to five years. Acquisition synergies are estimated at $US75m a year by fiscal 2020, with integration costs an estimated $US100m.
CSL chief executive Paul Perreault said the synergy costs would come from removing duplication of systems and processes rather than headcount reductions.
“This opportunity today is one that doesn’t come along very often,’’ he said, and described the purchase price as “reasonable”.
He said the deal would give CSL access to “quite a bit of production that can be spread across the geographies’’ and that the company would benefit from the global scale delivered by the Novartis facilities. The business lost $US138m at the EBITDA line in the 12 months to December 2013 from net sales of $US527m, which was largely a result of the company’s significant investment in research and development over recent years.
“We expect that over the next few years we should be able to turn this business into a successful, leading business within the flu sector,’’ CSL chief financial officer Gordon Naylor said yesterday.
JPMorgan said the transaction looked favourable “given the Novartis pipeline was close to commercialisation and the majority of research and development dollars had been spent”.
“There is a lot of upside if CSL can get this right but clearly that comes with a lot of integration risk. CSL ultimately is buying a loss-making business that is reliant on a very full R&D pipeline plus some $US75m synergies,’’ the broker said.
Macquarie Equities said yesterday the Novartis flu business would represent a 5.7 per cent headwind to its CSL EBITDA estimates if the losses continued.
But the market appeared prepared to back CSL’s ability to make acquisitions work, pushing its shares 1 per cent higher.
Mr Perreault said last year, when he took over the role, that he would not be stopping the aggressive growth that was a hallmark of the tenure of his predecessor, Brian McNamee.
The deal comes as Novartis is in the midst of divesting its non-flu vaccine business to GSK and its Animal Health business to Eli Lilly.
The acquisition is expected to be funded through surplus cash without affecting CSL’s buyback, which was announced at its latest annual results.
The merged entity will have manufacturing plants in the US, Britain, Germany and Australia, a diversified product portfolio and strong pre-pandemic and pandemic franchises in its major centres of operation.
Final settlement of the transaction is expected to occur in the second half of next year.
THE AUSTRALIAN OCTOBER 28, 2014 12:00AM
Damon Kitney
Victorian Business Editor
Melbourne
Vaccine expansion.
Vaccine expansion. Source: TheAustralian
CSL is set to become the No 2 player in the $US4 billion ($4.54bn) global influenza vaccine industry following its acquisition of Novartis’s influenza vaccine business, which has a number of new products close to commercialisation.
CSL said yesterday it expected the Novartis global influenza vaccine business to be profitable “within two to three years” after agreeing to pay $US275 million ($312.2m) for the asset with a view to combining it with its subsidiary bioCSL.
It said the combined business would have a strong growth profile and was expected to achieve sales approaching $US1bn a year over the next three to five years. Acquisition synergies are estimated at $US75m a year by fiscal 2020, with integration costs an estimated $US100m.
CSL chief executive Paul Perreault said the synergy costs would come from removing duplication of systems and processes rather than headcount reductions.
“This opportunity today is one that doesn’t come along very often,’’ he said, and described the purchase price as “reasonable”.
He said the deal would give CSL access to “quite a bit of production that can be spread across the geographies’’ and that the company would benefit from the global scale delivered by the Novartis facilities. The business lost $US138m at the EBITDA line in the 12 months to December 2013 from net sales of $US527m, which was largely a result of the company’s significant investment in research and development over recent years.
“We expect that over the next few years we should be able to turn this business into a successful, leading business within the flu sector,’’ CSL chief financial officer Gordon Naylor said yesterday.
JPMorgan said the transaction looked favourable “given the Novartis pipeline was close to commercialisation and the majority of research and development dollars had been spent”.
“There is a lot of upside if CSL can get this right but clearly that comes with a lot of integration risk. CSL ultimately is buying a loss-making business that is reliant on a very full R&D pipeline plus some $US75m synergies,’’ the broker said.
Macquarie Equities said yesterday the Novartis flu business would represent a 5.7 per cent headwind to its CSL EBITDA estimates if the losses continued.
But the market appeared prepared to back CSL’s ability to make acquisitions work, pushing its shares 1 per cent higher.
Mr Perreault said last year, when he took over the role, that he would not be stopping the aggressive growth that was a hallmark of the tenure of his predecessor, Brian McNamee.
The deal comes as Novartis is in the midst of divesting its non-flu vaccine business to GSK and its Animal Health business to Eli Lilly.
The acquisition is expected to be funded through surplus cash without affecting CSL’s buyback, which was announced at its latest annual results.
The merged entity will have manufacturing plants in the US, Britain, Germany and Australia, a diversified product portfolio and strong pre-pandemic and pandemic franchises in its major centres of operation.
Final settlement of the transaction is expected to occur in the second half of next year.