GSK and Pfizer Enter Joint Venture with their Consumer Healthcare Businesses

By Rajaneesh K. Gopinath, Ph.D.

The merged unit is all set to take over as a new world leader in consumer healthcare with annual sales worth 12.7 billion dollars and has plans to become an independent UK based company, few years down the lane.

On 19^th December, GlaxoSmithKline (GSK) and Pfizer announced the joint venture they have entered, combining their consumer health businesses worth $12.7 billion dollars. In this proposed all-equity transaction, GSK will take 68% of the equity interest, while Pfizer would own the remaining 32%. This partnership would see the creation of a major consumer healthcare company with a leading market share of 7.3% that would edge ahead of close competitors in the sales of over-the-counter medicines.

Emma Walmsley, the Chief Executive Officer of GSK said “Eighteen months ago, I set out clear priorities and a capital allocation framework for GSK to improve our long-term competitive performance and to strengthen our ability to bring new breakthrough medicines and better healthcare products to people around the world.” In a separate statement, Pfizer also said that this joint venture will be a category leader in pain relief, respiratory, vitamin and mineral supplements, digestive health, skin health and therapeutic oral health.

Within three years, GSK intends to split the division via a demerger of its equity interest and a listing of GSK Consumer Healthcare on the UK equity market. This arrangement gives it the liberty to own two companies, one focusing on consumer healthcare and the other on pharmaceuticals, something its shareholders insisted for quite some time. Post the announcement of the joint venture, GSK’s shares witnessed a 7% increase indicating investor’s acknowledgment and delight.

GSK has been making a number of deals this year under the directives of its new CEO Emma Walmsley. In 2015, GSK entered a similar joint venture with Novartis, but early this year, it spent 13 billion dollars to buy back the latter’s 36.5% stake acquiring full ownership of the business. In order to fund the Novartis buyout, GSK divested Horlicks and other consumer healthcare nutrition brands to Unilever for 4 billion dollars. Besides, to strengthen its oncology pipeline, GSK acquired the cancer biotech Tesaro earlier this month for 5.1 billion dollars. With a lot of revamping and deals made in a short time, GSK and Ms. Walmsley will be counting on many things to go their way, for their plans to succeed.

References

1. https://www.gsk.com/en-gb/media/press-releases/glaxosmithkline-plc-and-pfizer-inc-to-form-new-world-leading-consumer-healthcare-joint-venture/
2. https://www.pfizer.com/news/press-release/press-release-detail/pfizer_and_glaxosmithkline_announce_joint_venture_to_create_a_premier_global_consumer_healthcare_company
3. https://www.ft.com/content/3681be02-035d-11e9-9d01-cd4d49afbbe3
4. https://www.theguardian.com/business/nils-pratley-on-finance/2018/dec/19/gsks-pfizer-deal-is-the-first-step-towards-fixing-its-share-price
5. https://www.gsk.com/en-gb/media/press-releases/gsk-reaches-agreement-to-acquire-tesaro-an-oncology-focused-biopharmaceutical-company/
6. https://www.gsk.com/en-gb/media/press-releases/gsk-to-divest-horlicks-and-other-consumer-healthcare-nutrition-products-to-unilever/

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Author

Rajaneesh K. Gopinath