Drug-making giants change their priorities

Bloomberg News

The new bosses of two of Europe’s largest drugmakers are pivoting in different directions, with GlaxoSmithKline doubling down on consumer health as Novartis narrows its focus on prescription medicines.

Glaxo Chief Executive Officer Emma Walmsley’s $13 billion deal for Novartis’s stake in a joint venture that includes Panadol pain relievers and Theraflu cold medicine comes only days after the U.K. company abandoned its pursuit of Pfizer Inc.’s consumer unit. The agreement gives Novartis’s Vas Narasimhan more firepower for the Swiss giant’s drug business and acquisitions.

Narasimhan, who rose to the top spot last month, has said the over-the-counter business is no longer central to the strategy as he targets breakthroughs for cancer and other diseases. Walmsley, who took over last year, has emphasized the benefit of combining the more steadily performing consumer and vaccine businesses under the same roof as the more volatile pharmaceutical operations.

Glaxo’s three-pronged strategy means being “leaders in each of those businesses,” said Tara Raveendran, an analyst at Shore Capital in London. “In consumer in particular you need scale, and there aren’t that many assets out there that would have given them momentum to achieve that.”

The consumer health sector’s pricing has come under pressure as drugstores and other retailers vie for shoppers. Glaxo’s investors balked last year when Walmsley mentioned interest in the Pfizer unit, fearing that it might endanger the British drugmaker’s dividend.