Novartis and GSK announce multi-billion deals in consumer healthcare and vaccines, while takeover talk sends AstraZeneca shares soaring over 7%
Latest: City welcomes Glaxo-Novartis deal
Analyst: AstraZeneca takeover speculation won't stop
12.15pm BST
Why all this activity in the pharmaceuticals sector? The WSJ has a pithy explanation:
Many drugs companies have paid down debt from big acquisitions in the early 2000s and are generating a lot of cash.
Generic drug makers are seeking to gain scale as their competitors and customers bulk up. For prescription-drug makers, pressure on pricing in the U.S. and Europe has forced many to cut costs, scale back research and development activities, and think about joining with rivals.
12.01pm BST
Over in Hong Kong, Royal Bank of Scotland has been fined $6m Hong Kong dollars (or around £500,000) for internal control failures -- after not spotting that a trader had falsified her records to hide almost £20m of losses.
The penalty was imposed by the Hong Kong's Securities and Futures Commission (SFC), as Reuters reports:
The SFC said in a statement RBS failed to detect and prevent unauthorized trades in its emerging markets rates business in the city in 2011, following the discovery of unauthorized trades by former trader Shirlina Tsang.
Tsang was sentenced last year to 50 months in jail after pleading guilty to fraud after was she caught falsifying records of her trades...
11.41am BST
GSK has been holding an analyst call to discuss today's deals with Novartis (buying a vaccine arm, selling its oncology division, and setting up a consumer healthcare joint venture).
City analyst Louise Cooper tweets the key points:
listening to GSK conference call. 500 lawyers been working on deal!
GSK CEO jokes about over worked pharma analysts "hopefully this is one transaction you didn't read about in the papers". (unlike AZN)
Load of M&A and restructuring deals announced in UK and EU over last few days. Sign recovery. (Good for investment bank fees)
11.31am BST
Back to the big story of the morning, the deal fever in UK pharmaceuticals which continues to drive Europe's stock markets higher.
Novartis and GlaxoSmithKline have agreed a multibillion dollar swap of assets under which the two pharmaceutical firms will join forces in the consumer healthcare sector combining brands including Aquafresh, Beechams and Tixylix and exchange their oncology and vaccine businesses.
The deal comes amid a frenzy of takeover speculation in the sector with the US drugs company Pfizer thought to be considering a $100bn (£59bn) bid for AstraZeneca and Valeant Pharmaceuticals looking at Botox-maker Allergan in a $40bn move.
Last night, Citis Andrew Baum suggested that the offer is "very likely genuine" after The Sunday Times first reported that a tentative bid had been made. Credit Suisse's Vamil Divan notes that overlap with Lipitor and Crestor could cause some headaches with the Federal Trade Commission, but these "would not be prohibitive."
Divan sees synergies in primary care infrastructure, emerging markets, and in combining oncology assets. And Citi's note sees the acquisition fitting into Pfizer's "key strategic goals for immunotherapy and autoimmune disease." Baum says that the deal could transform Pfizer's competitive presence in that sector.
10.56am BST
A couple of Greek news stories to flag up.
Greece's prime minister, Antonis Samaras, has predicted that the recovery in the country's bond prices will continue, pushing down borrowing costs (although there are no plans to repeat this month's oversubscribed debt sale).
We reached rock bottom and now we can only go up and we will only go up,
Echoing official statistics in the UK showing suicide rates are still higher than before the crisis, researchers at the University of Portsmouth have found a correlation between spending cuts and suicides in Greece.
According to the research, every 1% fall in government spending in Greece led to a 0.43% rise in suicides among men after controlling for other characteristics that might lead to suicide, 551 men killed themselves "solely because of fiscal austerity" between 2009 and 2010, said the paper's co-author Nikolaos Antonakakis.
10.30am BST
Construction activity in the eurozone inched a little higher in February, according to Eurostat's latest survey this morning, suggesting that Europe's recovery from recession remains weak but steady.
The highest [annual]increases in production in construction were registered in Slovenia (+33.1%), Hungary (+28.3%), Spain (+23.9%), Poland (+14.4%) and Germany (+14.1%), and the largest decreases in Romania (-14.7%), Portugal (-11.5%) and Italy (-7.9%).
Euro area production in construction +0.1% in Feb 14 over Jan 14, +6.7% over Feb 13 #Eurostat http://t.co/RNeT53y5CT pic.twitter.com/UDz3RqMtKZ
The highest [monthly] increases in production in construction were observed in Poland (+17.4%), Hungary (+8.2%) and Spain (+3.0%), and the largest decreases in Slovenia (-4.9%), Italy (-3.7%) and the United Kingdom (-2.8%).
10.09am BST
9.58am BST
Bank lending to UK businesses continues to shrink, despite efforts to drive credit to small firms.
Mortgage lending, though, continues to rise -- which won't dent fears that Britain's economic recovery is based on the shifting sands of a housing boom.
The stock of lending both to small and medium-sized enterprises and to large businesses contracted over this period. Mortgage approvals by all UK-resident mortgage lenders for house purchase continued to rise, on average, in the three months to February.
The annual rate of growth in the stock of secured lending to individuals rose to 1.1%. The annual rate of growth in the stock of consumer credit continued to be strong.
Lending to small businesses is still falling, according to the @bankofengland pic.twitter.com/M0ldeCuRgO
Another #FLS failure! #BoE The stock of lending to small and medium-sized enterprises (SMEs) contracted in the three months to February.
9.38am BST
Dutch electronics firm Philips has seen 7.4%, or 1.7bn, wiped off its stock market value this morning after becoming the latest European firm to suffer from the strong euro.
Philips suffered a 22% plunge in earnings in the first three months of 2014, to 314m, well shy of analyst forecasts of 341m.
9.22am BST
The rally in pharmaceutical stocks has driven European stock markets higher, with the FTSE 100 jumping 53 points to 6679, a two-week high.
The German DAX has jumped 1%, as the optimism created by M&A activity ripples around.
Welcome news for Glaxo shareholders; the company managed to dispose of the oncology business which was suffering against the oncology units at global peers such as Roche and AstraZeneca. The combined consumer healthcare business controlled by GSK should also cheer investors given the current strength of Novartiss consumer healthcare portfolio.
A combination of both companies would help with reducing huge costs so although talks have ended for now, market participants are expecting AstraZeneca to now be in the spotlight as an attractive takeover candidate by not only Pfizer but other global pharma firms.
8.59am BST
Here's a handy explanation of the healthcare brands that will come together in Novartis and GSK's new consumer healthcare operation, from PA:
The tie-up will create a world-leading business with annual revenues of around £6.5 billion from Glaxo products such as Aquafresh and Beechams and antiseptic range Savlon and cough and cold brand Tixylix from Novartis.
8.49am BST
8.45am BST
Glaxo's CEO, Andrew Witty, has suggested that today's deal with Novartis (details below) could lead to more jobs being created in the UK.
He told my colleague Sarah Butler that there will be "minimal impact" to its workforce in the UK. Indeed, GSK plans to invest some of the deal's proceeds in research and development, potentially boosting employment within Britain.
Drugs frenzy: GlaxoSmithKline shares jump 4% on Novartis deal. Meanwhile UK's AstraZeneca up 8% on talk of takeover by US giant Pfizer
8.28am BST
Shares in pharmaceutical firms have jumped in early trading in Europe.
Investors are welcoming the Novartis-GSK deals, and the prospect of Pfizer launching a huge takeover bid for AstraZeneca -- whose shares are leading the London stock market.
AstraZeneca shares jump 8% in early trading; GSK up 4% and Shire also higher, up almost 5%. FTSE 100 +34 points, or 0.5%
8.19am BST
Good morning, and welcome to our rolling coverage of the financial markets, the global economy, the eurozone and business.
Switzerland's Novartis & UK's GlaxoSmithKline also to combine consumer healthcare. So Novartis buys cancer unit, merges consumer unit
Meanwhile #Glaxo becomes a leader in vaccines, buying Novartis' unit for $7bln + royalties...so quite the game of swap/combine
I believe you'd better be number one, two or three in your sector, and this is what this deal is all about.
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