Nine months later, Novartis is born

February 1, 1997
Pharmaceutical Representative

The U.S. Federal Trade Commission granted provisional approval to an agreement with Ciba-Geigy Ltd. and Sandoz Ltd., clearing the way for the $63 billion merger of the two drug giants.

The U.S. Federal Trade Commission granted provisional approval to an agreement with Ciba-Geigy Ltd. and Sandoz Ltd., clearing the way for the $63 billion merger of the two drug giants.

Based in Basel, Switzerland, the new company, Novartis, was formally founded at the end of December when it was registered in Switzerland. Novartis will be the world's No. 2 drug company behind Glaxo Wellcome p.l.c.

The combined company is expected to have annual sales of $27 billion. The American subsidiaries of Ciba and Sandoz are Ciba-Geigy Corp., Tarrytown, NY, and Sandoz Corp., New York.

"After only nine months of intensive preparations, we can now move forward with the task of building the world's leading life sciences company," said Alex Krauer, chairman of the board of Novartis and former chairman of Ciba-Geigy.

"Two organizations that are perfectly matched in terms of professional skills, financial strengths and innovative capabilities will be working constructively together to form a new company with tremendous growth potential."

Novartis aims to capture and hold a leadership position in all of its businesses, said Daniel Vasella, president of Novartis and former CEO of Sandoz. "Our competitive strength will be founded on enhanced power in the marketplace with sizable sales forces in all major countries, on over 20 pharmaceutical product launches anticipated in the next three years, on the span of almost 100 compounds in research and development and on the innovative potential of our...research budget."

A spokesperson for Novartis said there would be no sales force reductions as a result of the merger.

The companies' settlement agreement with the FTC addressed three areas where there was an overlap of Sandoz's and Ciba-Geigy's businesses in North America: corn herbicides, flea and tick control products, and gene therapy.

In gene therapy, the government sought to prevent a potential monopoly thatdoesn't yet exist because the company's products are still in the pipeline. Ciba, through its 46.5% ownership of Emeryville, CA-based Chiron Corp., and Sandoz are two of only a few entities capable of commercially developing a broad range of gene therapy products, the FTC alleged.

The FTC proposed to require, among other things, the licensing of specified gene therapy technology and patent rights to Rhone-Poulenc Rorer, Collegeville, PA. The goal, the FTC said, is to put Rhone-Poulenc Rorer in a position to compete against the combined firm, thereby resolving the agency's antitrust concerns.

Novartis agreed to provide access to the following discoveries: herpes simplex virus-thymidine kinase technology, ex-vivo gene therapy covered by a broad U.S. patent, Factor VIII for hemophilia gene therapy and cytokines for use in cell expansion for ex-vivo gene therapy. Novartis retains royalty rights and will have a cross-license option from potential licensees in cytokines and gene therapy for herpes simplex virus-thymidine kinase.

In North America, Novartis also plans to divest Sandoz's corn herbicide and animal health businesses with combined 1996 sales of $390 million dollars.

As part of its merger goal to focus on life sciences, Novartis already divested its construction chemicals business and is ready to spin off Ciba Specialty Chemicals in the first quarter of this year.

Integration

Since the merger was announced on March 7, 1996, a Novartis steering committee has been developing integration plans for the future company. The committee has designated managers, proposed organizational structures and selected its 600 company sites worldwide. PR