Pfizer, GSK to merge their consumer health units; spin off JV in three years

By PharmaCompass

2018-12-20

Impressions: 186 Article

The year 2018 is ending with another big M&A. American drug behemoth Pfizer Inc and British drug major GlaxoSmithKline Plc have decided to combine their consumer-health units, thereby creating a global consumer-healthcare giant. The 2017 global sales for their combined business were about US$ 12.7 billion.

GSK is to hold 68 percent stake in the joint venture and Pfizer the remaining 32 percent. GSK expects to close the deal in the second half of 2019.

The merger of the two units puts an end to all speculations surrounding Pfizer and its months-long endeavor to sell off its consumer business and focus on higher-margin prescription-drug units. GSK has been pursuing the same focus, but has stayed committed to its consumer health division, which was being led by GSK’s current CEO, Emma Walmsley, before she took on the top job.

GSK said within three years of closing the deal, it intends to demerge the consumer division through a UK stock market listing, splitting the company into two separate businesses — one focused on consumer products and one on prescription medicines and vaccines.

Walmsley said: “Ultimately, our goal is to create two exceptional, UK-based global companies, with appropriate capital structures, that are each well positioned to deliver improving returns to shareholders and significant benefits to patients and consumers.”

By spinning off the JV, the two pharmaceutical behemoths can focus on prescription medicines, which tend to be more profitable, though carry a higher risk.

The JV will combine GSK’s Sensodyne, Voltaren and Panadol brands with Pfizer’s Advil, Centrum and Caltrate. The venture would have a number one or two market share position in all key geographies, including the US and China, GSK and Pfizer said.

In March this year, GSK had bought out Novartis International AG’s stake in a healthcare joint venture for US$ 13 billion. The deal came just days after GSK walked away from a US$ 20 billion auction for the Pfizer unit where it had emerged as the clear frontrunner.

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