Glaxo to split into two after Pfizer deal
Historically we’ve liked the balance of a broader company but we’ve always been pragmatic about that...the deal will help support our number-one priority, which is strengthening the pharma business
EMMA WALMSLEY, CEO, Glaxosmithkline Plc
LONDON: Glaxosmithkline Plc paved the way for a split into two companies, agreeing to create a consumer-health joint venture with Pfizer Inc. to be listed on the stock market, sending the UK company’s shares to their biggest gains in a decade.
Glaxo will have a 68% controlling stake in the new entity, with combined sales of $12.7 billion and led by Brian Mcnamara, the chief executive officer (CEO) of the UK pharmaceutical giant’s consumer arm. The deal lets Pfizer exit a business after a yearlong sale process failed to find a buyer.
The non-cash transaction creates the world’s biggest supplier of over-the-counter medicines with brands of painkillers such as Advil and Panadol and marks a shift from Glaxo CEO Emma Walmsley’s previously stated strategy of keeping the steadily performing consumer and vaccine businesses under the same roof as the more volatile pharma operations.
The UK drugmaker’s shares surged as much as 8.3% on the London stock exchange. Pfizer shares rose about 1.2% in premarket US trading.
The benefits of separating into two companies—one focused on prescription medicines and the other on consumer health—outweigh the advantages that come with a more diversified structure, Walmsley told reporters on a conference call.
Glaxo, Pfizer and others are grappling with surging research costs to develop new medicines even as insurers and governments demand lower prices for the finished product. A split will help focus resources on separate businesses with different needs.
“Historically we’ve liked the balance of a broader company but we’ve always been pragmatic about that,” Walmsley said in an interview with Bloomberg Television. The deal creates a more focused pharma company “with an accelerating pipeline at the point of separation.”
The deal will help “support our number-one priority, which is strengthening the pharma business,” Walmsley said.
The transaction will let Glaxo focus on developing drugs for cancer, HIV and other diseases, taking it out of the business of selling low-priced products in the competitively squeezed consumer field.