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Novartis' soon-to-be-Glaxo's vaccine unit sees mounting losses, diving sales in Q2

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Novartis CEO Joe Jimenez

After years of waiting for a turnaround in its vaccines unit, it looks like Novartis ($NVS) may have sold it off at the right time. The Basel-based drugmaker Thursday reported stepped-up operating losses and flagging sales for the division, much of which will be on its way to former rival GlaxoSmithKline ($GSK) when the companies' $7.1 billion deal closes next year.

Vaccine net sales slid 14% in constant currencies to $240 million in the second quarter, down from $277 million in the year-ago period. Operating losses went the other direction, hitting $175 million for the quarter after coming in at $140 million in 2013's Q2.

But it's not all bad news for Glaxo. The Swiss pharma pinned the sales decline primarily on shipment phasing; last year, a large shipment of pediatric vaccines made 2014's year-on-year comparison unfavorable--something "GSK understands," CEO Joe Jimenez said on Thursday call, as quoted by Bloomberg.

Aside from the phasing issue, demand "continued to be solid across the product portfolio," particularly in meningitis. Excluding its impact, expanding sales for Menveo and newcomer MenB shot Bexsero helped push first-half vaccines sales up by 6%.

And Novartis attributed much of its core operating losses to costs at its newly licensed Holly Springs facility, which recently won the FDA's approval to produce cell-culture flu vaccines, in addition to two large Phase III quadrivalent flu vax studies. Novartis' flu business is the piece of the vaccines unit that Glaxo did not agree to pick up in the pharma giants' April deal, as it already boasts its own line of offerings.

Instead, Novartis is looking to hawk the business in a separate sale--a process that's currently ongoing, a company spokeswoman recently told FierceVaccines.

"As part of the portfolio transformation, Novartis has opened a competitive bidding process to all interested parties to identify a new owner for the flu vaccines business to maximize value," she said in a statement.

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