Glaxo’s £7bn day of drama
Horlicks is sold for £3bn US cancer firm bought for £4bn But shares fall 7.6pc
GLAXOSMITHKLINE is buying an American cancer specialist for £4bn as boss Emma Walmsley seeks to rebuild its pharmaceuticals business.
In a dramatic day for Britain’s biggest drug firm, Walmsley revealed it was purchasing Boston-based Tesaro for around £59 ($75) a share, a 62pc premium on its previous closing price.
The announcement came just hours after Glaxo separately confirmed the £3.1bn sale of malt drinks brand Horlicks to Unilever.
That deal initially lifted shares. But the Tesaro announcement sent them crashing back down, wiping almost £6bn off the company’s value, as investors worried that Glaxo had overpaid for assets that did not fit with the rest of its portfolio.
But Walmsley and her star scientist, Dr Hal Barron, argued that the Tesaro deal could be transformative for the company.
Since taking the helm in April 2017, Walmsley, 49, has led a radical overhaul at Glaxo to get it producing blockbuster drugs again.
The mother- of-four said: ‘ When I began in this job last year I said we want all our businesses to grow, but the number- one priority is to strengthen our pharma business and particularly the pipeline.
‘The acquisition of Tesaro will, by accelerating the build of our oncology pipeline and commercial footprint, along with providing access to new scientific capabilities.’
She added: ‘We are betting on this being a great driver for the company.’
It marks Glaxo’s return to the oncology drugs market after a deal in 2014 that saw it swap its cancer drugs portfolio for the vaccines division of Novartis.
With Tesaro, it gains control of Zejula, a treatment for ovarian cancer sold in the US and Europe, which Barron said holds significant promise.
Zejula is part of a cutting-edge class of drugs known as PARP inhibitors, which block the process that allows cancer cells to grow.
In addition to ovarian cancer, Barron said the medicine also had potential to treat other types of cancer, including lung cancer, breast cancer and prostate cancer, if it was combined with other treatments. He said: ‘We believe that PARP inhibitors will be a more important therapeutic class than is currently appreciated.
‘There is an enormous amount of science that is evolving, and this is just the tip of the iceberg.’
However, Glaxo is also entering what is fast becoming a very competitive space.
Arch-rival AstraZeneca owns Lynparza, seen as the marketleading PARP inhibitor, and Clovis Oncology, another US firm, is also fighting for market share.
Investors appeared unnerved by the takeover. Shares in Glaxo yesterday plunged by 7.6pc, or 123.6p, to 1498p, the firm’s biggest single-day drop since 2002.
The deal is the first major takeover by Glaxo under Walmsley and easily one of the biggest since the company formed in 2000 through the merger of Glaxo Wellcome and Smithkline Beecham.
Speaking from Boston, Walmsley said she would consider other so- called ‘ bolt- on’ takeovers if they helped to strengthen the pharmaceuticals business.
The deal is expected to eat into earnings until 2020 as the company pumps cash into research efforts at Tesaro.
On the other side of the world, Glaxo’s deal with Unilever freed up more cash for it to plough into takeovers.
It followed an auction which pitted Unilever against the likes of Nestle and Coca-Cola.
The transaction covers GSK’s health food and drinks portfolio in India, Bangladesh and 20 other predominantly Asian markets, with sales coming mostly from the Horlicks and Boost malt drinks brands.
Unilever said it would pay partly in cash and partly in shares.