On 22 April 2014, Novartis and GlaxoSmithKline announced a deal that appears to differ from other large pharmaceutical deals in the offing. Instead of a takeover of the entire business of one of the parties and a model in which a pharma company tries to do it all, each party will acquire assets that strengthen its core area business while disposing of assets outside its core area.

The deal would see GSK sell its portfolio of cancer drugs (and opt-in rights for new oncology products) to Novartis and Novartis sell its vaccines unit (less flu vaccines) to GSK. The deal will also include the formation of a consumer health joint venture between the companies to be controlled by GSK.

For Novartis, which is number two to its Swiss rival, Roche, in the area of cancer drugs, acquisition of the cancer drug portfolio from GSK (which as the 14th biggest competitor sees little chance of establishing a leadership position in that market) provides Novartis with a chance to strengthen its ability to compete in what it characterizes as a very competitive market. Likewise, acquisition by GSK of Novartis’s vaccine business (other than flu vaccine) affords GSK the chance to strengthen its position in that area, where it is already the world’s largest provider of vaccines, and, according to reports, will strengthen its position with respect to the meningitis vaccine market and in the United States. GSK will also have control of 63.5% of a combined consumer healthcare joint venture, which will be one of the world’s largest over-the-counter drug businesses.

The deal is conditional on each of these transactions taking place or being waived and of course is subject to antitrust approvals in several jurisdictions. It is contemplated to complete in the first half of 2015. The parties will no doubt argue that this deal will provide a way to lower costs, including research and development costs, in an environment where there is pressure to keep prices low.