Glaxo and Pfizer to combine consumer health businesses

GlaxoSmithKline and Pfizer will combine their consumer health businesses in a joint venture with sales of US$12.7

Once the businesses are combined, GSK plans to separate the joint venture as an independent company.

GlaxoSmithKline, one of the world's biggest drugs groups, is to be broken up after the company agreed to spin off its consumer healthcare business in a £10bn joint venture with USA rival Pfizer.

It will lead to the creation of a consumer health giant with a market share of 7.3 per cent, well ahead of its nearest rivals Johnson & Johnson, Bayer and Sanofi, all on around 4 per cent. Well-known brands to be sold under the JV include GSK's Voltaren and Panadol, and Pfizer's Advil, Nexium 24HR and Robitussin.

Walmsley said the deal presents a way forward for GSK to become a global pharmaceuticals and vaccines company focused on advanced technologies.

"It's something we've been able to do quickly and quietly", she told reporters in a conference call.

The new joint venture with Pfizer is expected to generate total annual cost savings of £500m by 2022 for expected total cash costs of £900m and non-cash charges of £300m.

Commenting on the planned GSK split George Salmon, equity analyst at Hargreaves Lansdown (Frankfurt: DMB.F - news), said: "The separation will take away the steady cash flows of the consumer business, meaning there's more pressure on the men and women in white coats to deliver the next generation of blockbusters". GSK plans divestments of some 1 billion pounds.

Up to 25pc of the cost savings are meant to be reinvested in the business to support innovation and other growth opportunities.

GlaxoSmithKline will hold a 68 percent stake in the new consumer health venture and Pfizer will hold the remaining 32 percent, reported WSJ.

The Pfizer deal is expected to boost adjusted earnings and free cashflow in the first full year after closing, which GSK anticipates will occur in the second half of 2019.

"Through the combination of GSK and Pfizer's consumer healthcare businesses, we will create substantial further value for shareholders", said GSK chief executive Emma Walmsley.

Shares in GSK rose 5% in early trading, to £15.22.

GSK will have six directors on the board, while Pfizer will have three.



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