GlaxoSmithKline and Pfizer to merge healthcare divisions

Ebony Scott
December 20, 2018

Pfizer consumer health products include Advil pain pills and Centrum vitamins.

Ian Read, chairman and current chief executive officer of Pfizer said, "Pfizer and GSK have an excellent track record of creating successful collaborations, and we look forward to working together again to unlock the potential of our combined consumer healthcare businesses".

The painkiller brands Panadol and Anadin will be bought under one roof under a giant deal between drug firms GlaxoSmithKline and Pfizer.

"It's something we've been able to do quickly and quietly", she told reporters in a conference call.

Commenting on the planned GSK split George Salmon, equity analyst at Hargreaves Lansdown (Frankfurt: DMB.F - news), said: "The separation will take away the steady cash flows of the consumer business, meaning there's more pressure on the men and women in white coats to deliver the next generation of blockbusters".

The decision surprised shareholders in both corporations, and GlaxoSmithKline shares jumped as much as 7 percent in London Wednesday, reported the WSJ.

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GSK added that the transaction is expected to realise "substantial" cost synergies, with the partnership expected to generate total annual cost savings of £0.5bn by 2022 for expected total cash costs of £0.9bn and non-cash charges of £0.3bn.

GSK plans divestments of some £1 billion.

Up to 25pc of the cost savings are meant to be reinvested in the business to support innovation and other growth opportunities. In addition, it represents "a compelling opportunity" to build on GSK's buyout of Novartis' 36.5% stake in a consumer healthcare JV in March of this year, said the UK-headquartered firm.

Earlier this month, she agreed to buy cancer drug specialist Tesaro for US$5.1 billion to try to revitalize its pharmaceuticals business, a high-priced acquisition that was poorly received by the market.

In a bid to reassure investors of its financial strength, GSK extended its guarantee on the dividend by stating it expected to pay unchanged dividends of 80 pence per share for 2019.

GSK was advised by Citi, J.P. Morgan Cazenove and Greenhill, while Centerview, Guggenheim and Morgan Stanley acted for Pfizer.

Other reports by GizPress

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